Sunday, July 20, 2008

Of Islamic Financing and Abandoned Housing

Assalamu ‘Alaikum,

Of Islamic Financing and Abandoned Housing

You took your little daughter and young wife to the housing site. Nothing there but cranes and a big hole in the ground. But you get all excited; this is the place you’d imagine would be the start of your life as a family, building up happy memories amid much love and fondness. That was 3 years ago. You are now back at the scene. It is still a big hole in the ground, but the cranes and construction workers have long gone.
You tire of the meetings after meetings of frustrated house buyers you have been to, to try and resolve the issue of your abandoned housing development. MP’s come and MP’s go none have been able to resolve your problem. You feel the strain not only in your mind but much in your pocket, every month you pay rent to house your family plus a monthly housing instalment to your bank for a house you will never own. You now have two kids plus another one on the way soon. Things look very bleak; with aging parents to support plus the price of every thing shooting north you are monthly in the red if not for the multiple credit cards you own. You contemplated stop paying to the bank again to ease your financial burden but the torrential rain pour of legal letters they swamped you with made you rethink this course of action. In the early days of the problem you remembered comforting your wife not to worry for your housing loan was with an Islamic bank; they would certainly be more understanding and compassionate than a conventional one. You recalled with bitterness how wrong you were; the Bank Officer and Manager you saw were polite and kind enough to hear you out but they were constrained by the Standard Operating Procedure handed down by the Bank’s Management. Crafted in the usual corporate lingo the manual basically says nothing more than that your problem is no different from any other defaulter, sue them, is the clear cut instructions coming from HQ.

Why couldn’t the Islamic Bank act with justice and see that you were not the cause of the problem. It was the developer who abandoned the project the bank should be after, not you. Everybody with a grain of justice in their soul can see that. Why are they blind to this or deliberately chose to be blind to this? Well let me tell you some inner secrets of the workings of a bank. The amount you owe the bank plus all other house buyers who went to the same bank is only half the money the bank have lost on the Project. Even before you came into the picture they have already extended much money to the developer in the form of what is called a bridging facility. The bridging finance they extended to the developer in the scheme of things shall be repaid from the drawdowns of your housing facility with the bank. In your case 60% of the proceeds of your housing facility with the bank have been passed on to the housing developer. In theory the developer will use this money to finance the Project but because of acute mismanagement and sometimes outright fraud, the money never reached the Project and the developer absconded. The Bank would have done everything to recoup from the developer but the truth is they have failed, the owner directors are bankrupted many times over by other banks. There were some white knight developers who offered a Proposal to rescue the project but the asking price was too low, the management of the bank has to report a huge loss to their board. Plus the three other abandoned projects in their books there will certainly be no bonus for them this year if they accept the white knights’ proposals. And that is why you are still in the picture, that is why you are still made to pay for a house you will never own. Any bank management with the moral courage and fortitude would have bitten the bullet and write off your debts a long time ago. There is absolutely no justification to lump on you the bad judgements they have made on the developers, but you are just a pawn, a very small pawn at that.

And why doesn’t the Islamic bank’s management act differently from a conventional bank’s management? Truth is, you need to pick the right people to lead Islamic Banks and you need to pick the right owners to own Islamic banks. Managers and owners of Islamic bank who has the conviction of justice and fairness to spare the common man the pain of their misjudgements. As long as Islamic banking is a mere system and not a declaration of faith, so shall the ummah suffer. As in a nation, good leaders sprout from the central leadership. If the central leadership are men of faith, then men of conviction shall lead under them. Whither now the ummah, the choice is no one else but theirs.


1 comment:

  1. Thanks Haji Zahid,
    Reminds me of a friend in such situation..and I had to loan some money to ease his burden. tapi dia lupa sampai la ni...