Monday, January 31, 2011

Bai’ul Inah – Is it really Permissible? Part IV

Definition of “Inah”?

Inah is derived from the word “ain” means goods or items since the buyer or the customer who is involved in this contract is in need to get the goods which is in this context, the “MONEY” or in more simple and descriptive words that usually used in the advertisments by banks or financial institutions “fast cash” or “express cash” only with a dash “i” ( -i ) to differentiate from the convetional financing options.

There are 2 (two) types of Bai’ul Inah:

  1. The CUSTOMERS are REQUIRED to immediately sell the items or goods to the BUYER with CONDITION that the customer will sell it at a lower price from the first sale.
  2. The CUSTOMERS are given to keep the items and after the buyer have the ownership, the cusomers have the OPTIONS to sell it back to the BUYER at a lower price from the first sale.

The Fiqh Scholars are collectively agreed on the prohibition of the first type of Bai’ul Inah since it has a condition that required the customers to immediately re-sell the goods to the buyer at a lower price in exchange for cash.

However, there are conflicts in opinion of the scholars regarding the second option of Bai’ul Inah since it may lead to the practice of riba’. The prophet S.A.W said that “Anyone who hover around the Hima-foyer (where prohibited) to fear of falling into it” – Al-Bukhari. Only a certain ulama’ from Syafi’e School are allowing the second type of Bai’ul Inah.

Bai’ul Inah – Is it really Permissible? Part III

Following is an illustration of a Bai’ul Inah transactions:

For example, Al-ABC Bank is a bank and Ahmad is a customer who is seeking for a financial assistance from a bank for his business. Ahmad came to Al-ABC Bank and applying for a loan through the Bai’ul Inah concept that offered by Al-ABC Bank.

Al-ABC Bank then will sell an asset to Ahmad (e.g: Bank’s Photostate Machine) on deferred payment basis at RM10,000. Thereafter, AlAmin Bank will immediately buy back the photostate machine from Ahmad for cash (spot payment) at RM6,000 (price that is lower than the initial selling price).

And in the end, Ahmad will received RM6,00 and indebted Al-ABC Bank for Rm10,000 with an extra amount of RM4,000.

Sunday, January 30, 2011

History Of Islamic Banking – Part III

Saint Thomas Aquinas, an Italian priest in the 13th century of the Catholic Church asserted that usury was a violation of natural moral law. He stated that putting money out for the generation of more money is an evil unto itself.

Money as defined by Aquinas is consumable goods (Goods that may be depleted or worn out by use). Therefore it is not appropriate to generate more money by lending ot to others. To illustrate the evil of interest, St. Aquinas claimed that usury or riba as a “rent” on the money given out as a loan. It is not fair to charge a rent on the money that has been depleted.

From above, we could see that, the Christians are also prohibited to practice riba'. It was considered as an evil practice since then

Wallahu a'lam

Saturday, January 29, 2011

History Of Islamic Banking – Part II

It was obvious that Islam prohibits the practice of riba’ (usury/interest) as Allah said in the Holy Quran (Al-Baqarah:275):

وَأَحَلَّ اللَّهُ الْبَيْعَ وَحَرَّمَ الرِّبَا ...

Allah has permitted trade and has forbidden interest

The main pillar of Islamic banking is the practice of Riba-free transactions.

Even according to the books of Heaven, (Torah and Bible) stated that interest was evil. In Judaism the enforcement of prohibition of Riba’ are applied only to among Jews but it is compulsory to be applied on the non-Jews (Goyyim). While in Christianity, it is more stern on the prohibition of riba practice, thus it is a sin for a lender to claim for repayment on the loan from the borrower. However, in Islam, it is permissible to claim the loan but even better to release the borrower from the debt.

In conclusion, all of religions in this world are prohibit the practice of riba as it is one form of oppression towards the poor and the needy. In fact, all religions are promoting welfare, brotherhood and harmony. Therefore, the practice of riba’ may lead to other social/criminal problems.

Wallahua’lam

Friday, January 28, 2011

Bai’ul Inah – Is it really Permissible? Part II

Ibnu Qayyim quoted that the Prophet said “the days will come where people will practices riba in the form of selling and buying transactions”.

From the above Hadith by the Prophet, it is obviously that Bai’ul Inah is not allowed and disliked by the Prophet since it was one form of riba practices.

Ibnu Qayyim (691H/1292M – 751H/1350M) was a respected Fiqh scholar during his time. Among his contributions are in the Islamic Economic System.

Even One of the cause of the fall of Islamic Empire was the practice of riba’ in the form of selling and buying and also ignoring the welfare of the needy. In this case, the practice of Bai'ul Inah was practiced freely as a medium to give out and receive loan and charging interest.

Wallahua’lam.

Thursday, January 27, 2011

History Of Islamic Banking – Part I

Islamic financial system was started during the time of the prophet Muhammad S.A.W. In fact, the Prophet himself is a businessman in Mecca and was called by the Meccan “Al-amin” - meaning an honest and sincere people. He was hired by a wealthy business owner, a widower - Khadijah and later married to at the age 25 year old whereas Khadijah was 40 year old.

The great Irish philosopher, George Bernard Shaw said once about Muhammad S.A.W. : "I have studied him (Muhammad) - the wonderful man - and in my opinion far from being an anti-Christ he must be called the savior of humanity."

Prophet Muhammad was practicing Murabahah concept in His transactions. As we all know, Prophet Muhammad travelled a lot in conducting his businesses. He travelled to Sham (nowadays Damascus) to purchases stocks and securing the caravans from Sham to Mecca. There are threats of pirates and Bedouins during the journey between Mecca and Sham.

Besides Murabahah, Prophet Muhammad S.A.W also practices Musyarakah, Mudharabah concept in his business operations. This is the starting point where the Islamic Financial System was brought to the world as promoting the spirit of fraternity and brotherhood.

Wednesday, January 26, 2011

Bai’ul Inah – Is it really Permissible? Part I

Bai’ul Inah – Is it really Permissible? Part I

Nowadays, we are bombarded by advertisements/flyers/pamphlets from banks, financial institutions even Ahlong (loan shark) about their Islamic Financing or Products especially BAI’UL INAH.

First of all, we need to understand what is Bai’ul Inah and why it is favorable by the banks and even ALONG(loan shark). Bai’ul Inah is a selling and buying contract that practices by the banks/financial institutions/Ahlong to BYPASS the prohibition of riba’/interest/usury/faedah (malay) by Islamic Laws or Syari’ah Laws. The selling and buying transaction are only an excuse to give out and receive loan in cash.

The four Schools of Fiqh (Maliki, Hanbali, Hanafi and Shafie) prohibit this practice of Bai’ul Inah since the initial intention of the contract is to give out and receive loan, not selling and buying. However, there is a certain Ulama’ from Shafie School is allowing this practice but under a strict conditions. Currently, Malaysia is the ONLY Muslim country that is allowing the concept of Bai’ul Inah.

Comments/Suggestions/Corrections are welcome.

Muamalat?

Muamalat is set of rules (fiqh) related to worldly matters such as business/trading/commerce transactions, lending and borrowing contracts. Muamalat also involves the rules regarding the social interactions between human such as marriage, inheritance (waqaf, faraidh) and other human activities

Muamalat nowadays, is always associated to economics and finance since these elements are the key for happiness in this world and hereafter.

As a Muslim, we are believed that all the wealth on this world are belonged to Allah. Humans are only the appointed trustees to manage and distribute the wealth among them. Humans are encouraged to seek wealth through knowledge and skills given by Allah.

The rules and practices of fiqh muamalat are derived from 2 (two) primary sources: the Holy Quran and Hadith of Prophet Muhammad S.A.W

There are other secondary sources of Islamic law which are collective opinions agreed among Shariah scholars (Ijma’) i.e the 4 (four) school of Fiqh – Hanbali, Maliki, Hanafi and Shafie, Analogy (Qiyas), Personal Reasoning by Ulama’ (Ijtihad) and Traditions/Customs (Urf) – as long as it is not in conflict with Shari’ah.

Among the requirement of Shari’ah laws in practicing businesses transacrions:

· Not producing and trading of illicit materials (swine, liquor, stolen goods)

· Not producing and trading of materials which are of no use

· Not producing and trading of materials which are of no use

· Gharar (Uncertain)

· Contains Elemnet of Riba and

· Involvement of gambling elements