Today I had the privilege of attending the Sustainable Development Goals Forum at Sasana Kijang, and it is interesting to have a different perspective to the idea of Islamic Banking. I have always had the impression that Islamic Banking is the means of reaching the Maqasid of Shariah (objectives of Shariah). However, listening to the forum, I realise Islamic Banking is probably only the START of the journey to the Maqasid of Shariah.
THE MAQASID OF SHARIAH
In general, the development of Usul Fiqh is to ensure the 5 objectives of Shariah are met, and the legal framework revolves around these understanding. To remind ourselves what those are:
- Protection of Religion
- Protection of Life
- Protection of Intellect
- Protection of Lineage
- Protection of Property
In the same breath, it is envisioned that Islamic Banking is also designed to help achieve the Maqasid of Shariah. But if you really look into it, banking per se has been so far developed to mainly fulfil the 5th objective which is “Protection of Property“. It deals mainly on the Muamalat element (economic relationships) of humans in daily life. Thus so far, most of the objective elements in a banking perspective revolves around:
- Are the funds deployed by bank used to finance Shariah compliant activities?
- Are the transactions valid and follows the minimum tenets of the contract?
- Are the processes following minimum Shariah requirements that avoid Riba (usury), Gharar (uncertainty) or Maisir (Gambling) elements?
- Are the features of the products and services resulting in justice and fairness to the customers?
- Are the products and services deliberated and assessed by the Shariah Committee to be in compliant to Shariah law and its veritable sources?
A lot of banking activities aims to comply with “Shariah requirements”. However, this is a snapshot of just one portion of the whole Islamic value chain, which simply looks at only the part where the bank’s processes and practices satisfy the minimum requirements to ensure transaction validity. This makes the process “Halal”. But is being “Halal” enough?
WHY IS HALAL NOT ENOUGH
In a Muslim’s daily life, many aspect revolves around “Halal”. In particular we prefer Halal food, which means the food is prepared the right way according to Muslim traditions, which excludes liquor, un-slaughtered animal meat, and pork or lard. In the banking proposition, these are Riba, Gharar, Maisir and unjust practices. But these are still within the control of the banking institutions. Avoiding these, surely Islamic Banking practice equals Shariah compliance.
But is merely being Shariah compliant sufficient to meet the objectives of Shariah?
Halal, in my view, only corresponds to the minimum requirements in meeting Maqasid of Shariah. Stopping at “meeting Shariah compliance in terms of products, services, and operational requirements” does not necessarily satisfy Shariah in a larger worldview.
One of the reasons of why I posted the picture of the Sustainable Development Goals (SDG) by the UN is that business activities should also take into consideration the environment in which it operates. The idea is to practice the business in a way that it provides a “Social Impact” to the community in particular and even for the country. Using propositions such as SDG provides a starting point beyond just “Halal”. It talks about taking responsibilities and accountabilities to the local community to ensure that the product on offer are not just “Halal” but also helps the community with meaningful improvements.
This is where “Sustainability” suddenly moved to the forefront.
SUSTAINABILITY : BEYOND HALAL
The idea is not new. It has gone through various incarnations, and the more popular terms are Ethical Banking, or Sustainable Banking. These ideas however, are still very much internal arrangements, but rarely a view of the whole value chain. The idea is that not just being halal, but also being clean, fair, compassionate, helpful, and humane. This is where the objectives of Shariah can be met.
A fair illustration of the above (which I picked up at the forum and it is a good one) is the conditions of rearing chickens. You have a chicken farm to supply chicken to your area. You supply the chicken which have been halal slaughtered and as far as your are concerned, you have met the “Halal” requirement ie slaughter in the traditions of Islam.
But how about the value chain of chicken rearing? Yes, the minimum requirement is met i.e. halal slaughter, but the end-to-end practices in this single transaction have not been looked at. Will it meet the standard that will be imposed by Shariah if they are made aware of it? Let’s look at the value chain of chicken rearing.
- Chicken eggs incubated for chicks or small chicks bulk purchased from suppliers
- Chicken are reared in cramped caged farms, or allowed to run free-range within the compound
- Chicken are fed for 46 days to maturity with natural feed, or processed pellets which may/may not have antibiotics in them
- Upon mature age, chicken are taken to be slaughtered under the Islamic traditions
Therefore, the Halal portion of the whole process is only No (4) which is the slaughter. Items (2) and (3) have the potential of making the value chain “Un-Islamic”. The question will be :
- If the chickens are kept in cramp places with diseases, is this considered acceptable under the objectives of Shariah?
- If the chickens are fed continuously with pellets containing growth hormones and antibiotics, is it ethical in the eyes of Shariah?
This is where Sustainability comes into the picture. There is a word that can aptly fit into this : “Thoiyyib” which means “pure”. A bank should look at the whole value chain of things to then decide whether a business activities is only “Halal” or “Halal + Thoiyyib”. This should be the new standards, when we think about achieving the objectives. There are many propositions on Sustainable practice which banks and customers can take cue from and develop further. Incentives to companies that adopt sustainable practices should be given, as sustainable practices are meant to be more humane, fair, just and gives bigger social impact than just being Halal. It is a skeleton than supports the whole community in sustainable activities. This includes concepts such as environmental friendly, non-polluting disposal, good waste management, people inclusion to jobs and equal opportunities, providing safety and security to communities, involvement in clean / renewable energies, and also providing education and equality in pay and relationships.
THE CHALLENGE
In my view, achieving “Sustainability” is a bigger challenge to overcome. But the rewards can potentially be bigger, as all institutions in the value chain become less “profit driven”. There are too many elements to choose from, and it is expected to take years to achieve. There will be cost to implement this but there is a need to rely on the well-being of the overall community for you to potentially profit. Choosing sustainability suggest choosing positivity, and continuity.
These concepts are also covered under the Value Based Intermediation (VBI) initiative that is promoted by BNM. Click link to see the Strategy Paper for VBI.
Making the jump from Halal to Thoiyyib takes political will and commitment as well as collaboration with all parties in the value chain. Some sacrifices are needed as there will probably be some costs to the processes. However, with clear objectives to be met, being Halal cannot be the end-game.
“Halal” should now just be minimum requirements, but can we be bold enough to take the next leap to take banking beyond Halal?
EXCERPT : In ‘Islamic’ Banking, we dance around issues as if vying for a Bollywood Oscar. The latest theme, on ‘Sustainability’, is fashioned after the United Nations (UN)’ Sustainability Development Goals (SDG), in concert with other large organisations such as the Islamic Development Bank and the World Bank. While they may seem like a natural fit with goals such as peace, justice and decent work for all, a closer look uncovers a few fundamental flaws. Firstly, while championing social and environmental wellness, we continue to evade the main issue, which is that profit- and loss-sharing, arguably the main tenets of Islamic Banking, have been replaced with tawarruq, which resembles riba in form and spirit. Secondly, and related to the first argument, this concept of ‘Sustainability’ is at odds with the modern financial system. One is about preserving for future generations while the other belies a winner-takes-all mentality. There is a view that like Islamic Banking, ‘Sustainability’ cannot be sustained in Commercial Banks even though several of them, from Singapore to London, have adopted the practices. In Islamic Banks’ (blind) pursuit of Commercial Banking, are we being set up for failure?
Islamic Bankers Resource Centre 