Investment Paradigm Under Shari’ah

By:
Prof. Dr. Mohd. Ma’sum Billah
masum@applied-islamicfinance.com
masum2001@yahoo.com
+6019-3699542

INTRODUCTION

Investment, which is in line with the Islamic law or Shari’ah principles, has been one of many concerns that a Muslim faced today.

This write up is a modest contributory note that sets out the most important Shari’ah rulings to be fulfilled when one would like to invest, or as a guideline for making an Islamic investment.

Investment and production in Islam take place within the framework of the following concepts and principles:

WHY WE INVEST?

Savings refer to that part of income that is not spent on consumption. Investment is that part of expenditure that is made, not for consumption purposes, but on creation of new capital assets such as buildings, land, stocks, mutual funds, etc. Investments are made for obtaining a benefit further away in the future.

When money is kept idle, that is not invested, it looses its value or purchasing power overtime because of inflation. Studies have conclusively proven that un-invested cash has lost over 93% of its purchasing power over the last 200 years. The same studies have also proven that investing in stocks has proven to be more rewarding than investments in securities and bonds with a fixed rate of return.

We invest because of our own consciousness to have a safe future but it is also commanded by Allah s.w.t as evident in the Qur’an and Sunnah.

For future use, so we do not to have to borrow from others

“Allah blesses those who acquire wealth in good manner, then the wealth is spent accordingly and the remaining is saved for future use when hardship occurs.”

Narrated by Ibn Mas’ud (r), the Holy Prophet (saw) said:

“In the day of Judgement, the generation of Adam (a) will not be allowed to escape without being questioned on the following five basic responsibilities

“Verily, Allâh! With Him (Alone) is the knowledge of the Hour, He sends down the rain, and knows that which is in the wombs. No person knows what he will earn tomorrow, and no person knows in what land he will die. Verily, Allâh is All­ Knower, All ­Aware (of things)

Hadith on to avoid oneself of involving in debts:

“Oh Allah, I seek refuge in thee from sin and debt. He was asked why do you so often seek the protection of Allah (swt) from debt. He replied: One who is in debt tells lies and breaks promises.”

“I seek refuge in thee from unbelief and debt.” A man asked him, do you equate debt with unbelief? He replied: “Yes”

To abstain ourselves from being spendthrifts

“Verily, spendthrifts are brothers of the Shayatîn (devils), and the Shaitân (Devil ­ Satan) is ever ungrateful to his Lord.

“And it is He Who produces gardens trellised and untrellised, and date­palms, and crops of different shape and taste (its fruits and its seeds) and olives, and pomegranates, similar (in kind) and different (in taste). Eat of their fruit when they ripen, but pay the due thereof (its Zakât, according to Allâh's Orders 1/10th or 1/20th) on the day of its harvest, and waste not by extravagance []. Verily, He likes not Al-Musrifûn (those who waste by extravagance)

Invest For the Benefits Of Others

From investment profit, we can help others by giving away charity and sadaqah. We also may pay zakat from the profits we have from investment, thus it would bring benefits to others.

“the most excellent of men is the believer who strives hard in the way of Allah with his person and property.”

“He who bring forth what is needed will be provided for and he who monopolizes is cursed.”

WHAT TO INVEST IN?

There are basically two categories of assets one can invest in, namely:

Financial assets are a more preferred choice because they are more liquid that physical assets. This means that they can be bought and sold with ease, cash can be realized anytime even on a short notice. Financial assets are more volatile, meaning that their values move up and down regularly. Financial assets offer two types of returns-cash income and capital gains.

WHY SHARI’AH COMPLIANCE?

WHAT AMOUNTS TO SHARI’AH COMPLIANCE?

“Al Asl fi al ‘Uqud al Ibahah”

-“the original rule in contracts is permissibility”

SHARI’AH RULINGS IN INVESTMENT CONTRACT

INVESTMENT SHOULD ONLY SUPPORT HALAL ACTIVITIES

The Shari’ah does not permit Muslims to invest in any business or activity that involves the production of items or the pursuit of activities the Shari’ah considers haram, or impermissible. Therefore, it is not permissible to acquire the shares of the companies providing financial services on interest, like conventional banks, insurance companies, selling or serving liquor, pork, involved in gambling, night club activities, pornography and etc.

Mufti Taqi Uthmani issued a Fatwa, which rules out that:

“If the main business of a company is not Halal (lawful) in terms of Shari’ah, it is not Halal (lawful) for one to purchase, hold, or sell its shares, because, it will entail the direct involvement of the shareholders in that Haram (prohibited) business”.

“When Holy Prophet (saw) said: When Allah (swt) prohibits a thing, He prohibits (giving and receiving) the price of it as well.”

PROHIBITION OF:

i) Fixed Interest /Usury (Riba)

Why does Islam prohibit Riba or what is the wisdom behind the prohibition of Riba? The first wisdom deduced from the Al-Qur’an is the elimination of justice. As the name suggests, Riba means excess (ziyadah), augmentation, increase, addition or growth. Thus by practicing Riba, one party would benefit at the expense of another.

The interest earned is without any risk of loss. By removal of the risks altogether, the transaction is no longer one of business and trade, but one of usury.

“And if you do not do it, then take a notice of war from Allâh and His Messenger []but if you repent, you shall have your capital sums. Deal not unjustly (by asking more than your capital sums), and you shall not be dealt with unjustly (by receiving less than your capital sums).”

Another wisdom as evident in the Al-Qur’an is call for corporation, charity and Qard al- Hassan (interest free loan). Here the concept of brotherhood prevails, as Riba would bring harm to the society. The collection of wealth through Riba is associated with selfishness, greed, impatience and cruelty.

The third wisdom involved in Riba is the illegitimacy of charging an extra amount on lent money or commodities because of deferred repayment. Time is not a commercial commodity.

Contractual fixed interest derived from loans (Risk Free) = Riba

“O you who believe! Be afraid of Allâh and give up what remains (due to you) from Ribâ (usury) (from now onward), if you are (really) believers.

“Those who eat Ribâ [] (usury) will not stand (on the Day of Resurrection) except like the standing of a person beaten by Shaitân (Satan) leading him to insanity. That is because they say: "Trading is only like Ribâ (usury)," whereas Allâh has permitted trading and forbidden Ribâ (usury). So whosoever receives an admonition from his Lord and stops eating Ribâ (usury) shall not be punished for the past; his case is for Allâh (to judge); but whoever returns [to Ribâ (usury)], such are the dwellers of the Fire - they will abide therein.

“For the wrong­doing of the Jews, We made unlawful to them certain good foods which has been lawful to them, and for their hindering many from Allâh's Way;

And their taking of Ribâ (usury) though they were forbidden from taking it and their devouring of men's substance wrongfully (bribery, etc.). And We have prepared for the disbelievers among them a painful torment.”

“O you who believe! Eat not Ribâ (usury) [] doubled and multiplied, but fear Allâh that you may be successful.”

;When usury and fornication appear in a community the people of that community render themselves deserving the sanction of Allah (swt).”

ii) Gharar (Uncertainty or Speculation)

Any transaction entered into should be free from uncertainty and speculation. Contracting parties should have perfect knowledge of the counter values intended to be exchanged as a result of their transactions.

“O you who believe! Intoxicants (all kinds of alcoholic drinks), gambling, Al­Ansâb [], and Al­Azlâm (arrows for seeking luck or decision) are an abomination of Shaitân's (Satan) handiwork. So avoid (strictly all) that (abomination) in order that you may be successful.

“The Holy Prophet (S.A.W) prohibited any dealing involves uncertainty.”

(Al-Muwatta)

iii) Maisir (Gambling)

“O you who believe! Intoxicants (all kinds of alcoholic drinks), gambling, Al­Ansâb [], and Al­Azlâm (arrows for seeking luck or decision) are an abomination of Shaitân's (Satan) handiwork. So avoid (strictly all) that (abomination) in order that you may be successful.” 

“Those who believe and do righteous good deeds, there is no sin on them for what they ate (in the past), if they fear Allâh (by keeping away from His forbidden things), and believe and do righteous good deeds, and again fear Allâh and believe, and once again fear Allâh and do good deeds with Ihsân (perfection). And Allâh loves the good doers.”

iv) Rishwah (corruption)

Investments should not involved bribery or misappropriation;

“And eat up not one another's property unjustly (in any illegal way e.g. stealing, robbing, deceiving, etc.), nor give bribery to the rulers (judges before presenting your cases) that you may knowingly eat up a part of the property of others sinfully.”

v) Jahl (ignorance)

Hadith:

‘There is no poverty worse than ignorance and no wealth more useful than reason’

EVERY CONTRACTUAL PARTY SHOULD HONOUR CONTRACTUAL

PROMISES

“O you who believe! Fulfill (your) obligations. Lawful to you (for food) are all the beasts of cattle except that which will be announced to you (herein), game (also) being unlawful when you assume Ihrâm for Hajj or 'Umrah (pilgrimage). Verily, Allâh commands that which He wills.”

“Verily! Allâh commands that you should render back the trusts to those, to whom they are due; and that when you judge between men, you judge with justice. Verily, how excellent is the teaching, which He (Allâh) gives you! Truly, Allâh is Ever All­Hearer, All­Seer.”

“And come not near to the orphan's property except to improve it, until he attains the age of full strength. And fulfil (every) covenant. Verily! the covenant, will be questioned about.”

FAITH AND MUTUAL GOODWILL

“O you who believe! Eat not up your property among yourselves unjustly except it be a trade amongst you, by mutual consent. And do not kill yourselves (nor kill one another). Surely, Allâh is Most Merciful to you.”

“Woe to Al-Mutaffifin [those who give less in measure and weight (decrease the rights of others)],”

“Those who, when they have to receive by measure from men, demand full measure”

“And when they have to give by measure or weight to men, give less than due. ”

Intention and consent have become the two fundamental principles to any contractual relation. As evident in the Hadith:

“The Prophet (saw) said, “Validity of the acts depends on (doers) intentions.”

CONTRACTS AND DEALINGS

The investment should be concluded in sincerity between the parties and no one should cause harm to one another.

“O you who believe! Why do you say that which you do not do?

Most hateful it is with Allâh that you say that which you do not do.”

Legal maxim:

“There should be neither be any harm (caused to someone) nor causing any harm (to someone)’

GUIDELINES OF ISLAMIC INVESTMENT

Making money from Money is not permissible

One of the wrong presumptions on which all theories of interest is based that money is a commodity. It is therefore, argued that just as a merchant can sell his commodity for a higher price than his cost, he can also sell his money for a higher price than its face value, or just as he can lease his property and can charge a rent against it, he can also lend his money and can claim interest thereupon. Islamic principles, however, do not subscribe to this presumption. Money and commodity have different characteristics and, therefore, they are treated differently.

The basic points of difference between money and commodity

But in the case of spot market on foreign exchange, the difference is permissible provided that it is for payment of the management fees.

Profit & Loss Sharing

The basic and foremost characteristic in Islamic investing is, instead of a fixed rate of interest, it is based on profit & loss sharing. Islam encourages Muslims to invest their money and to become partners in business instead of becoming creditors. This would in turn encourage entrepreneurship.

Complete Segregation of Funds

The funds of the Islamic investment product and those investments in which Shari’ah provisions are not observed must be completely segregated. The funds of investors who are very diligent and anxious to earn lawful income should not be commingled with those of conventional investors who are not observant of the Shari’ah. Therefore, there should be separate accounts, books, and computer programs evidencing this complete segregation of funds.

The existence of Shari’ah supervisory board

There should be a Shari’ah supervisory board for any institutional Islamic investment body, and that Board should consist of trustworthy scholars who are highly qualified to issue fatwa (religious rulings) on financial transactions. In addition, they ought to have considerable experience with knowledge of modern dealings and transactions. The Board should be independent and free to give opinions on proposed contracts and transactions.

Management committed to Islamic financial concepts

The investment’s fund manager should be fully convinced of the Islamic investment concept and fully committed and dedicated to it. It should be anxious to implement and comply with the teachings governing it. Unless the entire management is committed and convinced, the business activities and the enterprise will not be foul free or will not escape irregularities and deviation. Regardless of how strict and stringent fatwa and contracts are, this will not ensure sound practices if there is no one sufficiently sincere and committed to implement the principles.

Compliance with the standards of the AAOIFI

The Accounting and Auditing Organization for Islamic Financial Institutions has issue and published a number of accounting and auditing standards that all Islamic financial institutions should comply and implement. The AAOIFI’s activities are considered a fundamental groundwork that underpins Islamic banking activities by keeping them away from individual, personal reasoning. The collective personal reasoning (ijtihad) of the AAOIFI is highly important in this vital aspect of Islamic economic life.

Therefore, Islamic investment should comply to these standards in order to avoid confusion, misunderstanding, and ambiguity, and to seek clarity and sound business activities.

INTRODUCTION OF ISLAMIC UNIT TRUST

In the good old days, people automatically think of savings when they were thinking of performing hajj. Although savings kept in the bank has a great advantage of being risk free but it would take many years before they can realized their hope. Today, many options available that could make your savings grow. Investment for example, if wisely planned can bring higher profit whether in short term or long term.

The Malaysian capital market offers an array of investment products in form of shares, loan stock, bonds, warrants and unit trust. Furthermore, rapid growth of the Islamic banking and financial products and services has provided the opportunity for Muslims to actively invest and for Malaysia to play a more significant role in broadening and deepening Islamic financial services.

Recently, demand for the Islamic products and instruments that meet the risk return profile of market participants for various purposes such as liquidity, investment and financing activities necessitate the further expansion of the market in term of product and services.

The Islamic capital market has grown significantly in terms of the number of new products, size of funds raised and number of market participants. As for example, from only three Islamic unit trust funds in its early introduction stage in 1993, the industry now has more than 50, representing almost 25% of the total funds in the country. The Islamic capital market consists of two main sectors – the Islamic equity sector and the Islamic private debt securities (PDS) or bond sector.

The Islamic capital products which are available for Muslims to transact in include Commission Shari`ah Approved Securities, Islamic Debts Securities, Islamic and Shari`ah Indices, Warrants and Islamic Unit Trust. These products have been guaranteed their permissibility by the Securities Commission’s Shari`ah Advisory Council. For the purpose of this paper, we will focus our discussion on Islamic Unit Trust.

UNIT TRUST: AN OVERVIEW

By referring to Securities Commission;

“Unit Trust fund is an investment scheme that pools money from many investors who shares the same financial objectives. The fund is manage by a group of professional managers who invest the pooled money in the portfolio of securities such as shares, bonds and money market instruments or other authorized securities to achieve the objective of fund. The funds earn income from the investment in term of dividends, interest income and capital gains. The income is then distributed to the unit holders in proportion to their ownership, in form of dividends”

What makes the Islamic Unit Trust differs from the above definition is that the activities of the fund are carried out in line with Islamic teachings. In other words, the Islamic Unit Trust represents an assertion of religious of law in capital market transactions where the market should be free from the involvement of prohibited activities by Islam as well as free from the elements of usury (riba), gambling (maisir), and uncertainty (gharar).

The primary objective of Islamic Unit Trust is parallel with the Islamic objective of doing business or investment by participating in “halal” Shari`ah-based investment portfolio, which complies with the principles of the Shari`ah. Such “halal” investments will exclude companies involved in activities, products or services related to conventional banking, insurance and financial services, gambling, alcoholic beverages and non-halal food products.

The Prophet (SAW) said:

“A truthful and trustworthy trader will rise up with the Prophets, the righteous and the Martyred.”

For the time being, there are two types of Islamic Unit Trust funds offered by banks in the market; capital growth and income funds. For the purpose of this paper, we have chosen RHB Bank Bhd to be the sample of the discussion. The details of the funds are as below.

RHB MUDHARABAH FUND

(Capital growth and income funds)

The main objective of the fund is to provide a balanced mix of income and potential for capital growth by investing in stocks listed on the KLSE or on any other stock exchanges, unlisted stocks and Islamic Debt Securities and other non-interest bearing assets acceptable under principles of Shari`ah. The Fund's activities shall be conducted strictly in accordance with the requirement of the Shari`ah principles and shall be monitored by the Shari`ah Panel of the Fund.

ISLAMIC BOND FUND

(Income Fund)

The main objective of the Fund is to provide regular income to investors through investments in Islamic debt securities and bonds which are acceptable investment
under the principles of Shari`ah

HOW INVESTORS INVEST IN UNIT TRUST?

  Lump Sum Purchases

This is where an investor has a single amount of funds, which they want to invest into a unit trust. This may be the only investment the investor wishes to make. Over a period of time (3-20 years), the initial investment will increase as dividends and other income is earned by the fund. When redemption or sale of the unit takes place, the unit-selling price will reflect the accumulation and compounding of capital over the relevant number of periods. It is this compounding effect over time, which makes accumulation type investments, such as unit trusts, so attractive to the investor

 For example, someone who has recently inherited a sum of money may wish to invest the funds into a unit trust and hold it for an extended period to save for some specific purpose. E.g. children's education. At the end of the required period, the proceeds of the sale of the units will be the initial investment plus the returns on that amount, accumulated over the relevant period.

  Regular Savings

Some people invest in unit trusts by making regular (e.g. monthly) contributions to their fund. This is an ideal, disciplined and useful way to accumulate capital for a future need. By making regular contributions over a period of time, the sum accumulated at the end of the period will increase at a much quicker pace compared to if one simply makes a single investment at the beginning of the period.

At the end of the required period, the redemption (or sale) price of the units held will represent the accumulation of all contributions, plus returns generated from the total contributions since the first purchase was made. The effect is more noticeable the longer the holding and contribution period. This form of saving is the basis of most pension fund accumulation e.g. the Employees Provident Fund

CONCEPT OF AN ISLAMIC UNIT TRUST FUND

A unit trust is an agreement between the management company, the trustee and fund’s investors who are called unit holders. All parties have their specific rights and obligations that need to be observed. In order to cater the welfare and justice of those parties, the Securities Commission has been given the power to register the deeds of unit trust schemes.

The management company is the company that establishes the fund. It handles the marketing and administration of the fund. According to Shari`ah, fund managers can be considered as al-Amin since they manage investors’ property in trust. In other word, by putting confidence on their integrity, honesty and sincerity, investors believe that managers will not devour investors’ wealth by false or illegal means.

Allah says in the Holy Qur`an regarding the Amanah (trust) in the following verse:

“Allah does command you to render back your trusts to those whom they are due; and judge between man and man that you judge with justice. Verily, how excellent is the teaching, which he gives you. For Allah is He who hears and sees all things.”

As a safeguard, the management company is not allowed to keep the asset of the fund, such as the share certificates and banks accounts. The trustee’s act, as a custodian of these assets and its main responsibility is to look after the interest of the unit holders. This duty of keeping trust is linked with the sanction of the religion of Islam as Allah warns in the Holy Qur`an:

“And if one of you deposits in trust a thing with another let the trustee (faithfully) discharge his trust, and let him fear his lord.”

A Unit Trust scheme can be illustrated as a tripartite relationship between the managers, the trustee and the Unit holders. The concept of relationship is depicted below

PERMISSIBILITY OF ISLAMIC BOND IN MALAYSIA AND ITS DEBATES

As mentioned earlier in the beginning of our discussion, Malaysian Islamic capital market consists of two main sectors; the Islamic equity sector and the Islamic private debt securities (PDS) or bond sector.

For the time being, Islamic Private Debt Securities involves only bond market. It is regulated by the Securities commission (SC) through the framework provide under the guidelines on the offering of Private Debt Securities. Hence, as stipulated in the guidelines, the structure of Islamic PDS must be confirmed and approved by Shari`ah advisors who are appointed by the issuer. A Shari`ah advisor can be an independent Shari`ah advisor who has been approved by the SC or a Shari`ah committee attached to the financial institutions that carry out Islamic banking activities approved by the central bank.

The issuance of Islamic bonds began as early as 1992 and a total of RM 20.5 billion has been invested in Islamic bond since then. However, until today, there exist disagreements among Islamic scholars regarding the permissibility of Islamic bond. Basically, the contract is designed based on the principles of Al-Murabahah, Bay’ al-`inah and Bay’ al-Dayn and Bay’ al-Muzayadah. The application of those Islamic principles can be illustrated in the following steps

Step 1: Securitization – The creation of a Bay’ al-`Inah Underlying Asset

Asset securitization is the essence of Islamic bond issues as bond must be assumed as a property of value. It is transformed to an object of value in order to qualify it to be sold and purchased in both primary and secondary market. Bay’ al-`Inah is created when the financier purchases a bond from an issuer and sells it back to the same party at a credit price. This buy back agreement will ensure that the issuer will receive the money in cash while financier will be paid a prefix or contracted amount in a future date. Debt payment will be made by installment through bond issues. The difference between cash and mark up price will represent the profit due to the financier (al-Murabahah principle applied).

Step 2: Issuance of Islamic Debt Certificate (Shahdah al-Dayn)

As the consequence of the above transaction, the bond issuer will sell bond pictured in debt certificate to financier or investors. Debt certificates issues are valid when it is backed by an asset. In other word it should be securitized. In this case the underlying security is the BBA asset (for long term issues) or al-Murabahah asset (for short to medium term issues).

In Malaysia, there are two categories of Islamic bond available in the market; Islamic Coupon Bond and Islamic Zero Coupon Bond.

Islamic Coupon Bond

“Coupon” denotes the profit portion gained on Islamic bond issued whether in al-Murabahah notes issuance facilities (MuNif) or al-bai’-bithaman ajil Islamic debt securities (ABBA) . Two certificated will be issued to investors where certificate which represent capital component is called primary notes while the profit portion is called secondary notes.

Islamic Zero Coupon Bond

This type of bond is sold at a discount. Although no coupon is given, investors can its profit impliedly through the difference between par value and discount value.

Step 3: Trading of Debt Certificate

Secondary market is crucial in order to liquidate bonds. As object of trade, the bonds can be sold by investors to the issuer or third party if the secondary market for Islamic bond exists. Let say Ahmad, an investor bought a zero coupon bond at a discount RM 950. The bond par value is RM 1000 upon maturity. During the maturity, he sells back the bond (debt certificate) to the issuer or third party. Here, we can figure out that Ahmad receives RM 50 as a profit from the bond. That is how Bay’ al-Dayn applied in the contract.

Application of Bay’ al-Muzayadah Principle

Khazanah Zero Coupon Bond is government guaranteed bonds. It applies the same process of issuance like other types zero coupon bonds. However, what makes it different is that the discount price is market determined through a bidding process (bay’ al-muzayadah). The bidding process allows the bond priced according to the forces of demand and supply so as to produce a yield that can be used as a benchmark for the local bond market.

WHAT ARE THE OPPONENTS OF MALAYSIAN ISLAMIC UNIT TRUST SAY?

As most of Islamic bonds in Malaysia are structured using bay’ al-`inah and bay’ al-dayn many scholars especially Middle Eastern reject their permissibility to be traded. The contract of bay’ al-`inah and bay’ al-dayn is seen as something similar to riba based financing.

Bay’ Al-`Inah: Why It Is Not Allowed?

Bay’ al-`Inah is generally known as sale based on the transaction of Nasi`ah (delay). The (prospective) debtor sells to the (prospective) creditor some objects for cash which is payable immediately; the debtor immediately buys the simultaneous the same object for a greater amount for a future date. The contract involves loans and the difference between the two prices is interest. Such contract is forbidden because a loan for interest is equivalent to usury (riba).

Based on Shafi’I, Maliki and Hanbali views, Rosli and Sanusi draw the following conclusion

“A time is certainty coming to mankind when they legalize (yastahillun) the Riba under the name of Bay” (trade concerning that intending usury by words of a sale)

Bay’ al-Dayn for Immediate Payment and Deferred Payment: Are They Allowed?

All schools of scholars agree that Bay’ al-Dayn (sale of debt either to debtor himself or to any third party) for immediate payment is allowed provided that it is paid in full

and no benefit is given to the purchaser. Financial transaction involving debts should never be allowed for a payment relative to the period of loans because it can be regarded as Riba. The prophet in one hadith says:

“Do not sell a debt for a debt”

So, here we can conclude that selling debts for deferred payment is not allowed.

As far as sale of debt to a third party, most Hanafis, Hanbalis and some Shafi’is jurist, agree that it is not allowed to sell al-Dayn to non-debtor or a third party at all. Such opinions are based on the forbidden sale of Gharar, in which the seller does not posses the ownership of debt.

Otherwise the remaining scholars allow the above selling provided that the following conditions are observed

Conclusion and Proposal

In our opinion, based on the discussion above, it can be concluded that Bay’ al-`Inah and Bay’ al-Dayn are the principles which are still in doubt. However, the evidences presented by most of Islamic jurist show that they are not in a position of supporting the application of those principles. Al-Qaradawi states in relation those principles: Why should we practice transaction, which contains elements of devices while we are in position to have a clear and apparent alternative transaction? Furthermore, mu`amalat which contains elements of device deviates the true objective of Shari`ah. The Prophet S.A.W reminds Muslims in one of his Hadith to avoid any form doubt (shubhah) in our life.

The above arguments show that the implementation of Islamic bonds in Malaysia is not yet fully supported and agreed by Muslims through out the world. As Malaysia is going to realized its target of being the center of Islamic bond, those disagreements should be taken into consideration. Middle Eastern investors are among those rich people who are interested with Islamic products. However, principles of Bay’ al-`Inah and Bay’ al-Dayn in bonds certainly will pose a great challenge to the Malaysian to attract investors from Rich Gulf countries.

Here we like to propose some alternatives that can be implemented in Malaysia which can support our target to be among the key players in the regional Islamic capital market.

Shari `ah has been beautifully made by Allah SWT to be our guidelines in this worldly life. As the following verse;

“Then We have put you (O Muhammad SAW ) on a plain way of (Our) commandment [like the one which We commanded Our Messengers before you (i.e. legal ways and laws of the Islâmic Monotheism)]. So follow you that (Islâmic Monotheism and its laws), and follow not the desires of those who know not.”