According to Wikipedia bank is a financial intermediary that accepts deposits and channels those deposits into lending activities. Banks are a fundamental component of the financial system, and are also active players in financial markets. The essential role of a bank is to connect those who have capital (such as investors or depositors), with those who seek capital (such as individuals wanting a loan, or businesses wanting to grow)[1]. On the other hand, the word social according to answer.com connoted as living together in communities[2].
Combining the two words, Berjoyai Bardai proposed the social bank as to establish a bank which aims for the establishment of special fund from Muslims-owned resources in order to restructure the Muslims economy to improve the quality living of the ummah[3]. For that purpose he proposed the implementation of qardul hasan as the main contract of the social bank operation.
In addition, Sanusi Junid supported the idea to establish a fund namely New Economic Model Bank (NEMD) to run the same functions. According to Sanusi, the fund resources should come from the contribution of government linked companies such as Petronas, Tenaga Nasional Berhad, Telekom Malaysia Berhad, Employees Provident Fund dan Tabung Haji. The NEMD also aimed to provide the micro financing services to finance the education, housing loans, tourism, health, small industries and SMEs especially to those who in the low level income groups or the unemployed.
Social bank can be characterized by the followings:
- A non-profit organization established as an Islamic financial institution, aimed to help improving the quality living of the ummah by providing the interest free financial contract namely qardul hasan and rendering consultancy or appropriate monitoring services inspiring for successful entrepreneur among the Muslims;
- The institution may collect money from the public in form of deposits (in form of wadhiah or qard hasan), waqaf, sadaqah, government grant, musyarakah and mudharabah; and
- It may generate profit from a portion of the fund to support the administrative and operational cost, as well to pay for the musyarakah and mudharabah contract through investment activities.
In the concept of social bank, the qardul hasan contract will become the tool to help people in financial crisis. Qardul hasan is chosen as part of the financial instrument encouraged by Allah by 8 related verses in the Quran. The verse has been mentioned side by side with the call for prayer, fasting and zakat. In every verse Allah challenged all human being to ‘lend’ to Allah in the form of qardul hasan by promising them great rewards in the hereafter.
There are few characteristics of Social Bank proposed by Berjoyai Bardai:
- The basic tenet is that all human being have been appointed as the trustee to Allah in this world;
- Human being act as trustee to manage the wealth belonging to Allah s.w.t.;
- It is our duty and responsibility as the trustee to manage and maintain these wealth as to generate the maximum benefit that msut be shared with rest of ummah;
- If we are not capable we must then hand these assets and wealth to the professional to discharge our responsibility to Allah;
- We can discharge the this responsibility temporarily just as to make sure that every cent of these assets and wealth are properly managed and generate maximum benefit to all mankind. The concept of ‘temporary waqaf’ become the pillar of the model; and
- The qardul hasan bank will be the waqaf institution as it eill be ownedby the ummah instead of any individual or group in the society.
The diagram below shows the framework proposed in this paper as a model to be adapted by the social bank.
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| Proposed Social Bank Model |
According to this framework, the fund will be collected through several sources as follows:
i. Contribution
The fund comes from contribution from any individual, organization, government agencies, corporate or bankers who support the model in form of sadaqah or hadiah.
ii. Waqaf
Waqaf comes in form of cash waqaf or properties waqaf. The organization will invest the waqf properties and contribute to charity and financing fund as to achieve the organization objectives.
iii. Qard
The qard in this case comes in form of deposit account or the sukuk instruments based on qardul hasan contract. For the deposit account the account holder can withdraw money at any time, whilst for the sukuk instruments, it can only be withdrawn after the period agreed matured. The return on sukuk or deposit account will be given based on the discretion of the lender based on the profit made by the investment activities. The Qard account also accepts the property as qard and treat it as ‘temporary waqaf’ as discussed earlier in this paper.
iv. Mudharabah/Musyrakah/Ijarah
The public may also participate in the social bank in form of investment type of instruments such as mudharabah or musyarakah contract. Through this contract, the investors may invest capital to any project depending to the muthlaqah or muqayyadah types of contract. The profit will be shared as accordance to respective contract. In addition, all the instruments can be issued through the issuance of sukuk mudaharabah/musyarakah/ijaarah.
The fund collected will be operated on three main activities to ensure good return and continuity of the organization namely; charity, investment, financing and reserve.
i. Investment
A portion of the money pumped in the bank can be invested to generate profit to maintain the administrative and operational cost of the institution as well profit cost for the investors. Some of the activities that can generate return are as follows:
a) Buy strategic control over strategic company especially involve in trading in basic needs and commodities. E.g. rice, sugar, flour.
b) Develop property for sale or lease
c) Buying and selling financing instruments such as bank guarantee, standing by letter of credit, medium term notes, treasury bills and many others
d) Real estate development
e) Providing Ar-Rahn services
f) Other business that relevant and profitable
ii. Financing
Financing is the main function of the social bank. The financing is provided for the public in form of Qardhul Hasan. A part from that the bank will provide appropriate monitoring or consultancy services for the borrowers to ensure the successful of business activities. Among the characteristics of this fund are:
a) Provide financing services based on Qardul Hasan contract for the ummah’s project such as education loans, housing loans, to initiate economic activities for the needy groups in the society.
b) Consultation team, evaluate business proposal and give business advice throughout the project development until it is completed and can work independently.
c) For the purpose of control, fund release by phase / stage.
d) A sinking fund will be established a part form the qard approval and will be the backup fund for defaulters. The fund will be used to invest elsewhere together with the investment fund. Profit generated will be distributed back to the borrowers or else a mean to pay back the loan. This will reduce the burden of the borrowers.
iii. Reserve
Reserve is aimed for maintaining cash liquidity and managing cash flow efficiency. In addition, it will also be used to pay appropriate and reasonable administrative costs such as salary, rental, office expenses and many others.
iv. Charity
Charity is a part from the objective of the social bank. This is where the corporate social responsibility (CSR) relies. Other than giving out interest free loan, the bank is also responsible to share the wealth with the community and society. It can be distributed in form of contribution to the needy, provision of basic facility and others.
v. Rewards
This topic has not been discussed in the framework, however as Allah has made his promised, rewards will be given to those who giving loan in form of Qardul Hasan, and for the sadaqah and wakaf that are paid in the model.
However, the roles of the social bank should not be only relied on new institution but should also be played by all of the current existing Islamic banks. The banks should study the reason why after being introduced for more than 2 decade, Islamic banking industry had only merely penetrated less than 15% of the banking services market in Malaysia. There is about RM15 billion funds belonging to Muslims depositors kept in the current account of the conventional bank in Malaysia.
In order to shift all the Muslim investment in the current account of conventional bank, other than putting the responsibility on a new social bank, the existing Islamic bank, Berjoyai Bardai proposed that the a qardul hasan window will need to be set up in every banks in Malaysia on ‘service fee basis’ with the banks. Moreover, a study shows that only about 30% of the current account fund in the banks will be ever be used at ay time. The rest will be idle or solid for years to come. These are the portion that will be mobilized for the ummah development program by the banks.
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