AL-WAKĀLAH BI AL-ISTITHMĀR IN MALAYSIAN ISLAMIC FINANCIAL INSTITUTIONS: A CRITICAL
ANALYSIS FROM FIQHĪ PERSPECTIVE
AMNISUHAILAH BINTI ABARAHAN
A dissertation submitted in fulfilment of the requirement for the degree of Master of Islamic Revealed Knowledge
and Heritage (Fiqh and Uṣūl Fiqh)
Kulliyyah of Islamic Revealed Knowledge and Human Sciences
International Islamic University Malaysia
Al-wakālah bi al-istithmār is one of the recent instruments introduced in the Islamic banking industry, particularly under deposit-taking products. This research is aimed at examining al-wakālah bi al-istithmār and its operation as a Sharīᶜah compliant deposit-taking product as applied by Islamic Financial Institutions in Malaysia from the Fiqhī perspective. The main features and fiqh issues of al-wakālah bi al-istithmār is highlighted and analysed. This is a qualitative based research where related data and information are taken from various related literatures, conducted interviews with financial officers as well as official documents of respective financial institutions.
This thesis also evaluates the privileges as well as shortcomings of this instrument compared to other products such as qarḍ, wadīᶜah and muḍārabah. The comparison is indeed crucial so as to know the sustainability of this instrument. Polemical issues, in the case of early withdrawal for example, are also discussed to find considerable solutions where possible so that the instrument serves its compliancy in the field. This research also includes the investigation of al-wakālah bi al-istithmār in terms of its flexibility and consistency in its application at Al Rajhi Bank, Public Islamic Bank and AmIslamic Bank in Malaysia, where similarities of application such as in profit equalisation reserve, and slight differences in terms of remuneration are apparent. The viability and future prospects of al-wakālah bi al-istithmār as an alternative instrument such as that in ṣukūk, takāful as well as Islamic unit trusts are also addressed. The finding of this research shows that the element of remuneration, as studied in the three financial institutions, constitutes a very important initial role in the contract of wakālah bi al-istithmār. It is the state of bindingness or non-bindingness of the contract that will later result to subsequent effects in the deposit-taking product. It is also found that wakālah bi al-istithmār has a lot of resemblance with muḍārabah but significantly, wakālah bi al-istithmār is able to eliminate the controversial issue associated with reserves. The principle of wakālah bi al-istithmār is potentially viable, however it still requires further research and development to ensure that future alternative products based on this principle will always be in accordance with the requirements of the Sharīʿah.
ﻻﺎﺑ ﺔﻟﺎﻛﻮﻟﺍ ﺪﻌﺗ ﻦﻣ ﺎﺠﺘﻨﻣ ﱪﺘﻌﺗ ﱵﻟﺍ ﺔﺛﺪﺤﺘﺴﳌﺍ ﺔﻴﻣﻼﺳﻹﺍ ﺔﻴﻓﺮﺼﳌﺍ ﺕﺍﻭﺩﻷﺍ ﺪﺣﺃ ﺭﺎﻤﺜﺘﺳ
ﻊﺋﺍﺩﻮﻟﺍ ﻲﻘﻠﺗ ﺕﺎﺠﺘﻨﻣ .
ﻻﺎﺑ ﺔﻟﺎﻛﻮﻟﺍ ﻒﺸﻜﺑ ﺚﺤﺒﻟﺍ ﺍﺬﻫ ﻑﺪﻬﻳ ﺐﺴﺣ ﺎﺎﻘﻴﺒﻄﺗﻭ ﺭﺎﻤﺜﺘﺳ
ﻊﺋﺍﺩﻮﻟﺍ ﺓﺍﺩﺃ ﻯﺪﺣﺈﻛ ﺔﻴﻣﻼﺳﻹﺍ ﺔﻌﻳﺮﺸﻟﺍ ﻡﺎﻜﺣﺃ ﻦﻣ ﺎﻳﺰﻴﻟﺎﲟ ﺔﻴﻣﻼﺳﻹﺍ ﺔﻴﻟﺎﳌﺍ ﺕﺎﺴﺳﺆﳌﺍ ﰲ
ﺔﻴﻬﻘﻓ ﺮﻈﻧ ﺔﻬﺟﻭ .
ﻟﺍ ﺍﺬﻫ ﻡﻮﻘﻳﻭ ﺮﺻﺎﻨﻋﻭ ﺭﺎﻤﺜﺘﺳﻻﺎﺑ ﺔﻟﺎﻛﻮﻟﺍ ﺕﺍﺰﻴﳑ ﻞﻴﻠﲢﻭ ﺭﺎﻬﻇﺇ ﱃﺇ ﺚﺤﺒ
ﺎ ﻖﻠﻌﺘﺗ ﺔﻴﻬﻘﻓ .
ﺚﺤﺒﻟﺍ ﺍﺬﻫ ﺪﻨﺘﺴﻳﻭ ﺞﻬﻨﳌﺎﺑ
ﻟﺍ ﺮﻈﻨﻟﺍ ﻝﻼﺧ ﻦﻣ ﺕﺎﻧﺎﻴﺒﻟﺍﻭ ﺕﺎﻣﻮﻠﻌﳌﺎﺑ ﺔﻴﻋﻮﻨ
ﱃﺇ ﺔﻓﺎﺿﺇ ،ﺔﻴﻟﺎﳌﺍ ﻲﻔﻇﻮﻣ ﻊﻣ ﺔﻴﺼﺨﺷ ﺕﺍﺀﺎﻘﻟ ﺀﺍﺮﺟﺇﻭ ،ﺔﻋﻮﻨﺘﳌﺍ ﺔﻘﺑﺎﺴﻟﺍ ﺙﻮﺤﺒﻟﺍ ﱃﺇ ﻴﻟﺎﻣ ﺕﺎﺴﺳﺆﻣ ﻦﻋ ﺓﺭﺩﺎﺼﻟﺍ ﺔﻴﲰﺮﻟﺍ ﺕﺍﺪﻨﺘﺴﳌﺍ ﺓﱪﺘﻌﻣ ﺔ
. ﻢﻴﻴﻘﺘﺑ ﺎﻀﻳﺃ ﺔﺣﻭﺮﻃﻷﺍ ﻩﺬﻫ ﻡﻮﻘﺗﻭ
ﺔﺑﺭﺎﻀﳌﺍﻭ ﺔﻌﻳﺩﻮﻟﺍﻭ ﺽﺮﻘﻟﺍ ﻞﺜﻣ ﻯﺮﺧﺃ ﺕﺍﻭﺩﺄﺑ ﺎﻬﺘﻧﺭﺎﻘﲟ ﺓﺍﺩﻷﺍ ﻩﺬﻫ ﺏﻮﻴﻋﻭ ﺕﺍﺰﻴﳑ .
ﺓﺍﺩﻷﺍ ﺔﻣﺍﺪﺘﺳﺍ ﻯﺪﻣ ﺔﻓﺮﻌﳌ ﺔﲰﺎﺣ ﺪﻌﺗ ﺔﻧﺭﺎﻘﳌﺍ .
ﰲ ﺔﻴﻟﺪﳉﺍ ﺎﻳﺎﻀﻘﻟﺍ ﺔﺣﻭﺮﻃﻷﺍ ﺶﻗﺎﻨﺗ ﺎﻤﻛ
ﺘﻌﻣ ﻝﻮﻠﺣ ﺩﺎﳚﻹ ،ﻝﺎﺜﳌﺍ ﻞﻴﺒﺳ ﻰﻠﻋ ﺮﻜﺒﳌﺍ ﺐﺤﺴﻟﺍ ﺔﻟﺎﺣ ﻦﻣ ﺪﻛﺄﺘﻳ ﱄﺎﺘﻟﺎﺑﻭ ،ﺔﻨﻜﳑﻭ ﺓﱪ
ﱄﺎﳌﺍ ﻝﺎﺍ ﰲ ﺓﺍﺩﻷﺍ ﻩﺬﻫ ﺔﻣﺪﺧ ﻯﺪﻣ .
ﺔﻟﺎﻛﻮﻟﺍ ﺓﺍﺩﺃ ﻦﻣ ﻖﻘﺤﺘﻟﺍ ﱃﺇ ﺎﻀﻳﺃ ﺚﺤﺒﻟﺍ ﻰﻌﺴﻳﻭ
ﻻﺎﺑ ﻡﺎﻌﻟﺍ ﻚﻨﺒﻟﺍﻭ ،ﻲﺤﺟﺍﺮﻟﺍ ﻚﻨﺑ ﰲ ﺎﻬﺘﻣﺎﻘﺘﺳﺍﻭ ﺎﻬﺘﻘﻴﺒﻄﺗ ﺔﻧﻭﺮﻣ ﺔﻴﺣﺎﻧ ﻦﻣ ﺭﺎﻤﺜﺘﺳ
ﻚﻨﺑﻭ ،ﻲﻣﻼﺳﻹﺍ )
ﻡﺃ ( ﺘﳌﺍ ﺕﺎﻘﻴﺒﻄﺘﻟﺍ ﰲ ﺮﻈﻨﻠﻟ ﻚﻟﺫﻭ ،ﺎﻳﺰﻴﻟﺎﻣ ﰲ ﻲﻣﻼﺳﻹﺍ ﻞﻴﺒﺳ ﻰﻠﻋ ﺔﺎﺸ
ﺓﺮﺟﻷﺍ ﺔﻴﺣﺎﻧ ﻦﻣ ﺕﺎﻓﻼﺘﺧﻻﺍ ﻚﻟﺬﻛﻭ ،ﻁﺎﻴﺘﺣﻻﺍ ﺔﻟﺩﺎﻌﻣ ﰲ ﻝﺎﺜﳌﺍ .
ﻯﺪﻣ ﺚﺤﺒﻟﺍ ﺶﻗﺎﻨﻳﻭ
ﺪﳉﺍ ﻻﺎﺑ ﺔﻟﺎﻛﻮﻟﺍ ﺓﺍﺩﻷ ﺔﻴﻠﺒﻘﺘﺴﳌﺍ ﻯﻭ ﻙﻮﻜﺼﻟﺍ ﻞﺜﻣ ﺕﺍﻭﺩﻷ ﺔﻴﻟﺪﺑ ﺓﺍﺩﺃ ﺎﻮﻛ ﺭﺎﻤﺜﺘﺳ
ﺔﻴﻣﻼﺳﻹﺍ ﺔﻧﺎﻣﻷﺍ ﻖﻳﺩﺎﻨﺼﻟﺍﻭ ﻞﻓﺎﻜﺘﻟﺍﻭ .
ﺎﻤﻛ ،ﺓﺮﺟﻷﺍ ﺮﺼﻨﻋ ﻥﺃ ﺚﺤﺒﻟﺍ ﺍﺬﻫ ﻦﻣ ﺺﻠﳜﻭ
ﰲ ﺮﻬﻈﺗ ﻥﻷ ﺭﺎﻤﺜﺘﺳﻻﺎﺑ ﺔﻟﺎﻛﻮﻟﺍ ﺪﻘﻋ ﺃﺪﺒﻣ ﰲ ﺔﻤﻬﻣ ﺓﺭﻭﺩ ﺐﻌﻠﺗ ،ﺓﺭﺎﺘﺨﳌﺍ ﺔﻴﻟﺎﳌﺍ ﺕﺎﺴﺳﺆﳌﺍ
ﺪﻘﻌﻟﺍ ﺍﺬﻫ ﰲ ﺔﻔﻠﺘﳐ ﺭﺎﺛﺁ ﱃﺇ ﺞﺘﻨﺘﺳ ﺔﻣﺰﻠﻣ ﲑﻏ ﻭﺃ ﺔﻣﺰﻠﻣ ﺚﻴﺣ ﻦﻣ ﺎﻮﻛ .
ﻥﺃ ﺎﻀﻳﺃ ﺞﺘﻨﻳﻭ
ﺔﻟﺄﺴﻣ ﻞﻳﺰﺗ ﺭﺎﻤﺜﺘﺳﻻﺎﺑ ﺔﻟﺎﻛﻮﻟﺍ ﻥﺃ ﻻﺇ ﺭﻮﻣﻷﺍ ﺾﻌﺑ ﰲ ﻪﺑﺎﺸﺗ ﺔﺑﺭﺎﻀﳌﺍﻭ ﺭﺎﻤﺜﺘﺳﻻﺎﺑ ﺔﻟﺎﻛﻮﻟﺍ ﺔﻴﻓﻼﺘﺧﻹﺍ ﺕﺎﻃﺎﻴﺘﺣﻻﺍ ﰲ
. ﺕﺍﺭﻮﻄﺘﻟﺍﻭ ﺙﺎﲝﻷﺍ ﻊﻣ ،ﻖﻴﺒﻄﺘﻠﻟ ﺔﻠﺑﺎﻗ ﺭﺎﻤﺜﺘﺳﻻﺎﺑ ﺔﻟﺎﻛﻮﻟﺎﻓ
ﺔﻌﻳﺮﺸﻟﺍ ﻡﺎﻜﺣﺄﺑ ﻰﺷﺎﻤﺘﺗ ﱴﺣ ﺭﺎﻤﺜﺘﺳﻻﺎﺑ ﺔﻟﺎﻛﻮﻟﺎﺑ ﺪﻨﺘﺴﺗ ﱵﻟﺍ ﺔﻴﻠﺒﻘﺘﺴﳌﺍ ﺕﺍﻭﺩﻷﺍ ﻦﻤﻀﺘﻟ
I certify that I have supervised and read this study and that in my opinion, it conforms to acceptable standards of scholarly presentation and is fully adequate, in scope and quality, as a dissertation for the degree of Master of Islamic Revealed Knowledge and Heritage (Fiqh and Uṣūl Fiqh).
Azman Mohd Noor Supervisor
I certify that I have supervised and read this study and that in my opinion, it conforms to acceptable standards of scholarly presentation and is fully adequate, in scope and quality, as a dissertation for the degree of Master of Islamic Revealed Knowledge and Heritage (Fiqh and Uṣūl Fiqh).
Ahmad Basri Bin Ibrahim Examiner
This dissertation was submitted to the Department of Fiqh and Uṣūl Fiqh and is accepted as a fulfilment of the requirement for the degree of Master of Islamic Revealed Knowledge and Heritage (Fiqh and Uṣūl Fiqh).
Ahmad Basri Bin Ibrahim Department of Fiqh and Uṣūl Fiqh
This dissertation was submitted to the Kulliyyah of Islamic Revealed Knowledge and Heritage and is accepted as a fulfilment of the requirement for the degree of Master of Islamic Revealed Knowledge and Heritage (Fiqh and Uṣūl Fiqh).
Mahmood Zuhdi Abdul Majid Kuliyyah of Islamic Revealed Knowledge and Human Sciences
I hereby declare that this dissertation is the result of my own investigations, except where otherwise stated. I also declare that it has not been previously or concurrently submitted as a whole for any other degrees at IIUM or other institutions.
Amnisuhailah Binti Abarahan
INTERNATIONAL ISLAMIC UNIVERSITY MALAYSIA
DECLARATION OF COPYRIGHT AND AFFIRMATION OF FAIR USE OF UNPUBLISHED RESEARCH
Copyright © 2013 by Amnisuhailah Binti Abarahan. All rights reserved.
AL-WAKĀLAH BI AL-ISTITHMĀR IN MALAYSIAN ISLAMIC FINANCIAL INSTITUTIONS: A CRITICAL ANALYSIS FROM
No part of this unpublished research may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise without prior written permission of the copyright holder except as provided below.
1. Any material contained in or derived from this unpublished research may only be used by others in their writing with due acknowledgement.
2. IIUM or its library will have the right to make and transmit copies (print or electronic) for institutional and academic purposes.
3. The IIUM library will have the right to make, store in a retrieval system and supply copies of this unpublished research if requested by other universities and research libraries.
Affirmed by Amnisuhailah Binti Abarahan.
vii Dedicated to
My inspiring and beloved mother Sarimah Awang
My heroic brothers
Muhammad Al-Amin Afiq Safwat Bin Abarahan
Muhammad Adli Safwan Bin Abarahan
In the Name of Allah the Most Gracious and Most Merciful, Alhamdulillah I am truly blessed and grateful to Allah to be given the wonderful opportunity and time to complete this research.
I would like to firstly thank my sponsorship, the scholarship of His Majesty Sultan Haji Hassanal Bolkiah under Ministry of Religious Affairs Brunei Darussalam.
My sincere and deepest gratitude goes to my lecturer and supervisor, Associate Professor Dr Azman Mohd Noor, who has assisted and encouraged me through the whole process of writing this dissertation. For without his help and guidance, the completion of this dissertation would not be possible. I would also like to thank my wonderful mother Sarimah Awang, for instilling in me the importance of education that I will always thirst for. I would also like to thank her for always being the great and strong person that she is. To my two wonderful brothers, Muhammad Al-Amin Afiq Safwat and Muhammad Adli Safwan, I love you both for being the characters that you are and look forward to your continuous success in life. To my dearest love and friend, Muhammad Adlan Aziz Haji Yussop, thank you for your continuous support, encouragement and advice through the process of writing this research.
There are so many that I would like to thank, for it would exhaust this section.
Words could not describe my utmost thanks to all my undergraduate and postgraduate lecturers who have helped me grow both academically and personally as a person. To fellow peers, thank you for making my six-year experience in the university memorable.
TABLE OF CONTENTS
Abstract ... ii
Abstract in Arabic ... iii
Approval Page ... iv
Declaration Page ... v
Copyright Page ... vi
Dedication ... vii
Acknowledgements ... viii
Table of Transliteration ... xii
CHAPTER ONE: INTRODUCTION ... 1
1.1 Introduction ... 1
1.2 Statement of the problem ... 2
1.3 Research questions ... 3
1.4 Objectives of the research ... 3
1.5 Scope of the research ... 4
1.6 Significance of the research ... 4
1.7 Methodology of the research... 5
1.8 Literature review ... 5
CHAPTER TWO: AL-WAKĀLAH BI AL-ISTITHMĀR AS A DEPOSIT- TAKING INSTRUMENT ... 13
2.1 Definition of al-wakālah bi al-istithmār and its permissibility ... 13
2.1.1 Al-Wakālah in general ... 13
126.96.36.199 Definition of Wakālah ... 13
188.8.131.52 Legality of Wakālah ... 15
184.108.40.206 Pillars of Wakālah ... 17
220.127.116.11 Classifications of Wakālah ... 20
2.1.2 Definition of Wakālah bi al-Istithmār and its Application ... 24
2.1.3 The Issuance of the Permissibility of Wakālah bi al-Istithmār. .. 27
2.2 Contractual Relationship between the Bank (wakīl) and the Depositor (muwakkil) ... 29
2.3 The Significant Features of Al-Wakālah bi al-Istithmār as a Deposit- taking Instrument ... 32
2.3.1 Upfront wakālah fee (ujrah)... 32
2.3.2 Expected Profit Rate ... 37
2.3.3 Incentives Based on Performance ... 37
2.4 The polemics of al-wakālah bi al-istithmār as a deposit-taking instrument ... 47
2.4.1 Tanāzul (waiver) in the case of early withdrawals ... 48
2.4.2 Qard (loan) to the investment pool to cater withdrawals... 50
2.4.3 Retaining some of the profits as reserves for profit equalisation distribution ... 52
CHAPTER THREE: AL-WAKĀLAH BI AL-ISTITHMĀR AND OTHER
DEPOSIT- TAKING PRODUCTS: A COMPARISON... 55
3.1 Al-qarÌ and al-wakālah bi al-istithmār ... 55
3.1.2 Definition of al-qarḍ and its application in deposit-taking ... 55
3.1.2 Comparison of al-qarḍ and wakālah bi al-istithmār ... 60
3.2 Al-wadīᶜah (safe-keeping) and al-wakālah bi al-istithmār... 63
3.2.1 Definition of al-wadīᶜah and its application in deposit-taking.... 63
3.2.2 Comparison of wadīᶜah yad al-ḍamānah and al-wakālah bi al- istithmār ... 66
3.3 Al-muḍārabah (profit-sharing) and al-wakālah bi al-istithmār ... 68
3.3.1 Definition of muḍārabah and its application in deposit-taking .. 68
3.3.2 Comparison of muḍārabah and al-wakālah bi al-istithmār ... 74
CHAPTER FOUR: THE APPLICATION OF AL-WAKĀLAH BI AL- ISTITHMĀR IN DIFFERENT ISLAMIC FINANCIAL INSTITUTIONS: FLEXIBILITY AND CONSISTENCY ... 80
4.1 The Practice of Al Rajhī Bank Berhad ... 80
4.2 The Practice of Public Islamic Bank Berhad ... 85
4.3 The Practice of AmIslamic Bank ... 89
CHAPTER FIVE: STRENGTHS AND FUTURE PROSPECTS OF AL- WAKĀLAH BI AL-ISTITHMĀR: ANALYSES ... 93
5.1 Evaluation of Performance of Al-Wakālah bi al-Istithmār as Experienced by Local Banks ... 93
5.2 Future Prospects of Al-Wakālah bi al-Istithmār. ... 96
5.2.1 Takāful (Islamic Insurance) ... 97
5.2.2 Ṣukūk (Islamic Bonds) ... 101
5.2.3 Islamic Unit Trust ... 107
CONCLUSION ... 112
Recommendations ... 114
BIBLIOGRAPHY ... 115
APPENDIX I COURT CASE OF THE INVESTMENT DAR COMPANY KSCC VS. BLOM DEVELOPMENTS BANK SAL ... 123
APPENDIX II AL RAJHI BANK WAKĀLAH BI AL-ISTITHMĀR INVESTMENT ACCOUNT-i BROCHURE ... 132
APPENDIX III AL RAJHI WAKĀLAH BI AL-ISTITHMĀR INVESTMENT ACCOUNT-i TERMS AND CONDITIONS ... 134
APPENDIX IV AL RAJHI WAKĀLAH BI AL-ISTITHMĀR INVESTMENT ACCOUNT-i PLACEMENT DEPOSIT FORM ... 144
APPENDIX V PUBLIC BANK ISTISMĀR ACCOUNT-i BROCHURE ... 146
APPENDIX VI PUBLIC BANK ISTISMĀR ACCOUNT-i TERMS AND CONDITIONS ... 148
APPENDIX VII AMISLAMIC BANK AMADVANCE INVESTMENT ACCOUNT-i BROCHURE ... 152
APPENDIX VIII AMISLAMIC BANK AMADVANCE INVESTMENT ACCOUNT-i TERMS AND CONDITIONS ... 154
b =ب t =ت th = ث
j =ج ḥ = ح kh = خ
d = د dh = ذ r = ر
z = ز s = س sh =ش ṣ =ص ḍ =ض ṭ =ط ẓ =ظ ᶜ = ع gh = غ
f = ف q = ق k = ك l = ل m = م n = ن h = ه w =و y = ي
Short vowels: a i u Long vowels: ā = ا ī = ي ū = و Diphthongs: ay = ا ي aw = او
CHAPTER ONE INTRODUCTION
Ever since Islamic finance started its operations in Malaysia in the year 1983, the industry has developed progressively. Starting from then onwards, various products have been offered by Islamic financial institutions according to the needs of customers. Most importantly, these products are ensured to be based on Sharīᶜah principles, termed as Sharīᶜah compliant. Among the financial products catered to the public are the deposit-taking instruments, which play very important roles in the Islamic banking system. In Malaysia’s Islamic financial institutions, these deposit- taking instruments come under various contracts namely, qarḍ (loan), wadīᶜah (safe- keeping) as well as muḍārabah (profit-sharing). These deposit-taking instruments provide variety to customers in choosing a suitable deposit-based plan based on their whim and will. It is only in recent years that al-wakālah bi al-istithmār is further added as another contract in deposit-taking after the issuance of its permissibility in 2007 by Bank Negara Malaysia. The application of al-wakālah bi al-istithmār contract however, has existed and has been used earlier as an investment concept but for it to be used as an instrument in deposit-taking is clearly something new. Al- wakālah bi al-istithmār involves the mobilization of deposit-taking through the wakālah (agency), where the deposits or funds from customers are invested in Sharīᶜah compliant investments or activities, upon a particular agreed fee to the bank whether it yields profit or loss. The bank however will not guarantee any profit return from the said investment. Due to its only recent introduction into the deposit-taking
field, al-wakālah bi al-istithmār’s application in Islamic banks or even in conventional banks with Islamic modules has not received great exposure as well as overwhelming response.
Another reason could also be attributed to the fact that features of the contract itself have not been discussed thoroughly. For example, on matters regarding the amount of agreeable fee in al-wakālah bi al-istithmār and also its incentivization. The issue of tanāzul (waiver) in the case of early withdrawals in this wakālah bi al- istithmār based deposit still remains questionable. The discussion of this research will in its entirety focus on the application of al-wakālah-bi al-istithmār in deposit-taking.
This research will therefore strive to study and analyse al-wakālah bi al- istithmār as a new instrument for deposit-taking in the Fiqhī perspective. Discussions and analyses will also be done in matters relating to al-wakālah bi al-istithmār to determine the instrument’s practical aspects in Islamic financial institutions and to make sure that the implementation of this instrument is in accordance with Sharīᶜah principles.
STATEMENT OF THE PROBLEM
Al-wakālah bi al-istithmār as a deposit-taking instrument is a new Islamic banking product used in Islamic financial institutions in Malaysia. The researcher has chosen this particular deposit-taking product due to the fact that it is not yet widely applied in Malaysia’s Islamic financial institutions and because of the market’s curiosity of its viability. The real stance of this instrument as one of the deposit-taking products based on Sharīᶜah compliance is still vague. The contract of al-wakālah bi al- istithmār for example, needs to be investigated, clarified, explained and understood correctly from the Sharīᶜah perspective prior to applying it in Islamic financial
institutions. In addition to that, the operational sides and outcomes of this product are also not quite handled comprehensively and critically from the Fiqhī perspective.
Among the related issues are the pricing of the fee and the application of incentive in cases where profits exceed the expected profit rate. The researcher feels that there is certainly a great need to compare the application of al-wakālah bi al-istithmār to other deposit-taking products such as qarḍ (loan), wadīᶜah (safe-keeping) and muḍārabah (profit-sharing) so as to know the applicability of this new instrument when compared to existing ones. This research is also meant to investigate possible prospects in the long run, for al-wakālah bi al-istithmār to be an alternative instrument in other various financial products.
This study attempts to answer the following questions:
1) What is al-wakālah bi al-istithmār?
2) What are the features of al-wakālah bi al-istithmār in deposit-taking?
3) What are the privileges or shortcomings of al-wakālah bi al-istithmār as a deposit-taking instrument compared to other available deposit-taking instruments?
4) How does the structure of al-wakālah bi al-istithmār model as a deposit- taking instrument differ in various Islamic financial institutions?
5) What are the strengths and future prospects, apart from deposit-taking, that could be based on al-wakālah bi al-istithmār?
OBJECTIVES OF THE RESEARCH
This study has several intended objectives. They are as follows:
1) To investigate the full operation of al-wakālah bi al-istithmār as an instrument in Malaysian Islamic financial institutions.
2) To analyse the features of al-wakālah bi al-istithmār contract as a deposit- taking instrument.
3) To study and evaluate the privileges or shortcomings of al-wakālah bi al- istithmār as a deposit-taking instrument when compared to other available deposit-taking instruments such as qarḍ, wadīᶜah and muḍārabah.
4) To study and analyse the consistency and flexibility of al-wakālah bi al- istithmār structure as a deposit-taking instrument applied by different financial institutions.
5) To investigate the viability and future prospects of al-wakalāh bi al- istithmār as an alternative instrument for deposit-taking and other Islamic financial products such as Islamic unit trust, ṣukūk and takāful.
SCOPE OF THE RESEARCH
The research will focus on the operation of al-wakālah bi al-istithmār as a deposit- taking instrument in Malaysia’s Islamic financial institutions. The study will focus on the application of this instrument in Al-Rajhī Bank, Public Islamic Bank Berhad and AmIslamic Bank Berhad.
SIGNIFICANCE OF THE RESEARCH
To the best of the researcher’s knowledge, the topic of al-wakālah bi al-istithmār as a deposit-taking instrument has not been dealt before by previous researchers.
Literature on the subject matter is also limited; only brief discussions can be found in small sections in official trusted websites such as that of Bank Negara Malaysia
without elaboration nor explanation. Literature regarding the subject matter of al- wakālah and al- istithmār in general, are available either in Arabic, English or Malay;
however, those which are specifically related to the scope of the research are few in numbers.
The research is therefore beneficial to find out and provide a suitable platform for al-wakālah bi al-istithmār by investigating the instrument’s compliancy with Sharīᶜah. It will therefore be of valuable information and contribution to financial institutions, especially Islamic based financial institutions in Malaysia and also for the public at large to know the full operation and actual stance of al-wakālah bi al- istithmār as a deposit-taking instrument.
METHODOLOGY OF THE RESEARCH
The research will be conducted qualitatively, depending on library research which will include collection of data on general issues pertaining to the subject matter. Due to the fact that the research is conducted on a new and contemporary issue, findings will also be based on consultations and personal interviews with financial experts of the mentioned institutions, where al-wakālah bi al-istithmār as a deposit–taking instrument is applied. This research will also depend on the thorough study of the institutions’ official documents. A comparative approach will also be done to look at different opinions of jurists from different schools of thought pertaining to the raised issues of al-wakālah bi al-istithmār.
References regarding the topic of this research are limited while those that revolve around the subject do exist but are scattered, scarce and are often explained in general
terms for example in matters regarding al-wakālah and al-istithmār. Others also discuss the issue of deposit-taking instruments but only some are related to the concept of al-wakālah bi al-istithmār, either directly related to the deposit based instrument or that being applied in other financial products.
Al-Juᶜālah wa Aḥkāmuhā fī al-Sharīᶜah al-Islāmiyyah wa al-Qānūn1 by Khālid Rashīd al-Ḥambalī centres on the discussion of juᶜālah in which the researcher closely relates to the discuss on incentivisation. The book contains thorough explanation on juᶜālah, beginning from its definition, sources of permissibility from the Qurʼān and Sunnah as well as its conditions. The author also explains the stance of juᶜālah in various situations such as the withdrawal of one of the parties in ᶜaqd. The researcher finds it beneficial as the author makes a comparison of juᶜālah (incentive) with ujr (fee). This comparison can help the researcher in understanding the two terms better as well as adding information when touching on the issues of fee and incentivisation of al-wakālah bi al-istithmār in deposit-taking.
ᶜIzzu al-Dīn Muḥammad Khūjah and ᶜAbd al-Sattār Abū Ghaddah in the later section of their book titled, Adawāt al-Istithmār al-Islāmī2, wrote on al-muḍārabah.
The discussion on muḍārabah is also general, none specified to the application of muḍārabah in deposit-taking. The information available in this material has helped the researcher to understand the flow of muḍārabah better. The details are arranged in point form. The book is concise in content and it only took the author a page to explain the muḍārabah concept. A rather simple diagram of the flow of muḍārabah is also inserted in this small sized book. The researcher also intends to follow this footstep in including diagrams for better understanding of this research.
1 Al-Ḥambalī, Khālid Rashīd Al –Juᶜālah wa Aḥkāmuhā fī al- Sharīᶜah al-Islāmiyyah wa al-Qānūn (Bayrūt: Maktabah al-Nahḍah al-ᶜArabiyyah, 1986).
2 Al-Khūjah, ᶜIzzu al-Dīn & Abu Ghuddah, ᶜAbd al-Sattār, Adawāt al-Istithmār al-Islāmī (Jeddah:
Majmūᶜat Dallah al-Barakah, Idārat al-Taṭwīr wa-al-Buhūth, 1995).
Bank Sharīᶜah Dari Teori ke Praktik3 by Muhammad Syafi’i Antonio contains a few pages on the general issue of al-wakālah. The reference is elaborated in its discussion where it included Quranic verses, Ḥadīth and the consensus (Ijmāᶜ) involving the concept. Based on this reference, the researcher also feels that the inclusion of diagrams in the research as has been done in the book, will certainly be another effective way of explaining the discussions.
Al-Maᶜhad al-Islāmī li al-Buhūth wa al-Tadrīb in its ninth issue, by Shauqī Aḥmad Dunyā titled Al-Juᶜālah wa al-Istiṣnaᶜ Taḥlīl Fiqhī wa Iqtiṣādī4 revolves around the discussion of how juᶜālah in general, is one of the major components in a particular Islamic banking system. There are two opinions on the issue of juᶜālah where jumhūr, namely Mālikī, Shāfīᶜī, Ḥanbalī and Shīᶜī all agreed on its permissibility whereas Ḥanafi as well as Ẓāhiri, deemed it as part of taking risk, a resemblance of gambling. The latter argue that in juᶜālah, the contract itself is unknown as the particular work to be done is not known. The first half of the book contains thorough discussions on al-juᶜālah in general, including its definition from all four jurists. The arkān (pillars) and conditions of al-juᶜālah are also mentioned elaborately. The book is also beneficial as it states that al-juᶜālah and al-ijārah have quite strong significance with each other but there are certain differences that set them apart. These differences are clearly and simply identified in the book for better understanding. The book has assisted the researcher to understand the need to bring in opinions of jurists in every discussion before starting off directly into giving the explanation. This step does not only reflect a discussion of concrete arguments but
3 Muhammad Syafi’i Antonio, Bank Syariah dari Teori ke Praktik (Jakarta: Gema Insani Press, 2001).
4 Dunya, Shauqī Aḥmad., Al-Juᶜālah wa al-Istiṣnaᶜ Taḥlīl Fiqhī wa Iqtiṣādī (Jeddah: Al-Bank al-Islāmī li al-Tanmiyyah al-Maᶜhad al-Islāmī li al-Buhūth wa al-Tadrīb, 2003).
also reflect the ethical side of the researcher when going into relevant and resourceful references.
Kitāb al-Fiqh ᶜAlā Madhahib al-Arbaᶜah5, Volume Two by ᶜAbd al-Raḥmān al-Jazīrī provides the elaborate definition of al-qarḍ by all four juristic schools as well as the ḥukm associated with al-qard. The term al-qarḍ is only given in general and does not refer to al-qarḍ specifically in deposit-taking. The researcher finds the details to be of great use when comparing al-wakālah bi al-istithmār with al-qarḍ in a later chapter. Al-Jazīrī also mentions the issue of al-wakālah in general in his third volume of Kitāb al-Fiqh ᶜAlā Madhahib al-Arbaᶜah. The information is more elaborate compared to the matter of al-qarḍ, as mentioned previously. In the third volume, the author gives the literal definition of al-wakālah, as well as the technical meaning of the term from all four jurists. Matters pertaining to the conditions and arkān (pillars) of al-wakālah are also available in the third volume of the book. The valuable insights will help the researcher when mentioning about al-wakālah bi al- istithmār in an early chapter.
Besides that, the researcher will also further add information regarding the essence and conditions of general wakālah at the beginning of Chapter Two as the researcher has found valuable additions when reading Ascarya’s Akad & Produk Bank Syarīᶜah6. The discussion of wakālah in general, its essence and conditions in the literature is brief despite mentioned examples of wakālah application; L/C (Letter of Credit), transfer and salary payment.
5 Al-Jazīrī, ᶜAbd al-Raḥmān, Kitāb al-Fiqh ᶜalā al-Madhāhib al-Arbaᶜah (Bayrūt: Dar al-Fikr, 2004).
6 Ascarya, Akad &Produk Bank Syarīᶜah (Jakarta: PT Rajagrafindo Persada, 2007).
The book by Muḥammad Najdāt al-Muḥammad titled Al-Wakālah fī al-Fiqh al-Islāmī wa Taṭbīqātuhā al-Iqtiṣādiyyah al-Muaᶜṣirah7 is based totally on the discussion of wakālah. It is the only book that the researcher found to be comprehensive in discussing the issue of wakālah as the author wrote on wakālah in general, which is from fiqh perspective, wakālah in financial services as practiced in banks as well as wakālah’s applications in investments. The author also mentions the types of deposits but the information on al-wakālah bi al-istithmār as a deposit-taking instrument is not available.
Another book which has a section discussing the concept of al-wakālah is Engku Rabiah Adawiah Engku Ali and Hassan Scott P.Odierno’s Essential Guide to Takāful (Islamic Insurance) 8. This book explains al-wakālah in the field of takāful investments. The explanation found in the book is detailed. The authors mention that the authorization of wakālah can be specific and general. This helps the researcher to bear in mind to insert the discussion when touching on the general essence of al- wakālah in the early chapter of the research as well as a source of reference when dealing with the takāful prospect in the final chapter.
To know the real stance of al-wakālah bi al-istithmār, the researcher will need to know the pros and cons of this concept. Prosiding Muzakarah Penasihat Syari’ah Kewangan Islam of Kuala Lumpur Islamic Finance Forum (KLIFF)contains several proceeding papers presented by various scholars in 2006 and 2007. One of the papers presented by Aznan Hasan is titled Islamic Structured Products: Issues and
7 Al-Muḥammad, Muḥammad Najdāt, Al-Wakālah fī al-Fiqh al-Islāmī wa Taṭbīqātuhā al-Iqtiṣādiyyah al-Muᶜāṣirah (Dimashq: Dār al-Maktabī, 2007).
8 Engku Rabiah Adawiah & Hassan Scott P. Odierno, Essential Guide to Takaful (Islamic Insurance) (Kuala Lumpur: CERT Publications, 2008).
Challenges9 which also makes part of the chapters of the book edited by Angelo M.
Venardos titled Current Issues in Islamic Banking And Finance: Resilience And Stability in The Present System. The researcher can clearly identify the significance of al-wakālah bi al-istithmār concept in investments when the presenter compares al- wakālah bi al-istithmār to muḍārabah. Fees are both applied in the concepts but differ in terms of fixedness. This particular information will help to set up the researcher’s discussion on the concept of fees and incentives of the investment manager in the later chapter of this research.
In Brian Kettell’s Frequently Asked Questions in Islamic Finance10, the author compiles all questions which ae often asked. He also inserts the ABC’s of Islamic banking, for example, how to establish an Islamic bank, its qualifications, and other general matters related to Islamic finance. The book however does not deal with the issue of al-wakālah bi al-istithmār as a concept as it only gives the answer to the question of al-wakālah in the takāful model briefly. Although not exactly what the researcher is looking for, the information has helped the researcher to understand the general concept of al-wakālah in its application in deposit-taking. The book also contains brief discussions on general takāful and ṣukūk, providing better understanding of the two areas.
In the article written by Mufti Taqi Usmani entitled, Principles of Sharīᶜah Governing Islamic Investment Funds, in the book Islamic Banking and Finance11, edited by Amer Al-Roubaie and Shafiq Alvi, he outlines several conditions for
9 Aznan Hasan, “Islamic Structured Products: Issues and Challenges” in Prosiding Muzakarah Penasihat Syarīᶜah Kewangan Islam, edited by Cert Publications (Kuala Lumpur: Cert Publications, 2009), 87.
10 Brian Kettell, Frequently Asked Questions in Islamic Finance (Great Britain: TJ International Ltd., 2010).
11 Muhammad Taqi Usmani, “Principles of Shariah Governing Islamic Investment Funds” in Islamic Banking and Finance, edited by Amer Al-Roubaie & Shafiq Alvi (New York: Routledge, 2010), 237.
investment in shares. One of the conditions he mentions is that the main business of the company to be invested in should not be against Sharīʿah, for example should not be a company selling or offering liquor and gambling. These conditions are very important to highlight because in al-wakālah bi al-istithmār, the actual position of a potential investment needs to be clearly known and identified, as the wakīl is to invest the deposits of the muwakkil in investments which are Shariah compliant and have potential yield.
The book published by INCEIF on Sharīᶜah Rules in Financial Transactions12 contains many of the general issues related to the scope of the research. It contains thorough discussions on the application of ujr (fee). The researcher found the book to be of great information as it contains the essential basis for the discussion on ujr where it defines ujr, states the legitimacy of ujr, its conditions, its prohibited elements as well as the types and application of ujr in Islamic financial institution.
Sharīᶜah Rules in Financial Transaction13, on the other hand, also comprehensively discusses the application of al-wakālah in general and what is of most use to the researcher are the modes of termination of al-wakālah. The information on the modes of termination can be used in circumstances when the researcher touches on the aspect of tanāzul (waiver), in the case of early withdrawal in the deposit-taking concept of al-wakālah bi al-istithmār.
It is the second edition of Resolusi Syariah Dalam Kewangan Islam14 by Bank Negara Malaysia that the researcher found to fully refer to the phrase of al-wakālah bi al-istithmār applied as a deposit-taking instrument. The explanations are brief on the issue. The book also contains the decision made by the MPS on the permissibility of
12 INCEIF, Shariah Rules in Financial Transactions (Kuala Lumpur: INCEIF, 2010).
14 Bank Negara Malaysia, Resolusi Syarīᶜah Dalam Kewangan Islam (Kuala Lumpur: Bank Negara Malaysia, 2010).
al-wakālah bi al-istithmār in Islamic financial institutions. It further states a few guidelines such as the wakīl (financial institution) should only invest the deposits in instruments that they know have potential of yield, otherwise the financial institution would be responsible for the loss. The book also mentions the reasoning of the said permissibility followed by inclusion of a verse from the Qurʼān as well as several Ḥadīth which revolve around the discussion of al-wakālah. However, no thorough discussions are available regarding al-wakālah bi al-istithmār on matters involving its contract, as well as that pertaining to tanāzul (waiver) in the situation of early withdrawal from the contract.
Based on the available literatures mentioned, the researcher will have a clear understanding on what need or need not be included in this particular research. These literatures will also be made and taken as examples and references for the betterment of this research. It will definitely help the researcher in constructing her writings, contents as well as argumentations because being a topic which has not yet been written previously will definitely be a great challenge for the researcher.