1/ Recently, there was a sudden uproar in twitterraya criticizing the practice of Islamic Banking.
The uproar was a result of a twitter space event by @magmalaya inviting Safdar Alam to explain his views about riba and Islamic Banking,

2/ which gained significant traction among the young Malaysians.
This is a thread in sharing my views on issues raised by Safdar Alam.

3/ First of all, before I start, I would like to stress out that the views I will be sharing are not in any way affiliated or shall be construed as an official opinion of any organizations I am or was attached to in my work experience.

4/ Secondly, I have no intention whatsoever to have a public debate with Brother Safdar Alam on his views. This is on only me as my moral obligation to share my views based on my knowledge and experience in Islamic finance.

5/ Thirdly, I respect him as someone older than me and I thank him for his years of contribution in Islamic finance. Fourthly, I would like to stress out that I am not claiming that I am the brightest of all and of course not the most experienced.

6/ But I feel that my background and work experience provides me with good fundamentals and basis to speak out about this topic. I am classically and formally trained in two different fields; Shariah and Economics where I boast two different degrees and a Master Degree.

7/ My 10 years work experience also involves roles as a regulator (BNM), a Multinational Banking Company, and GLC Banking Institution, all in the area of Shariah and Islamic Finance. You can search my bio on LinkedIn with the exact same name and exact same profile picture.

8/ I will be dividing my points to 4 parts:
1-Addressing the points I agree with brother Safdar
2-Addressing the points I disagree with him
3-Addressing some other comments by twitterraya
4-Conclusion and the way forward

9/ Ok, let’s start with what I agree with.
Brother Safdar urged his listeners to stay away from riba and live within your means.
200% agree with him. Prohibition of riba is clearly stated in the primary and secondary sources of Islamic knowledge.

10/ On the other hand, consumerism has been one of the diseases of manking leading to multiple social problems.
People are taking unnecessary bad debts to sustain a glamorous lifestyle, all because of the dopamine of sharing these things on social media.

11/ Be honest, how many of us love to snap pictures drinking starbucks, eating in fancy restaurants, spending holidays in fantastic places?

12/ If you have the means to do it, go ahead. If not, why are we swiping our credit cards to enjoy these things even though we know that we might not be able to fully pay the outstanding amount on the due date?

For these two points, he is spot on.

13/ Now, let’s move towards where I would have to depart from his arguments.
Basically, the ultimate premise of brother Safdar is that the business model of banking (taking deposits and giving credit) is riba and totally haram in whatever form, Islamic or otherwise.

14/ I can understand his views because based on his experience, the economic impact of a shariah-compliant financing is more or less similar to a conventional loan (i.e. rates are the same).

15/ But this is where I would provide a different opinion in understanding this. There is a HUGE difference between a shariah-compliant financing structured around shariah-compliant contracts and conventional loans.

16/ First of all, Islamic financing is structured around legally acceptable Shariah contracts. It can be a sale, a lease, etc. We are allowed to take profits on these activities as long as there are conducted within the parameters of Shariah outlined by the Shariah scholars.

17/ Even though the rates between Islamic financing and Conventional financing may be the same, one is governed under the activities allowed by Shariah and the other is not.

18/ A simple analogy would be a ‘Kari Ayam” cooked using a slaughtered animal and not. Both taste exactly the same, but one is haram and the other is not. Why?

19/ Equating the economic impact of an Islamic financing and a conventional loan as the same does not bring justice to the discussion. For instance, Islamic banks in Malaysia does not charge you any interest for late payment and does not compound it on top of the payment due.

20/ Islamic banks are only allowed by the BNM, to charge a max of only 1% as compensation to cover administrative costs of the bank as a result of late payment. And these charges cannot be compounded and need to be justified and presented to the Shariah Committee of the bank.

21/ Secondly, I disagree on his understanding of what would be the definition of riba. As mentioned earlier, he is of the view that a credit provider business model in whatever form is a riba based business. This is not consistent with the views of the ulama’s,past & present.

22/ The prohibition of riba is clearly stated in the Quran, but the illah of riba is not. This is where the ulama’s using their capacity and knowledge in understanding Shariah provides guidance to humanity.

23/ It is important to understand that ulama is the responsible party in determining a specific consistent illah (reasoning) on the prohibition of riba. Not me. Not Safdar.

24/ To talk about riba and its definition would be long. But in summary, the illah of riba is any increase or excess which accrues to the lender, without giving in return any equivalent counter.

25/ This illah shall be consistent at all times. Whatever type of business model you are doing, if the illah of riba is there, then it is prohibited.
Ulamas do not prohibit the credit providing business as long as it is executed within the ambit of Shariah.

26/ Some may argue that, hey, there were no credit businesses during the time of the prophet, why do we need one now?
But….. are you really sure there were no such things during the time of the Prophet?

27/ For your information, it is clearly stated in the Hadith that our Prophet allows a form of credit in the form of bay` al-salam.

28/ Bai’ al-Salam is an agreement that involves a creditor providing advance payment for homogenous goods that are to be delivered later at a specific date and time. Isn’t this a credit providing business?

29/ Another example is the story of a Sahabah who was regarded as trustworthy and the villagers always come to him for him to keep their wealth. Because the wealth was kept by him for a long time, he did use it for personal purposes including business activities.

30/ Therefore he had declared to his depositors that the wealth kept with him was no longer in the form of safekeeping (wadhiah contract) but was actually a loan to him. Isn’t this also the exact same thing Islamic banks are doing now?

31/ Yes, you can say that at the time of the prophet, these things were only conducted on a small scale and not at a systematic level. But hey, aren’t all things like that?

32/ For instance, there are no specific army squads with salaries during the time of the prophet. All adult Muslims are required to go to jihad when there was a calling to do so.

33/ But Khalifah Umar organized the Army State department. A register of all adults who could be called to war was prepared, and a scale of salaries was fixed. Therefore are we saying that Khalifah Umar was wrong because organizing something that was not done by the prophet?

34/ This is the beauty of Islam. Shariah is very flexible in satisfying the needs of mankind. As long as it is consistent with Shariah and fiqh as established by generations of Ulama, it is perfectly halal to explore innovations including establishment of an Islamic bank.

35/ This is why it is important to understand the objectives of Shariah including the concept of hajah (need). The need for credit is an acceptable hajah in Islam. There are various sources in the Quran and Sunnah acknowledges the need to take credit.

36/ Surah al-Baqarah verse 282 (the longest verse in the Quran) talks about debt.

37/ Surah al-Baqarah verse 185 clearly stated that “Allah wants ease and not hardship for you”. Nowadays, it is very difficult for us not to take any credit at all to execute our duty as khalifah on earth.

38/ For instance, if you just started working, have no income or savings whatsoever, but require a car or a motorcycle to go to work and gain some halal rezeki in order to contribute to the society, are you saying that muslims should avoid taking credit from Islamic banks?

39/ Then how are you gonna perform your work? This is why Islam allows mankind to take credit to fulfil their needs in this world.

40/ The main problem is when we are too extreme on both spectrum of the argument. We shall not take excessive credit beyond our capacity. If you have a modest need to buy a Saga, why do you opt to buy a Honda Civic instead even though your credit profile allows you to do so?

41/ On the other hand, if you totally avoid taking credit to make purchases for your needs, as a Muslim, are we gonna allow others to buy all properties in our land using banking loans, rent it to us, whilst we wait patiently,

42/ saving our funds (and at the same time paying rent) to buy our homes in the future? Think about it.

43/ The other thing that I disagree with our respected brother is when he told his listeners that you yourself are responsible in front of Allah in the judgement on your actions including involving in Islamic banking business which he considers as Riba. Not him, not the ulama.

44/ This is not totally wrong but also not totally right. In Shariah, you will be responsible for your actions within your level of capacity and expertise.

45/ Other than that, there is a concept of mufti (scholars providing opinion) and mustafti (the masses asking for opinion from scholars) in Islamic jurisprudence (usul al-fiqh) principles.

46/ Islam recognizes that not all mankind has the ability and expertise to be a Shariah scholar. All of us have a role to play in this world.

47/ That is why it is important to understand as long as we follow whatever fatwa provided by the experts, we will be absolved from any liability in front of God in the hereafter.

48/ The one that would be answerable to God will be the Ulamas providing the opinion. A hadith by the prophet stated that a scholar providing a correct fatwa will be rewarded with TWO rewards. If he made a mistake, the scholar will be rewarded with ONE reward.

49/ YES. Still be rewarded even though he is wrong PROVIDED he already has exercised his utmost best effort in his capacity to provide the opinion.
This is the beauty of Islam.

50/ This is why there are differences of opinion between Shariah scholars in various issues, and we as the masses are allowed to follow the muftis and experts we refer to.

51/ In relation to the Islamic banking practices in Malaysia and also around the world; these practices have been approved by various reputable and credible Shariah scholars locally and globally.

52/ Our brother somehow pointed out that these scholars were misguided and may to a certain degree have a conflict of interest when providing opinions to these banks. If only a small minority of scholars approved Islamic banking, then there may be a merit to his claims.

53/ However, the number of scholars approving Islamic banking practices is huge. Some of them have an extensive number of years of experience in studying the day-to-day Islamic banking operations.

54/ I understand that certain segments of twitter crowd would be skeptical with the “ustaz” providing fatwas.

55/ While I agree there are a number of Ustaz with little expertise providing ridiculous opinions to masses without any fundamental knowledge, there are a huge number of other scholars with real knowledge out there.

56/ Especially in the Islamic finance space. Most if not all Shariah scholars in the Islamic finance space are dedicated researchers and academicians dedicated their whole life to the advancement of knowledge behind lenses.

57/ Locally, Malaysia has a central governance authority on Shariah matters under Bank Negara Malaysia for Banking which is called Shariah Advisory Council of BNM.

58/ The council is chaired by Tan Sri Dr Daud Bakar and the deputy is Prof Dr Ashraf Hashim. The full list can be referred here:
https://www.bnm.gov.my/shariah-advisory-council

Try to google these people. Read about their credentials and their contributions.

59/ Globally, we have scholars such as Shaikh Nizam Yaqubi, Prof Dr. Yusuf Shubaili, Dr Muhyiddin Ali al-Qaradaghi, Dr Nazih Hammad, and many many more.
Reading their credentials, I strongly believe we cannot just simply say ‘oh there are misinformed and by the market'.

60/ The last thing I would like to point out before I talk about other comments by twitterraya is that recently, brother Safdar made a twit comment stating that AAOIFI have denses of pages about tawarruq however he only finds a 4.5 line of fatwa by the SAC.

61/ For your information, the BNM has already issued 14 Shariah standards including Tawarruq where these standards are regulatory requirements to be adhered to by the Islamic Banks in Malaysia. WAJIB IKUT!

62/ And Shariah Standards on Tawarruq has 34 pages!
https://www.bnm.gov.my/documents/20124/938039/pd_reissuancetawarruq_dec2018.pdf/bcc4b359-381c-5035-f9f0-3908faebb92a?t=1592249563244

63/ My point is that it is unfair for him to be heavily criticizing the Islamic banking practices in Malaysia without even understanding the practices and regulatory landscape in Malaysia.

64/ Now, on the other comments but actually only one I would be addressing: ‘Islamic banks are more expensive and oppressive than conventional banks.’

The question I would like to ask all of you: Is this a fact backed by data or a myth?

65/ Based on my experience, I can say with 99% confidence interval that Islamic banking rates are less if not the same as conventional banking rates. In certain cases I can say that Islamic banking is cheaper and more lenient to its customers.

66/ For instance, a conventional credit card will charge you interest rates on top of interest rates. If there are any late payments, the penalty will be compounded on top of all the debt.

67/ For Islamic Credit Cards, any profit charges by the bank shall not be compounded. The total debt incurred by conventional credit card clients will be way more bigger than Islamic client.

68/ Moreover, The Shariah Advisory Council (SAC) of BNM also has ruled that Islamic financial institutions are not allowed to include and compound for any accrued profit from the original financing in the new principal amount of restructuring and rescheduling in financing.

69/ This is because such practice will amplify the amount of profit on debts (compounding profit).

Conventional loans have no such restrictions.

Still thinking that Islamic products are more expensive?

70/ Conclusion and the way forward:
We all agree that Islamic banking is not perfect. Of course there is room for improvements, especially in their marketing activities where Islamic banking should not follow in the footsteps of banking in promoting consumerism among us.

71/ But, as a Muslim, why would we choose to subscribe to conventional loans while there is already a halal alternative in Malaysia?

72/ I urge all twitterraya who have interest on such a topic after listening to Safdar Alam to widen your sources of knowledge in this space. Try listening to talk from credible and respectable Shariah scholars in the space.

73/ After that, if you are more inclined to Safdar’s view and are willing to practice a lifestyle where you don’t need to take credit to buy a car or a house and have the ability to save your funds on a monthly basis until you can afford to buy these items via cash,

74/ feel free to do so. No one should judge you on your preference.

75/ But, if you feel that there is a need on your side to take healthy credit, to purchase items which will help you perform your role in this world, as a husband, wife, teacher, police, banker, etc, then you have a choice.

76/ To subscribe to Islamic banking products which have been certified by majority of Shariah scholars in this world (with only a small number of people view they are the same with conventional banking),

77/ or to subscribe to conventional loans which have no Shariah certification whatsoever by any Shariah scholars.

The choice is yours.

78/ Thats all. Hope the thread benefit the readers.

I would like to thank my good friend @MatRodi_MY for encouraging to step forward and share my views in the twitter space on this topic. May Allah bless us all.