Response to Conversation with a Journalist

Date: Fri, 24 Feb 2012 00:27:25 +0800
Subject: Re: [MCOBA:109091] Conversation with a Journalist
From:
To: zaziz@hotmail.com

Salam, Bro Zahid, can you elaborate on what the journalist asked you to elaborate?

A clash between Muslim Consumer's Association and AIBIM, the Association of Islamic Banks. AIBIM Press Statement attached. The excessive profits charge by the Muslim Consumers Association here  http://mynewshub.my/eng/2012/02/15509/

 My comments is to a London based Islamic Finance publication. Coming out next week I believe.

The key issue I see in a dual banking system, is that Islamic banking benchmarks returns on investment based on the returns of a conventional banking system.

I agree that Islamic financial institutions are businesses, and that profit making is necessary. But benchmarking what 'poor' or 'good' returns are, both from the consumers and bankers point of views, based on the conventional system surely defeats the purpose of Islamic financing? On what basis, for example, does xxx bank Islamic financing justifies a premium of RM1million on a RM400,000 house loan that I'm taking now? Yes, the tenure is for 30 years, but still, that looks far too excessive to me. Will the value of my house really reach that price?

Yes I see your point Islamic banks should earn less profit being Islamic in nature. Issue here is the KPI set by the owners of Islamic banks. We need to tackle the owners before the operatives can change.

'Re-engineering' of riba based financing just to make it halal without removing all the negative impacts of riba', I just don't see any difference and benefits of having so called Islamic financing, as it is the negative impacts of riba' that makes it haram.

Absolutely spot on. Currently many Islamic banks especially the newer ones wants Islamic Finance products that carry the same risk and rewards profile as conventional products. That is why there is a great movement now to push them to be more equity in nature. ie focus more on Mudarabah and Musharakah than just debt based products.

If Islamic bankers see the opportunity costs of providing Islamic financing as the returns gained from conventional financing, and as such benchmarks it accordingly, then surely there's no use for them to be in Islamic financing in the first place? Are Islamic bankers only going into the Islamic finance industry to exploit the 1billion Muslims in the world who are trying their level best to search for god's blessing?

The owners bro, the owners., Change the owners and change the mindset and we will see a difference. The Operatives is also a problem if they are shallow in the knowledge of requirements of Shariah.

You mentioned the importance of achieving Maqasid Shariah. Without a decoupled system, this can never be achieved. Key to having a decoupled system is to have a paradigm shift against excessive return levels from conventional systems and to identify the real opportunity costs, from an Islamic standpoint.

Make riba haram to Muslims will be a start. But we need knowledge, understanding and commitment on the part of those who can make decisions.

Can we try to put a dollar value on the importance of achieving Maqasid Shariah? How much financially worse, collectively, shall society be, without achieving the shariah objectives in our financial institutions? Surely this needs to be included when identifying the opportunity costs.

Tough question bro. How much financially worse off will a Muslim be if he ignores the obligation of going to Haj, of doing his daily prayers, of saum in Ramadhan etc. Nothing beats education. we need to relook Islamic education in schools. Make it deeper going beyond recitals and fardhul 'ain

Looking forward to your feedback on this matter, thanks.

Regards,

Zamir

9498