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| Bank Islam - The First Islamic Bank in Malaysia which also Own Takaful Malaysia |
Islamic Financial Institutions play great roles to maintain economic stability, providing syariah compliance services and to create socio economic balance through wealth distribution. In current days, these cannot be achieved by a single financial institution, however it needs cooperation and support from all Islamic institutions which play different functions such as the banks, the baitulmal, the hisbah or in kind organizations, takaful operators and many others. In general the roles of Islamic financial institutions from the Islamic perspectives are:
Agent of Da’wah
Other than offering financial services, financial institutions should also be agent of da’wah by delivering knowledge about Islam especially the knowledge and values of Islamic Muamalat. The financial services should be very attractive and competitive in order to attract also the non Muslims that will slowly approach them and learn about the values and philosophy behind the Islamic financial products and services. For this purpose, all the financial institutions’ employees should be made ready through the appropriate knowledge and to be trained to be a good da’ie. Therefore, the Islamic finance will not only become the tool of economics but also a tool of da’wah.
Provide financial services based on syariah compliance
All financial services provided by the financial institutions should be syariah compliance. Syariah compliances in this case are referring to:
i. Avoiding riba’ transactions - Interest free
Allay says: "Those who devour usury will not stand except as stands one whom the Satan by his touch has driven to madness. That is because they say, "trade is like usury", but Allah has permitted trade and has forbidden usury" (Al-baqarah:275)
ii. Avoiding gambling and uncertainty
Allay says: “O you who believe, truly intoxicants and gambling and divination by arrows are an abomination of Satan's doing; avoid them in order that you may be successful. Assuredly Satan desires to sow enmity and hatred among you by means of intoxicants and gambling, and to hinder you from the remembrance of Allah and from prayer. Will you not then desist?” (Al-Ma'idah: 93-94)
iii. Avoiding from involving in any prohibited activities such as alcoholic, gambling, prostitution and pork related products
Allay says: “O you who believe, truly intoxicants and gambling and divination by arrows are an abomination of Satan's doing; avoid them in order that you may be successful. Assuredly Satan desires to sow enmity and hatred among you by means of intoxicants and gambling, and to hinder you from the remembrance of Allah and from prayer. Will you not then desist?” (Al-Ma'idah: 93-94)
In fact, Allah has provided alternative for riba’ which is sales based transaction, therefore all transactions are backed by assets. In addition, other form of contracts other than sales are also available to be adapted by the financial institutions such as ijaarah, qard, musyarakah, mudharabah and many others.
Financial intermediaries
Islamic financial institutions especially the banks are also play role as financial intermediaries where the surplus units go there to keep and invest money whereas, the deficit units approach the banks to ask for financial help. This can be explained further by the followings:
a. For the Surplus units
The surplus units usually come from the households, business firms and governments who has money surplus. They keep money in the banks in form of savings/deposits through multiple choices of contract such as Wadhiah Ya Dhamanah, Qardh Hassan, Mudharabah. The banks will treat this as liabilities in the financial accounts as the money will be return back any time according to the contract. In return, some of the banks on their discretion will provide returns in form of Hibah back to te customers based on profit generation form financing activities.
b. For the Deficits units
The deficits units are the parties that need money or properties. They will approach the bank to get the financial facilities. Banks will then offer appropriate products that suit the needs of the customers based on Islamic contracts such as Murabahah, Bay Bi Thamanil Ajil (BBA), Istisna, Salam, Mudharabah, Musyarakah, Ijaarah or many other instruments. The profit gain from such activities is the profit of the banks and will be divided to appropriate stakeholders such as shareholders, depositors, charity fund and for the company reserves.
Distribution of wealth
A part from that, the financial institutions also have to play they role in creating balance in the socio economics especially between the poor and the rich. This usually performs by the Zakat Colletors Institutions or Baitul Maal. The zakat institutions should provide appropriate means to collect zakat from those who are eligible and distribute it back to the proper asnaf as mentioned in the quran. They are fakir, miskin, amil, muallaf, fisabilillah, gharim, ibnu sabil, and riqob.
Allah says: "Zakat is for the poor, and the needy and those who are employed to administer and collect it, and the new converts, and for those who are in bondage, and in debt and service of the cause of Allah, and for the wayfarers, a duty ordained by Allah, and Allah is the All-Knowing, the Wise". (Al-Taubah: 60)
Moreover the voluntary sectors such wakaf institutions also play a big role to achieve the objective of wealth distribution. This voluntary sector is aimed to provide proper facilities to the public especially Muslims to help them to decrease the burden of high cost of livings and reduce dependence on government subsidies. The wakaf institutions receive contributions in form of cash and properties and distribute back to the society in form of facilities which also generate continuous income to maintain the facilities, at the same time protect the welfare of ummah.
CSR is defined as open and transparent business practices that are based on ethical values and respect for the community, employees, the environment, shareholders and other stakeholders. It is designed to deliver sustainable value to society at large.
The banks, co-operations and other Islamic institutions shall play their roles in CSR in form of obligatory and voluntary functions. They are obliged to pay zakat to the zakat institutions for the wealth they are generating. On the other hand, voluntary responsibilities are referring to how the banks themselves play the roles to support triple main areas which emphasizes on the economic, social and environmental especially related to Muslim’s society.
Supervision of syariah compliance
One of the most important aspects of syariah implementation in the banking system is the supervision and monitoring system. It is easy to declare ones institution as an Islamic institution as registered as per required by regulation. However, the hardest part is to maintain the syariah compliance, thus urge for a systematic monitoring system.
The profit organizations especially the banks are very eager to convert the conventional system into Islamic system and at the same time creating a lot of new Islamic financial instruments to be competitive and to create advantage over their competitors. Thus, they tend to miss something that is not compliance with the syariah requirements. In this case, they have to be transparent and accountable, thus requires the syariah audit compliance mechanism to ensure this.
The supervision and monitoring system in Islam can be referred as Hisbah System. The Hisbah is a religious institution under the authority of the state that appoints people to carry out the responsibility of enjoining what is right, whenever people start to neglect it, and forbidding what is wrong, whenever people start to engage in it. The purpose of this is to safeguard society from deviance, protect the faith, and ensure the welfare of the people in both religious and worldly manners according to the Law of Allah. Allah has made it obligatory upon all Muslims to enjoin good and forbid wrongdoing to the extent of their knowledge and abilities. Allah says: "Let there arise from you a group calling to all that is good, enjoining what is right and forbidding what is wrong. It is these who are successful."(Ali Imran:104)
Other branch of voluntary sector is the takaful which established based on the concept of cooperation and interdependent. This concept is the alternative of the conventional insurance. The establishment of the fund under the licensed takaful operators is meant for helping all the members who involve in calamities or tragedies. The fund is collected from the members in a specified term usually monthly and a certain amount will be paid to the member who in help due to unwanted circumstances.
The takaful concept is based on tabarru’ concept which monthly contributions are treated as a type of sadaqah and at the same time will receive rewards from Allah. Nowadays, the takaful fund has been combined with wakalah and mudharabah concept to enables the fund to be invested on mudharabah contract.
Not only that, takaful concept has been applied to almost all Islamic banks as to manage the risk due to disability and death of the borrowers or clients. If that happen, all outstanding financing balances will be paid by the takaful operators. This will help the families to continuously use the assets without being burdening with the outstanding balances.
Allay says: "Help you one another in AlBirr and AtTaqwa (virtue, righteousness and piety); but do not help one another in sin and transgression. And fear Allâh. Verily, Allâh is Severe in punishment." (Al-Ma'idah :2)
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