SHARIAH AND MAQASID AL SHARIAH, 

A BRIEF OVERVIEW

By SHAYA'A OTHMAN

Summary

I would like to define Shariah as “The Commandments of God [Allah] derived from the primary sources of Holy Quran and Sunnah, for all human activities which include Aqidah (Belief), Akhlak (Human Behaviours, Attitudes and Ethics), and Fiqh (Ibadat – Rules of Worshipping; Munakahat -Family Laws; Mu’amalat- Trade and Commercial laws; and Jinayat – Criminal Laws)”

In conclusion I would defining Maqasid Al Shariah as "The Ultimate Objectives of Shariah or Islam which consisting of [1] Protection of Religion [2] Protection of Life [3] Protection of Offspring [4] Protection of Intellect, and [5] Protection of Wealth or Property."

INTRODUCTION

Many Islamic scholars, politicians and managers, particularly in Islamic Nations all over world are eager to implement “Shariah” in their companies or Nations. Notably what I have been observed till today is that many of them failed to integrate “Shariah” and “Management” in the contact of today’s running or managing of modern world.

Those so called experts in the field of “Shariah” have little knowledge of modern management managing in running a very complex of present company or nation. Because of this situation, many Islamic scholars and Islamic Politicians cannot explained in the language of present modern management. Most of the explanations are academics in nature and operational model in the contact of today’s modern world cannot be realised. This is because most Islamic Scholars or Islamic Leaders have little knowledge of management, and thus their explanation cannot meet to the level of understanding of modern managers and leaders.

This situation resulting in the modern managers and leaders, Muslim and Non-Muslim alike, of today failed to understand “Shariah” and thus could not imagine how “Shariah” can be applied in managing the present modern world. For modern managers they cannot see how ‘Shariah” to be implemented in managing of a company. Politicians too failed to understand how “Shariah” which have been practised by Prophet Muhammad [Peace be upon him] may be applied in running of today technological and digital modern company or nation. Because of this misunderstanding, they reject the application of “Shariah” to running of a company or a state.

Here I would like to explain my understanding of “Shariah” in a very simple, but in a complete way. This is to help Islamic Scholars, Managers and Politicians to structure their explanations to other Muslims or Non-Muslims alike, in more simple and complete way and they can understand easily from their level of thinking or from their angles.

My approach of explanation “Shariah” is to give them an overview or a bird eye view of ‘Shariah’ in the form of ‘Mappicxs’, so that they can have an overview or holistic view of “Shariah” which includes , the following :

• 1.      Meaning of “Shariah”
• 2.      Sources of “Shariah”
• 3.      Classifications of “Shariah”
• 4.      Objectives of “Shariah” [Maqasid Al-Shariah]

 1. MEANING OF SHARIAH

The word “Shariah” literally means a waterway that leads to a main stream, a drinking place, and a road or the right path. From this meaning, the word Shariah was used to refer to a path or a passage that leads to an intended place, or to a certain goal.

Karim (2005), elaborate further on Sharia whereby Sharia is an Arabic word that literally means “the road to take or the line to follow.” Sheikh Syalthut (1959) p.68, defines the terminology of Sharia as a set of divinely pre-sanctioned lost and rulings, or prescribed principles which Muslim should abide themselves so they can relate to Allah as well as other human beings

Although the word Shariah and its different derivative forms are mentioned in five places in the Qur’an, its extensive use only came into vogue much later, for the words Islam and deen (religion) were more commonly used to express the same meaning in the early days of Islam.

2. SOURCES OF SHARIAH

           

It is important to note that al-Shariah or The Commandments of Allah are from Holy Quran and Sunnah which are considered to be the most important Primary Sources. Sunnah which is also commonly referred to hadith is consisting of all sayings, deeds, and approvals of Prophet Muhamaad (peace be upon him).

The Holy Quran which is the Last Testament from Allah consisting of 6235 verses which are divided into 114 Chapter or Suras. Out of 6235 verses 350 verses are relating to rules or laws and further being divided into the following:

              1. Verses Relating to Ibadat                  = 140

              2. Verses Relating to Munakahat        = 70

              3. Verses Relating to Mu’amalat         = 70

              4. Verses Relating to Other Matters   =70

The Second Secondary Sources of Shariah consisting of (1) Ijitma (unanimous agreement among Islamic Jurist), (2) Qiyas (analogical deduction), (3) Istihsan (equity of Islamic Law), (4) Maslahah (consideration of public interest), (5) ‘Urf (customs) and lastly (6), Itisahab. (presumption of continuity).

3. CLASSIFICATION OF SHARIAH

ome scholars divided Shariah into two namely (1) Shariah Kubra and (2) Shariah Sugra. They refer Shariah Sugra to Faqh only or Islamic Laws, and Shariah Kubra refers to Allah Commandments in all aspect of life which include fiqh as well.[1]

Since Faqh is already included in Shariah Kubra, all my discussion in this book, the term Shariah is used as Shariah Kubra. This is to avoid confusion and maintaining consistency in understanding and discussion.

Shariah, conceptually, refers to a set of rules, regulations, teachings, and values governing the lives of Muslims. However, these rules and regulations, contrary to how they are often described by many non-Muslims, cover every aspect of life. Shariah embraces worship, morals, individual attitude and conduct, as well as the political, social, economic, criminal, and civil spheres.   The Shariah, therefore, is a path – set by Allah for those who accept Him – to follow, in order to attain success both in the worldly life and in the hereafter. In short Shariah is a commandment of Allah.

Many commonly understand “Shariah” in a very narrow scope which is confined to Islamic Law relating to “Munakahat” and “hudud”.  They are happy if “Munakahat” or Islamic Family Laws are being implemented. On the other hand being ignorant some quarters of Muslim are pushing only “hudud” which is only a subset of Criminal Laws to be implemented. Other aspect of Shariah which include Aqaidah, Akhlak  Faqh Ibadat, Faqh Mu’amalat and Faqh Jinayat are being side line or not giving emphasis.

As further illustrated in Mappicx Chart 2, we can see that “Munakahat” or Islamic Family Laws is one of “Faqh” and “Faqh” is one of three Classifications of “Shariah”.

“Hudud” is the penal laws of Islam. This word is the plural of “hadd”, which means prevention, hindrance, restraint, prohibition, and hence a restrictive ordinance or statute of God, respecting things lawful and unlawful. Thus hudud is part of “Jinayaat” or Islamic Criminal laws which is one of the three Classifications of “Shariah”[2].

In legal terms Shariah takes on the meaning of laws or commandments relating to all aspects of human life established by God [Allah] for mankind.

At this initial of understanding I would like to define Shariah as:

Shariah as “The Commandments of God [Allah] derived from the primary sources of Holy Quran and Sunnah, for all human activities which include Aqidah (Belief), Akhlak (Human Behaviours, Attitudes and Ethics), and Fiqh (Ibadat – Rules of Worshipping; Munakahat -Family Laws; Mu’amalat- Trade and Commercial laws; and Jinayat – Criminal Laws)”

 4. MAQASID AL SHARIAH

Maqasid is an Arabic word [singular maqsid] which carries the meaning of goals or purposes and when it refers to Shariah [Maqasid Al Sharia] it specifically means the goals and purposes of Shariah. There are three other Arabic words that are found in the relevant literatures of usul al-fiqh that convey similar meaning as maqasid. These words are hikmah [wisdom], ‘illah [effective cause] and maslahah [interest or benefits].

The approach to Maqasid was not given special attention even many of the reputable text of usul al-fiqh do not even have a section or chapter to the study of maqasid, until al-Shatibi [1388] gave Maqasid al-Shariah a special emphasis.

Most Muslim scholars are of the opinion that the ultimate objectives [maqasid al-Sariah] which are a necessity [al-daruriyyah] for mankind to be able to live peacefully in this world, according to al-Quran and al-Sunnah, include five main areas – [1] Protection of life, [2] Protection of al-Din [Islam], [3] Protection of Progeny or Offspring, [4] Protection of Intellect or Faculty of Reason, and, lastly, [5] Protection of Material Wealth or Resources. From a review of the related literature, little is mentioned or discussed about how Maqasid al-Shariah may be applied in today management towards achieving these ultimate objectives or maqasid al-Shariah.

Here in this paper we are not going to discuss the order of importance or priority to these five objectives of Shariah, or Maqasid al-shariah. But I share the view of Gamal Eldin Attia (2010) that we have to acknowledge the arrangement posed by al-Ghazali *(505 HA/1111 AC), which became most widely acceptable thereafter, notably in the following order of priority:

1.      Protection of al-Din (Islam)

2.      Protection of Life

3.      Protection of Intellect or Faculty of Reason

4.      Protection of Progeny or Offspring

5.      Protection of Material Wealth

---

[1] Mohd Herwan Sukri bin Mohammad Hussin and Mohd Hawari Bin Mohammad Hussin (2011) Kuala Lumpur. IBFIM

[2] Abdul Hamid Siddiqui. KITAB AL-HUDUD (THE BOOK PERTAINING TO PUNISHMENTS PRESCRIBED BY ISLAM)

ISLAMIC MANAGEMENT IN HOTEL INDUSTRY

IQS - ISLAMIC QUALITY STANDARD FOR 

HOTEL INDUSTRY 

A Shariah Compliance Standard

By Shaya'a OTHMAN, Adviser to UCSC 

The idea of creating Islamic Quality System started in November 2, 2000, when the Chairman of Institute of Islamic Understanding [IKIM] Tan Sri Ahmad Sarji Abduk Hamid said in his speech at the opening of an expert consultation to formulate a quality standard based on the Islamic perspective, at IKIM that “It is hope that a set of Islamic quality standard, which are accepted and later to be adopted by Islamic nations, can be formulated”. After 8 years in 2008, I started my research to formalize this idea, when I was working as a lecturer and Director of Centre of Excellency in Selangor International Islamic University College [KUIS], Malaysia. My interest in this research carried on when I took a new responsibility as Academic Fellow and Executive Director of Centre of Excellency, at Insaniah College University [INSANIAH], Kedah Malaysia, beginning 2010.

The Founder of 1st Islamic Hotel, Mr Fadil AKGUNDUZ, is seen
here discussing with H.E. Tun Dr Mahathir Mohamad [Former
Prime Minister of Malaysia], about his 2nd on going Luxury Hotel
 in Europe, the CAPRICE GOLD PALACE HOTEL, ISTANBUL

Not realizing it, such practices being carried out or put to practices far back in 1996 by Mr. Fadil Akgunduz, the founder and owner of a hotel known today as Caprice Thermal Caprice, at Didim in Turkey. Ironically I was working too, with the group as Chief Executive Office, Asia, since 1995. Briefly, since its operation in 1996 till to date, no-alcohol is served, and all foods are “halal”. The facilities provided are “Muslims-friendly” such as separate swing pools and spa for male and female, a mosque with full time Imam to manage and lead the congregation daily and Friday prayers. 

 

 CAPRICE THERMAL PALACE Hotel, Turkey is the first Resort Hotel in the world operating since 1996,  operating according to Shariah Compliance.The founder of this Hotel is Mr. Fadil AKGUNDUZ. 

We did research how the west doing their rating for their hotel industry, in Europe, in Australia as well as in United State of America, which are well established and known as “star-rating” in Europe and Australia, and “diamond rating” in United States of America. This “star-rating” was well known worldwide even in Muslim countries. 

The ratings or quality standards do not taken into consideration the sensitivities of Muslim community, in other word, the rating systems or quality standards are not “Muslims friendly”. For examples the availability of alcoholic beverages is part of measuring the quality which is not acceptable to Islam. Thus the "star -rating" and " diamond-rating " are not acceptable by Muslim.

The formulation of this IQS-Islamic Quality Standard For Hotel, while taking the quality of physical facilities provided by the hotel, and the quality of its services to the customers, it is also taking into consideration how the hotel conformed to the Islamic principles such as alcoholic beverage is not available or served in the hotel premises, and all foods served are “halal”. These basic requirements under Islamic principles are the perquisites for a hotel to be considered under IQS-Islamic Quality Standard. Other factors such as separate summing pools or spa for male and female, Muslims prayer facilities such as prayer rooms, and mosque are important measurements for IQS- Islamic Quality Standard.

It is hope that IQS-Islamic Quality Standard For Hotel, will become useful guide line for those who wish to become a “Muslim friendly” hotel, and be considered under various classifications from IQS-1 to the very top of IQS-7 under this IQS-Islamic Quality Standard classification.

On of the largest University in the world with over 
170,000 students in 12 branch campuses and 9 city campuses, 
all over Malaysia, with over 5000 academicians and
University Teknoloji Mara, Malaysia

I wish to extend my sincere appreciation to the co-writer Associate Professor Nor’ain Othman, Deputy Dean [Research & Industry Linkages], Faculty of Hotel and Tourism Management, Universiti Teknoloji Mara, Malaysia [UiTM] for making this work possible. My appreciation too, to the technical research team, all from the same Faculty of Hotel and Tourism Management, Universiti Teknoloji Mara [UiTM], namely Dr Rozian Mohd Taha, Dr Nor Zuwana Sumarjan, and Dr Salamiah A. Jamal in helping to conduct the research, and making the formulation of this IQS-Islamic Quality Standard. A special thanks to Universal Crescent Standard Centre [UCSC] for adopting and propagating this IQS-Islamic Quality Standard as their guidelines in awarding special award to various hotels according to the standard measurement and levels of classification as spell out in this IQS- Islamic Standard Quality for Hotel.

It is hope that this IQS- Islamic Quality Standard will become as an alternative evaluation systems to that of “star-ranking” systems which are being used in classifying various class of hotel today. It will become useful guide to Muslim tourists in searching suitable accommodations which are ‘Muslims friendly, according to the levels of quality which are acceptable.

The development of IQS-Islamic Quality Standard should not stop at the hotel Industry only. It should be further developed to include other areas for examples in Islamic Tourism Industry, Islamic Banking and Finance, Islamic Insurances, and Islamic Educational Institutions. I believe UCSC can play an important part to spear ahead this development with the collaboration from universities and relevant government agencies.

8 October 2012

IQS - ISLAMIC QUALITY STANDARD FOR HOTEL AS AN ALTERNATIVE TO STAR RATING STANDARD .    

CREATING AN ISLAMIC MANAGEMENT STANDARD IN MANAGEMENT OF HOTEL.

   

Prof. Dato’ Dr. Ismail Ibrahim

Chairman, Universal Crescent Standard Center [UCSC],  Malaysia

One of the objectives of Universal Crescent Standard Center in short UCSC is to create standards which are in conforming with Islamic principles, in various fields, which include but not limited to Islamic Tourism Industry, Islamic Banking and Finance and Islamic Insurance. This move is based on private initiative with the hope to get various supports from universities and government agencies.

IQS - Islamic Quality Standard for Hotel, is the result of
combined  research carried out by both Shaya'a Othman
and Nor'ain Othman. It is being adopted by USCS

The work of Professor Shaya’a Othman and Associate Professor Dr. Nor’ain Othman in formulating IQS-Islamic Quality Standards for Hotel Industry creates the interest of UCSC, to publish it as well as to adopt it, as a guideline of measuring and classifying levels of quality for hotels, not only in Malaysia but also all over the world.

The idea of IQS was also being discussed with
H.E. Tun Dr Mahathir Mohamad [The former
 Prime Minister of Malaysia] to get his input.
From the right - Norain Othman, Ismail Ibrahim,
Shaya'a Othman and Fadil Akgunduz.

The significant increase in Muslim Tourists arrivals in the world has put a great demand for accommodations which are “Muslim friendly”. If we exclude Muslims pilgrimage to Mecca and Medina, Malaysia is the top preference for Muslims tourist followed by Turkey. 

The easy availability of Halal foods in both countries, make these countries as the preferred destinations of Muslim tourist. It was reported in daily Milliyet of Turkey that the needs for such “Muslim friendly” accommodations in Turkey increased to about 200% just over the past 5 years.

It is timely that a standard of classifying accommodations which are in conformation to Islamic principles should be introduced in the markets. 

The formulation of IQS-Islamic Quality Standard For Hotel and the publication of this book is a step forward of introducing such Islamic standard in Tourism Industry or Islamic Tourism. It will become an alternative to the present classifications or levels of standards which are widely being practiced by the west known as “star-rating’. 

UCSC in collaboration of other  universities and relevant agencies, locally and intentionally,  is planning to develop more IQS –Islamic Quality Standards, not only in Tourism industry but also in other industries.

ISLAMIC MANAGEMENT DECISION PROCESS

ISLAMIC MANAGEMENT DECISION PROCESS:

The Essence of a Leader’s or Administrator's Responsibility 

[Summary of Series of Lectures on Islamic Management by Dr SHAYA’A OTHMAN]

“If we as Muslim Leaders and Managers practice this Islamic Management Decision Process, I am sure Muslim Nations, Muslim Organisations, and Muslim Families will become models for others to follow. But the situation today is generally otherwise”.

Decision-making is the essence of a leader’s, administrator's or manager's responsibilities. In carrying out the 5 functions of management in relation to effectively and efficiently utilising all the resources [see SHAYA'A OTHMAN ISLAMIC MANAGEMENT MODEL as discussed in earlier post], many decisions have to be made. Thus, a leader or manager needs to understand what is meant by decision-making.

As shown in the following DECISION MAKING MAPPiCXS, a manager needs to understand the following:

1. Decision-Making Process

2. Manager as Decision Maker

3. Decision Making for Today's World

4. Decision Making from an Islamic Perspective.

I would like to highlight the effective element of "CONSULTATION" which you may notice is not being included in the Management Process as advocated by management gurus.

Management from an Islamic perspective, "CONSULTATION" is the essential element before any decision is made. Examine and digest the following MATRiCXS, and you will understand why "CONSULTATION" has to be included in the DECISION-MAKING PROCESS.

God [Allah the one and only God], the Most Gracious & Merciful, mentioned in the Holy Quran S3:159 [ The only Authentic & Unadulterated Holy Book from God to mankind as guidance] about the Process of Making Decision, shall include the 2 main elements of "CONSULTATION" and "put TRUST in Allah" :

"....and consult them in the affairs. Then, when you have made a decision, put your trust in Allah...."

In line with the guidance from God as mentioned in the verse of the Holy Quran above, I would like to include "CONSULTATION" as one of the steps or elements in "DECISION MAKING PROCESS", which applies to all Leaders, Administrators and Managers - Muslims and Non- Muslims alike.

If you are a Muslim, I would like to encourage you to perform Solat Istikarah [ Prayer for Guidance from God], after you have made "CONSULTATION" but before a decision is made. Then finally "..put TRUST to Allah..." by performing Solat Hajat [Prayer asking God to bless for decision made]. As a Muslim, these additional 2 steps need to be included in "DECISION MAKING PROCESS", - this makes a difference and the beauty of Islam.

The following Chart shows the Islamic Process of Making Decisions for Muslim Leaders, Administrators and Managers. 

Finally, let us examine ourselves as Muslim leaders, administrators or managers, whether we include these additional 3 steps in the process of making decisions. If we, as Muslim Leaders, administrators and Managers, practice this Islamic Management Decision Process, I am sure Muslims Nations, Muslim organisations, and Muslims Families will become models for others to follow. But the situation generally today is otherwise.

ISLAMIC BUSINESS; A TIMELESSNESS MANAGEMENT

TIMELESSNESS OF ISLAMIC BUSINESS MANAGEMENT

In Islamic Business, the elements of socioeconomic responsibility are built into it

By SHAYA'A OTHMAN

An example of Social Responsibility that brings profit to the Corporation is CAPRICE THERMAL PALACE HOTEL, TURKEY

Caprice Thermal Palace Hotel, Turkey, [the 728 rooms hotel facing the Mediterranean sea] is the first 5 star hotel in the world that provides a Mosque within its main hotel building complex serving to all Muslim communities to form daily and weekly Friday prayers.  No alcohol and all foods are halal in this hotel.

In Dec 6, 2012, during the International Islamic Tourism Standard Conference, which was held in Malaysia, attended by more than 2000 participants from 42 countries, Caprice Thermal Palace was awarded Islamic Quality Standard - 5 Crescent by the Universal Crescent Standard Center [UCSC].  The Caprice Thermal was the first hotel in the world to receive IQS Crescent Standard.

Following the Islamic Business Principles which I called it– “ Timelessness Islamic Business Management”, this hotel is making a history of having full occupation rate throughout the year even in winter, with an advance booking of more than 10 years ahead, while several conventional hotels surrounding the area had to be closed down during this bad world economy.

VIDEO ON CAPRICE THERMAL PALACE HOTEL

 The CAPRICE GOLD GROUP is now constructing the 2nd   similar hotel known as CAPRICE GOLD  in Istanbul, the biggest 7 stars hotel in Europe with 1300 rooms,  an estimated cost of USD300 millions, and schedule to be officially opened in year 2014. Similar several CAPRICE HOTEL providing Ultimate Hospitality in accordance to Islamic principles are in the pipeline.

Recently in Dec 6, 2012, Caprice Gold Istanbul received a prestigious award of IQS-7 Crescent  Standard from UCSC As seen in the photo Mr Fadil AKGUNDUZ, Founder and Chairman of Caprice Gold Group received the award from Right Honorable Tun Dr Mahathir Mohamad  President of Putra Leadership Foundation, Malaysia.

VIDEO ON CAPRICE GOLD ISTANBUL UNDER CONSTRUCTION

Western world is searching the best approach to business, which is friendly to mankind and the environment – the rejection of “Classical View’ resulting in the new approach of “Socioeconomic View”.

Business students or managers managing business institutions need to realize that the institutions should go beyond making profits only, but also to include protecting and improving the societies or communities. This view which is called as SOCIOECONOMIC VIEW is well received by the society today.

But there is a different school of thought; having the view that business institutions should only concern on financial returns only. If there is a social obligation to be made financially, the costs should be passed to the consumers in the form of higher price. Such school of thought may be called as CLASSICAL VIEW.

In Islamic Business, the elements of socioeconomic responsibility are built into it, as they are obligated to all businesses undertaking – for examples, Islamic Banking, Islamic Insurance, Islamic Hotels and Halal Food Industries are good for mankind and environment [which are being stipulated in ‘Syariah law – based on the Holy Book, Quran, and the practices of Prophet Muhammad [peace be upon him].

In conclusion Islamic Business [Muamalat] is the business of yesterday, today and tomorrow, a Timelessness Business Management, which put social responsibility beyond financial profits.

From research finding it shows there is positive relationship between Social Responsibility and Economic Performance. Thus Corporate Social Performance positively associated to financial performance [prior & future] – concluded by many researches.

A Good example is CAPRICE THERMAL PALACE HOTEL, TURKEY  as discussed above – providing a mosque for Muslims community, inside its main building, serves no alcohol and only halal foods, bringing high profitability to the company, yet making positive growth profits.

“THERE IS LITTLE EVIDENCE THAT A COMPANY SOCIALLY RESPONSIBLE ACTIONS SIGNIFICANTLY HURTS ITS LONG-TERMS ECONOMIC PERFORMANCE”

.

http://www.youtube.com/watch?v=6mwx7wet2dU&feature=related

THE NEED OF MAQASID AL-SHARIAH IN MANAGEMENT STRATEGY

The Maqasid al- Shariah in

Management Strategy of Islamic Bank

by SHAYA’A OTHMAN

INTRODUCTION

The business of banking in Malaysia came into force with the introduction of the Central Bank of Malaya Ordinance, 1958 (CBO), and on 26 January 1959 the Central Bank of Malaysia or known in Malay as Bank Negara Malaysia (BNM), was first being established in the then Federation of Malaya. This ordinance was further revised in 1994 and renamed as the Central Bank of Malaysia Act 1958 (revised -1994). Under this Act, the roles of Bank Negara Malaysia are defined, which constitutes the apex of the monetary and banking structure of Malaysia, with the objectives to include the following: 

1.  Issue currency and keep the reserves safeguarding the value of currenc.
2. Act as a banker and financial adviser to the Government. 
3. Promote monetary stability and a sound financial structure; and
4. Influence the credit situation to the advantage of Malaysia. 

The introduction of Islamic Bank in Malaysia was driven by the growing interest of number of Muslims who want to lead their way of lives in accordance with Shariah which include the area of banking and finance. In response to this development Government of Malaysia enacted a separated banking legislation, the Islamic Bank Act 1983. This enactment enables the establishment of Islamic banking to run side-by-side with conventional banking. Later in the same year the Government Investment Act 1983 was also being enacted, to allow the Government to issues Government Investment Issues based on Islamic principles.  The Act also enables Islamic banks to meet their liquidity requirements as well as acting as an instruments to absorb idle funds in the short run. The same with all other conventional banks, Bank Negara Malaysia was given absolute powers under the provision of Islamic Bank Act 1983, to regulate and supervise the Islamic banks licensed under this Act

DEVELOPMENT OF ISLAMIC BANK

The first known Islamic bank was first introduced in 1963 in Egypt at Mit Ghamr by Ahmad El Najjar. Unlike conventional this bank based on sharia, whereby no interest was charged to investors and borrowers.  Unfortunately this bank lasted for less than 5 years. It stopped operation in 1967.

Another interesting development in 1963 was the establishing of an Islamic institution in Malaysia known as the Tabong Haji Malaysia was established in 1963. I share the view of Khir, Gupta and Shanmugam (2008), that “Islamic banking, with a very different approach to that in Egypt, also emerged in Malaysia. It was a financial institution developed for Malaysia Muslims undertaken the pilgrimage to Mecca and medina. This institution called Lembaga Tabung Haji (Pilgrims Fund Board, Malaysia) was set up to help Muslims save for their pilgrimage expanses’.

In 1971, another bank known as Nasser Social Bank was later established in Egypt. Although it makes no reference to sharia, but it declared as an interest-free commercial bank, and it may be considered as Islamic bank. The development of Islamic banking also taken place in Philippine, which is a prominently Christian Catholic nation. Bank Amanah was established here in 1973, and has survived without any state intervention. 

The establishment of Islamic Development Bank [IDB} in 1975 by the Organisation of Islamic Countries (OIC), marked the mile stone the significant development of Islamic bank, and triggered the formation of Islamic banks all over the world, not only in the Muslims countries but also in the Christendom, especially in the European Unions.  The formation of IDB by the OIC members resembles to that of World Bank and Asian Development Bank (ADB).

In Malaysia, although Lembaga Tabung Haji was established in 1963, the first full-flashed Islamic commercial bank was established in July 1983, known as Bank Islam Malaysia Berhad (BIMB). It was established, when the Islamic Banking Act 1983 was enacted by Malaysian Government, and BIMB is the first commercial Islamic Bank licensed under this Act. The introduction of Islamic Banking Scheme Skim Perbankan Islam –SPI) 1998, by Bank Negara Malaysia, further allowing conventional banks to offer Islamic banking products and services which are in compliance with Shariah.

The development of Islamic bank is not confined to Islamic countries only but also to other countries such as the United States of America, European Union, Australia, Singapore, Thailand and Hongkong. Interestingly, non-Muslims countries like United Kingdom, Singapore and Hongkong are trying to develop centres as hub for Islamic products and services. Figure 1 shows the development of Islamic Banking.

Figure1. Establishment of Islamic Banks (1960- 2002)

PURPOSE OF ESTABLISHING ISLAMIC BANK

It is observed that the early establishment of Islamic bank was meant to provide services to Muslims who want to practice Shariah in their way of life which were relating to financial activities, as the case of establishing Mit Ghamar Local Islamic Bank (1963) in Egypt. The products or services provide by the Islamic bank develop from retail banking only prior in 1970s, to fully commercial banking in 1970s, and develop further to property finance and syndication in 1980s. In 1990s the services provide by Islamic Bank include more to equity funds and Islamic securitization, and today it developed actively in areas of  treasury services, balance management and innovation asset management. Figure 2 shows this significant development.

Figure2: Significant Development of Islamic Finance 1970s

Khir,et al (2008), explained that Islamic banks are financial intuitions established to promote Islamic economics. An Islamic economy is a market economy guided by moral values. Islam differs essentially from capitalism and socialism in nature of ownership. Islam has given detailed regulations for economic life, which is balanced and fair. According to the Holy Quran, everything on this earth belongs to Allah the Almighty. Man is mere trusty and he is accountable to Allah in accordance with the rules laid down in the Sharia. The fundamental principles of an Islamic Economy system include the following;

1.      Socio-Economic Justice and Equitable Distributions

2.      Trading of forbidden objects

3.      Trusteeship

4.      Prohibition of Hoarding

5.      Spirit of Corporation

6.      Duality of Risk

7.      No gain without either effort or liability

.

Karim (2005), elaborate further on Sharia whereby Sharia is an Arabic word that literally means “the road to take or the line to follow.” Sheikh Syalthut (1959) p.68, defines further the terminology of Sharia as a set of divinely pre-sanctioned lost and rulings, or prescribed principles which Muslim should abide themselves so they can relate to Allah as well as other human beings

Muslim scholars are of the opinion that the ultimate objectives [maqasid al-Sariah] which are a necessity [al-daruriyyah] for mankind to be able to live peacefully in this world, according to al-Quran and al-Sunnah, include five main areas – [1] Protection of life, [2] Protection of al-Din [Islam], [3] Protection of Progeny or Offspring, [4] Protection of Intellect or Faculty of Reason, and, lastly, [5] Protection of Material Wealth or Resources. From a review of the related literature, little is mentioned or discussed about Islamic banks working towards achieving these ultimate objectives or maqasid al-Shariah.

Here we are not going to discuss the order of importance or priority to these five objectives of shariah, or Maqasid al-shariah. But I share the view of Gamal Eldin Attia (2010) that we have to acknowledge the arrangement posed by al-Ghazali *(505 HA/1111 AC), which became most widely acceptable thereafter, notably in the following order of priority:

1.      Protection of al-Din (Islam)

2.      Protection of Life

3.      Protection of Intellect or Faculty of Reason

4.      Protection of Progeny or Offspring

5.      Protection of Material Wealth.

MAQASID AL-SHARIAH IN ISLAMIC BANKING

It is observed as to date there is not much discussion on the application of Maqasid al-Syariah [Ultimate objectives of Syariah] in the formulation of Strategic Planning in Islamic banks. The management of Islamic financial institutions such as Islamic banks and Islamic insurance companies should look beyond profit. Although profit is very important for the institution to be able to exist, it is not the main objective of the institution. Profit is just like oxygen in our bodies which is essential for us to stay alive, but which is not the main objective.

Today non-Muslims are getting inroad into the business of Islamic banking, even the name of the bank is confusing to the public. For Example Hong Leong Islamic Bank of Malaysia, is totally owned by non-Muslim. The name “Hong Leong” itself reflects that the bank is owned by non–Muslim but Islamic. Could be in the future that more non-Muslim names reflected as the name of Islamic Bank owned by non-Muslims? The question is whether the current Islamic banks owned by non-Muslims will be able to incorporate Maqasid al-Shariah into their management strategies so as to justify being “Islamic”.

What are the objectives of the many conventional banks which are rushing to “convert” their products but not themselves into “Islamic Banks” or provide open windows of “Islamic Banks”? Are they attracted to the ultimate objectives [Maqasid al-Shariah] as advocated by Islam? Or are they attracted to make profits from the abundant wealth of Muslims?

Also, is there is any rationale whatsoever for countries predominantly populated by non–Muslims and governed by non-Muslims becoming Islamic Financial Centres?  London, Singapore and Hong Kong are all planning to establish such centres, and the question arises as to whether maqasid al-Syariah is being incorporated into their blueprints for creating these centres?

FUTURE SUSTAINABILITY OF ISLAMIC BANK

In year 2012 the asset management under the management of Islamic Instructions is estimated to be around USD1,600 billion and revenues to be around USD120 billion. The future growths and sustainability of Islamic finance could be realized if Maqasid a-Syariah is put in place in all Islamic Banks. If not Islamic Banks will experience the disastrous financial melting down as experienced recently by conventional banks.

Curtis, G. (2008) in his research of the main causes of the recent financial meltdown, concludes that “the root cause of the crisis was the gradual but ultimately complete collapse of ethical behaviour across the financial industry. Once the financial industry came unmoored from its ethical base, financial firms were free to behave in ways that were in their – and especially their top executives’ – short-term interest without any concern about the longer term impact on the industry’s customers, on the broader American economy, or even on the firms’ own employees”. This conclusion may be capsulized in other words of “the non-compliance to Maqasid al-Shariah”, particularly in the area of “Islamic Ethic”.

It is proposed that Maqasid Al-Shariah need to be incorporated in the present management strategy of all Islamic banks. Though profitability is essential and must be achieved, but it is not the main objective. In Islam, the ultimate objectives of any activities including business activities are ultimately with the aim of achieving objectives of Shariah or Maqasid al-Shariah.

CONCLUSION

Strictly, I have the view that the current practice of Islamic banks needs to incorporate Maqasid al-Shariah into their management strategy to ensure its sustainability to serve mankind in the future, in confirmation to the requirement of Shariah. Otherwise, the use of the word ‘Islamic’ should be dropped. Furthermore, it is proposed that the term ‘Islamic Bank’ should be reviewed, and should only be used to refer to an ‘Islamic Bank’ owned and managed by Muslims.  This is because Muslims are the only community [ummah] recognised by Allah, that can or able to uphold Maqasid al-Shariah.  Islamic banks owned by non-Muslims may be called ‘Interest Free Banks’.

References:

Gamal Eldin Attia ( 2010). Towards Realization of The higher Intents of Islamic law : Maqasid al-Shariah a functional Approach. Kuala Lumpur. Islamic Book Trust.

Khir, K. Gupta, L. Shanmugam, B (2008). Islamic Banking: A Practical Perspective, Selangor, Malaysia. Pearson-Longman

Curtis, G. (2008). White Paper No. 44 – The Financial Crisis and the Collapse of Ethical Behavior , Greycourt & Co., Inc.

Beekun, R. I.,(2006). Strategic Planning and Implementation for Islamic Organizations. London. International Institute of Islamic Thought.

Karim, A. A., (2005). Islamic Banking: Fiqh and Financial Analysis, Jakarta, PT Radjagrafindoprasada.

The Central and The Financial System in Malaysia: A Decade of Changes (1999) Bank Negara Malaysia, Kuala Lumpur

The Central Bank and the financial System in Malaysia: A decade of Change 1989-1999 (1999).  Kuala Lumpur. Bank Negara Malaysia