Dear Redza Rais Jamil,
Assalaamu 'alaikum!
Thank you for the very valuable correspondence (under) which you shared with
me. It is a classic case which I intend to quote in my future writings.
Kindly note that I have never said that Murabaha is a form of Riba. Rather
I have declared that the transaction which Islamic Banking has described as
Murabaha is not Murabaha!
Murabaha is a (business) transaction which realises a profit and in which
all parties to the business transaction are aware of the amount of the
profit. It matters not whether the transaction is a cash or a credit
transaction it would still be Halal and would still be Murabaha.
However, while the blessed Prophet (s) did enter into credit transactions
there is absolutely no evidence whatsoever that there was ever any increase
of price (over and above cash price or market price) in a credit
transaction. Indeed Riba in Makkah was practiced in precisely this way that
in lieu of an extension of time (in which to pay, i.e., credit), the
outstanding amount which was owed was increased. Thus Makkah believed that
'time' had 'value'.
Hence what Islamic Banking is doing around the world today when it argues
that an increase in price because of time (i.e., that 'time' has 'value') is
Halal is false and has no basis in the Qur'an or Sunnah. In fact it is
Riba!
If an increase in price over and above CASH price is permitted in a CREDIT
transaction in the four mazahib (as the bank argues) then that permission
must itself be firmly grounded in the Qur'an and Sunnah. I invite the
scholars of the Islamic Bank to provide the texts of the relevant fatawa of
the four mazahib with the legal arguments from the Qur'an and Sunnah which
support them so that they can be scrutinized.
Finally let me remind the scholars of the Islamic Banks of the famous
warning of Umar (ra) that we should abstain not only from Riba but, also,
from all that is DOUBTFUL (of whether or not it is Riba). Hence there is an
imperative for the Bank to demonstrate BEYOND DOUBT that the so-called
Murabaha transaction is FREE FROM DOUBT.
I urge that we proceed with this task free from intimidation and with mutual
respect for each other.
with love,
Imran N. Hosein in the Caribbean island of Trinidad.
----- Original Message -----
From: "Redza Rais Jamil" <
redza@pacific.net.sg>
To: <
ihosein@onejamaat.com>
Cc: "Kolin" <
norlinda_malias@petronas.com.my>
Sent: Sunday, August 17, 2003 6:03 AM
Subject: Bank Islam in Malaysia
> Assalamualaikum,
> I recently came upon an article regarding the practices of Bank Islam in
> Malaysia.
> I would like to foward it to you as a matter of interest. Bank Islam's
> reply follows the said article.
>
>
> --------------------------------------------------------------------------
--
> ------------------------------
>
>
> Saturday, 28-Jun-2003 7:13 AM
>
>
> Malaysia's Bank Islam: A bank steeped in usury
>
>
> Raja Petra Kamarudin
>
>
> The Quran says, if you lend someone money, take back only the exact amount
> you lent him and not a cent more than that. The Quran further says that if
> the person you lent money to is unable to pay back the amount borrowed in
> the agreed time, then give him grace until such a time he is in a position
> to do so.
>
>
> Prophet Muhammad has asked all Muslims to follow the Quran, both to the
> letter and the spirit, in conducting your daily affairs. If the Quran is
> "silent" on certain issues, then the sayings of the Prophet are to be your
> guiding light. And, if the Prophet has never decreed certain things, then
> the examples or actions of the Prophet are to be used as the rule instead.
>
>
> Only when all three above are silent can the council of religious leaders
> come out with a decree. But this would only apply to issues which are
> peculiar to modern life and may not have been prevalent in the days of the
> Prophet.
>
>
> For example, should an abortion be carried out on a mother who has AIDS if
> the doctors know for a fact that the baby will be born with AIDS? AIDS was
> not something that was around in the days of the Prophet so there is no
> clear rule on such matters. The council, therefore, may come out with a
> ruling on this.
>
>
> However, in matters involving usury, there are clear rules in Islam - in
> all religions, in fact. The Jews are forbidden to charge interest on loans
> extended to fellow Jews, though they may charge non-Jews interest. The
> Bible's only account of Jesus going on a rampage is when he chased the
> money lenders out off the temple. I take it that Jesus too was against the
> business of charging interest.
>
>
> The Prophet said there are 60 levels of usury, and the sin for the lowest
> or most "harmless' level is equivalent to the sin of intercourse with
one's
> own mother. That is how serious Islam views usury or riba'.
>
>
> The question now would be, how Islamic is Malaysia's Islamic Bank or Bank
> Islam and does it comply with what Islam has prescribed?
>
>
> I think not! And let me relate my own experience with Bank Islam.
>
>
> About 20 years ago, I took a RM1.5 million loan from Bank Islam. They
asked
> me for collateral and I offered them three pieces of property ? a
> three-storey bungalow house in Bangsar and two shops in Terengganu, each
> which the bank valued for RM500,000.
>
>
> The bank, however, told me it did not give out loans. It only financed the
> purchase of properties. We, therefore, signed a Sales and Purchase
> Agreement where the bank "bought" the three properties from me for
RM500,00
> apiece, totalling RM1.5 million.
>
>
> We then signed another Sales and Purchase Agreement for the bank to "sell
> back" the three properties to me for RM1.1 million each. My total
> "repurchase" price for the three properties therefore came to RM3.3
> million.
>
>
> The bank told me it would make a 10% "profit" per year on the "sale" of
the
> three properties to me, which would come to 7.73% a year on a reducing
> balance over 15 years. I was to pay the bank RM18,000 per month or RM6,000
> for each piece of property over these 15 years.
>
>
> And I did so, for the next seven years. By the end of the seven years, I
> had paid the bank about RM1.5 million, the amount I had unofficially
> borrowed from them. Yet I still had about RM1.8 million more to pay over
> the next eight years.
>
>
> I found the monthly payments a burden and felt the bank was making just
too
> much money from me, so I offered to make full settlement on the loan. I
> figured I would have to pay the bank a further RM900,000 or so on the
> "unused" time of eight years, a savings of about RM900,000.
>
>
> Much to my shock, however, the bank refused the full settlement offer. It
> told me it had never given my any loan but instead had "sold" the
> properties to me for a total price of RM3.3 million. I would therefore
have
> to pay them the full amount of RM3.3 million even if I make early
> settlement. In other words, whether I pay up in seven years or 15 years,
> the amount I would have to pay the bank remains the same, RM3.3 million,
or
> another RM1.8 more.
>
>
> My only response to something so preposterous was four-letter words in 65
> different languages ? and I am not talking about the word "UMNO" which,
> incidentally, is also a four-letter word. I told the bank it is worse than
> a so-called Jewish bank. At least the "Jewish" bank sharpens its knife in
> front of you and not sticks it in your back when you are not looking.
> ("Jewish" bank, here, is Bank Islam's interpretation of the conventional
> banking system).
>
>
> Understandably, they took offence to this.
>
>
> I argued that they never bought the properties from me nor did they sell
> them back to me. We only signed two Sales and Purchase Agreements as a
> disguise or front. In fact, the properties were at all times still
> registered in my name. They were never, at any time, transferred to the
> bank. All the bank did was to take a lien on the properties just like in
> any normal loan transaction.
>
>
> I further argued that, in an Islamic sales and purchase agreement, there
> should be the niat (intention) and the lafaz (the verbal declaration). In
> our case, none of these existed. It was intended, from the very beginning,
> that the bank would lend me RM1.5 million. I knew this and so did the
bank.
> This was what the entire transaction was all about and the paperwork such
> as the Sales and Purchase Agreements was just the front for the loan.
>
>
> How can the sales and purchase be legitimate when both parties were fully
> aware that all I was doing was borrowing RM1.5 million from the bank? Our
> niat was a loan, and now I wished to pay off that loan, ahead of time, and
> I demanded a rebate for early settlement.
>
>
> I made one thing very clear, either they agree to deal or I stop paying
> totally and they can sue me. Then we will see how far they can go with
this
> matter.
>
>
> Finally, the bank agreed to the rebate ? they had no choice as I had put a
> gun to their head. But I would still have to pay them another RM1.25
> million, a rebate of a mere RM550,000 on the eight years early settlement.
>
>
> Only RM550,000? I was flabbergasted. I had expected a rebate of at least
> RM8500,000 or RM900,000. This was less than what I had bargained for. The
> bank explained that even this figure is a loss to them so they were
> actually being quite generous. It seems, according to the bank's
reckoning,
> I was denying them their profit by making early settlement. This was the
> "loss" they meant.
>
>
> Under the circumstances I had no choice in the matter ? the rebate figure
> was the bank's prerogative - so I agreed. I then arranged to sell off the
> three pieces of properties to fully settle my outstanding loan with the
> bank.
>
>
> Unfortunately though, as I was in a hurry, I only managed to sell off the
> three pieces of property for a total of RM1 million. The bank was not
> satisfied. They wanted another RM250,000. I urged them to take the RM1
> million first while I sorted out the balance. I had, after all, been a
good
> paymaster and did not miss the monthly payments of RM18,000 and they had,
> after all, recovered the RM1.5 million I had borrowed from them. The only
> amount still outstanding was the "profit" the bank was supposed to make
> from me over the seven years. (They called it "profit", I called it
> "interest").
>
>
> But the bank would only do so if I offered them further collateral, so I
> gave them a few pieces of land that came to a total value of RM500,000.
The
> bank then gave me three months to settle the outstanding balance
RM250,000.
>
>
> I immediately took steps to sell off the land the bank was now holding as
> collateral and Haji Harun Jusoh, the one-time PAS State Assemblyman for
> Kuala Terengganu, helped me find a buyer in Singapore to take the land off
> my hands.
>
>
> I told Haji Harun I was not concerned with the price as long as it was a
> cash buyer because I just wanted to pay off Bank Islam. Haji Harun offered
> the land to the Singapore buyer for RM250,000 on condition it was cash and
> that the amount would be settled within three months. The Singapore buyer
> jumped at the offer as the price was only half what the land was worth.
>
>
> Haji Harun and the Singapore buyer then went to meet the bank carrying the
> RM250,000 cash in an attaché bag. But, to our horror, the bank would not
> accept the cash. I was three weeks late, the bank told Haji Harun and the
> Singapore buyer. The bank had given me three months and it was now a
couple
> of weeks past the deadline.
>
>
> The bank now wanted the "full" amount of RM800,000.
>
>
> Haji Harun showed the bank their letter which confirmed the
full-settlement
> amount as RM250,000. How could they now up the price to RM800,000? The
> delay is not Raja Petra's fault, explained Haji Harun. The Singapore buyer
> had to raise RM250,000 in cash and apply to the Singapore government
> approval to take the money out of the country. What's two or three weeks
> delay, asked Haji Harun.
>
>
> But the bank was adamant. The deal was off. Full amount or no more deal.
>
>
> But why, asked Haji Harun. Why so hard on Raja Petra? "To teach him a
> lesson," replied the bank.
>
>
> I had written an article in Harakah entitled "How Islamic is Bank Islam
> Malaysia?" and they were pissed. They had in fact asked their lawyers to
> commence legal action against me but they would also have to sue Harakah
as
> well. Since Harakah was one of their largest clients they decided not to
> sue but to get me another way. Then there was the earlier four-letter word
> dressing-down I had given them ? they never forgave me for that.
>
>
> Haji Harun and the Singapore buyer walked off and the deal was aborted.
The
> bank then tried to sue me to recover the balance still outstanding but
> withdrew the action when they realised they had no case against me.
>
>
> And that is what Bank Islam is all about. Is this Islamic? Far from it! In
> fact, as what I told Bank Islam, it is less Islamic than the so-called
> "Jewish" banks.
>
>
> Seruan Keadilan
>
> ---------------------------
> The reply
> ----------------------------
> Assalamu 'alaikum warahmatullah.
>
> This is one example of somone who is talking about Muamalat Contracts in
> Islam but knows nothing about the subject matter he is talking about. He
do
> not even understands what riba is all about. Following is the observations
> made by the Shariah Supervisory Council's Secretary of Bank Islam Malaysia
> Berhad regarding the article posted:
>
> 1. Writer's inability to differentiate between contract of Qardh(Loan) and
> contract of Bai'(Sale and purchase). Riba is the extra amount of money
> imposed by lender on the borrower or promised by the borrower to the
lender
> in the contract of Qardh(Loan). Any thing extra imposed by the Seller on
the
> buyer in a sale contract is known in Islam as profit not interest. How you
> calculate this profit is not the issue. You can use annuity factors or
> future value of money or any formula just to arrive at the absolute figure
> of the profit amount. It is just mathematic and how you use this
> mathematical formula will not lead to riba. The essential element of a
sale
> contract is seller, buyer, merchandise, akad and price. The price must be
> absolute figure. How you determine the price is nothing to do with the
> Shariah. Shariah in this instance does not put any ceiling for the profit
> amount except in the case of taghrir and tadlis i.e deception and deceit.
> The hadith mentioned describes the contract of Qardh(Loan), not the
contract
> of Bai'(Sale and Purchase). The differention of the price with respect to
> cash sale and deferred sale is perfectly acceptable in Islam(all four main
> Mazhabs).
>
> 2.Writer's inability to understand the meaning of akad in Muamalat
> transactions. In muamalat transactions, akad is the agreement(offer and
> acceptance) between two parties to the contract. So, in a sale contract it
> is the agreement between the seller and the buyer to sell and purchase the
> specific merchandise with a specific price. This agreement can be done
> verbally or through signing of sale and purchase contract. In some cases,
> the akad is even valid although is not done verbally or through signing of
> any document, in Islam we call it Bai' al-Ta'ati such as sale and purchase
> through vending machines. In fact I don't think the writer of the article
is
> doing sale and purchase transactions verbally all the times, especially in
> the supermarkets, shops and so on. If we agree with the writer that the
sale
> and purchase must be done verbally all the time as what he understands as
> akad when he says "it was nothing more than a paper transaction as there
was
> no real purchase or sale involved here". If what the writer perceives is
> true, then the muslim cannot buy through vending machines, cannot go to
> supermarkets and most interestingly cannot involve in e-commerce.
>
> 3.Writer's inability to understand Law Of Ownership in Islam. The writer
> fails to understand the issue of ownership transfer as Shariah sees it.
> According to Shariah, the ownership of a merchandise is transferred from
the
> seller to the buyer once the akad is executed although the asset is not
> registered in the name of the buyer. This is what Shariah says. Transfer
of
> ownership happens, although the single cent of the price amount is not
paid.
> Registration of asset in the name of owner is done because of the legal
> requirement, not Shariah requirement. If Shariah requires all the asset
sold
> must be registered under the name of buyer, in order to affect the
transfer
> of ownership, then you can imagine how difficult is the process of buying
> and selling becomes!
>
> 4.Regarding the rebate, Islam allows rebate under ibra' contract. However
> the Ibra' is a sole discretion of the bank and normally is not mentioned
in
> the contract. If we mention the ibra' amount then the contract of sale
> becomes null and void according to Shariah if this amount is subject to be
> revoked. I think the operation people can elaborate further regarding
Bank'
> policy on Ibra' because the claim made by the writer is baseless.
>
> 5. With regard to the verses of the Quran mentioned, it is true that Islam
> prefers Muslims to give extension of time and this what we are doing if we
> will be able to restructure the facility given to the customer. But the
> writer fails to understand the context of this verse. This verse refers to
> "dzu 'usratin" meaning that the people who are unable to settle the loan
> because of difficulty due to certain reasons such as death, unable to work
> or people who are suddenly become poor and unable to pay the debt. In Bank
> Islam, we even allocate part of our zakat to help this type of people. But
> in most cases, the customers who fails to pay do not belong to this group.
> They are taking advantage of Bank Islam for not charging the penalty
> interest! So it is cruel and unfair according to Shariah to allow this to
> happen because when the customers fail to pay their debt then the
depositors
> are affected. The bank is obliged by the Shariah to protect the rights of
> the depositors to earn maximum profit for their investments. That's why
the
> property financed is charged back to the bank because we want to protect
the
> depositors' money. This is what we call banking, it is a business to earn
> maximum profit and not a charity. Bank Islam from its first day of
inception
> declares the Bank as a commercial bank not a social bank because making
> profit is the aim as long as the profit earned from halal investments!
>
>
> ---------------------------------------
> And our reply
> --------------------------
>
> Assalamualaikum
> Point 1:
> I quote:
> "The differention of the price with respect to cash sale and deferred sale
> is perfectly acceptable in Islam(all four main Mazhabs)."
> Our answer:
> Isn't this a definition of Riba?
> Point 2:
> From Sheikh Imran N Hosein the author of "The Prohibition of Riba" the
> Murabahah concept (the whole concept Bank Islam in Malaysia is practising)
> is Riba through the back door. ie. lending money on interest disguised as
> sale.
> One form of Riba:
> Increasing the price of an article in consideration of deferred payment.
> This credit transaction is known as riba al-nasi'ah.
> Point 3:
> I quote:
> " This is what we call banking, it is a business to earn maximum profit
and
> not a charity. Bank Islam from its first day of inception declares the
Bank
> as a commercial bank not a social bank because making profit is the aim as
> long as the profit earned from halal investments."
> Our answer:
> Islam as a whole is a charity. Putting business and profit ahead of the
> whole good of Muslims by going around Riba is not a solution to anything.
> Let's put it this way: If it walks like a duck and quacks like a duck....
> Redza Rais Jamil
> Norlinda Mohad Alias
>
>
>
>
>
>
>
>
>
