Islamic banking: Establishing morality in financial dealings

Harmonising legality with morality in Islamic Banking and Finance was the focus at a lecture recently organised by the Forum for Islamic Education and Welfare (FIEW) for its members in Lagos. PAUL OMOROGBE brings excerpts.

It is often a challenge while dealing in financial transactions as morality is often put to question particularly when the one party is tricked, cheated or shortchanged. This happens globally and it applies to individuals, private organisations, conglomerates and countries. The bottom-line is often to maximise profit in a crooked way without putting fellow business parties into consideration.

As a result of the global financial recession, new and alternative approaches to curb prevailing economic problems have begun to emerge among economists and the general public.

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The Islamic financial system has emerged to become a possible solution to the mayhem.

However, implementing Islamic Banking and financial practices would require adopting their undergirding Islamic legal and moral frameworks.

Departing from these foundations of Islamic law could render the activities conducted under its name religiously unacceptable, and thus perhaps philosophically problematic. Thus it is crucial to understand these foundations in order to consider the viability of incorporating an Islamic approach to finance into the mainstream practice more seriously.

Generally, how does the populace perceive the concept of morality and legality in Islamic banking and finance, which also extends to our day-to-day activities and careers? Islamic banking was formed in the 1950s by some Arab Egyptian elites as a cooperative society which later blossomed and extended to the West.

The Western view on morality is doing the right thing while morality is legally backed in Islam which encourages persons to do the right thing for a reward now and life after.

In order to address the issues of legality with morality in Islamic banking and finance taking into cognisance its moral and legal burden backed by law and to educate its members, particularly Moslem brethren, and the implications of engaging in underhand dealings in the course of transactions, a breakfast lecture was put together by the Forum for Islamic Education and Welfare to celebrate its President, Amir Mobolaji Lawal, who turned 70 on October 1.

Held at Radisson  Hotel in Ikeja, Lagos on Sunday October 7, 2018  the dignitaries were led by the celebrant and the President of the forum, Alhaji Mobolaji Lawal and his wife Adefunke Lawal. Others present included the Deputy Amir, Alhaji Rafiu Ebiti and wife, Adebisi; guest lecturer and Head of Research Kulliyyah,  (Faculty) of Islamic Revealed Knowledge and Human Sciences, International Islamic University Malaysia, Malaysia, Professor Luqman Zakariyah; Alhaji Adiamo Oyefiade;  Biodun Rufai, Dr Tajudeen Lawal, Kayode Buraimo,  Fatai Lawal,  Alhaji Ariyo Orisekun,  Hakeem Gbajabiamila, Mr and Mrs Ganiyat Osho, among others.

In the paper titled, ‘Harmonising legality and morality in Islamic Banking and finance,’ by the guest speaker, Professor Luqman Zakariyah, critically examined the feasibility of harmonising morality with legality in Islamic finance.

In doing so, he revealed what constituted morality and legality in the Islamic legal theory, and critically examined the approaches of Muslim classical scholars in fusing the two elements together for realization and actualisation of the very objectives of Sharīah.

Taking the participants through the lecture on how to harmonise legality and morality in Islamic banking, Professor  Zakariyah noted that while transacting business, there  are certain areas that parties involved must put into consideration to avoid his/her morality being questioned. While ethics and morals are the core of Islamic law in general and also of rulings on commercial transactions, the speaker pointed out that the principles underlying the Islamic ethical system revolve around the unity of God.

He said while pursuing economic well-being is encouraged in Islamic law, engaging in deals that involve prohibited substances such as, alcohol, pork-related products, and gambling is legally and morally forbidden in Islam.

In addition to these instances, certain commercial behaviours or activities such as ambiguous dealing are also prohibited, owing to the Islamic moral value of not compounding financial problems for  people or not employing destitution and desperation to get out of a problem.

Speaking further, he said Islamic moral standards and resulting approaches to finance and banking is thus a subject worth exploring, especially with regard to how they can gain acceptance within the Western conventional economic system. As these two systems interact, however, challenges naturally arise.

In recent times, scholars on the Islamic Finance Industry (IFI) has called for integrating Islamic moral norms with legal theories in the industry. Among reasons for this call are unethical trends in product innovation and execution of the industry. Implementing Islamic banking and financial practices would require adopting their undergirding Islamic legal and moral frameworks. Departing from these foundations of Islamic law could render the activities conducted under its name religiously unacceptable, and thus perhaps philosophically problematic.

He noted that with their keen observation and deep knowledge, scholars at various  times   have raised  questions of relationship between morality and legality and samples of Islamic finance products are evaluated to dig out their moral and legal dimensions. The observations of these scholars he stressed revolve around a professional’s pragmatic approach in the field of Islamic banking and finance.

He said a scholar once pointed out that the current practice of Islamic finance is that the legalistic forms of contracts are fulfilled, but the substance and spirit are not.

For a clear understanding, three typologies of Islamic finance products in the market were identified as: Sharī‘ah-based products,   Sharia’s-compliant products, and pseudo-Islamic products.

Throwing light on the rules that guide the aforementioned typologies, the scholar stressed that Sharia based products fulfill both social and legal codes of law emphasis: that one shouldn’t take bribe because it has consequences, don’t concede information to exploit your fellow human being while transacting business, and don’t sell the house of mortgage defaulters. Pseudo Islamic, on the other hand, forbids using tricks while doing business.

“How can you harmonise all of these rules in business activities particularly by avoiding maximising profits in a crooked way?” he asked.  The answer according to Professor Zakariyah is simple. “By appealing to your conscience that in whatever you do there is a reward. Bearing this in mind, you won’t trick, dribble or shortchange your fellow human being.”

While the purpose of embarking on business venture is to make profit, what is then the moral implication for a mortgage defaulter as banks often repossess the properties, or if a one borrows money and refuses to pay back?

According to the speaker, mortgage is a prevailing issue and at the same time it is also a necessity. “Well, mortgage issues depend on how you structure it. And in case the occupant defaults, provided it is not a business avenue, you don’t need to give him/her respite but to negotiate. Note: provided the mortgage in question is meant for residential,” he stressed.

“In most cases, if it is a bigger house you can sell it and get a smaller place for the occupant. It is a win-win situation as the owner gets his/her money back and at the same time the former occupant is not rendered homeless.”

Speaking on the take away from the lecture, the convener of the programme, Alhaji Rafiu Ebiti said he is happy that the speaker has been able to throw more light on the topic because there is always confusion about the moral and legal aspects in Islamic banking. “For instance, he gave a vivid example of  mortgage that  in case  there is default there shouldn’t be a quick repossession. That is, one should look to help human kind. I think we have done a lot by bringing a lecturer all the way from Malaysia who is an expert on that. It is also an opportunity to celebrate Amir Mobolaji Lawal who has been a role model in Islamic tower.”

For the executive secretary of the forum, Dr Tajudeen Adebayo, he said he was happy that the forum has impacted the people.

“The forum has provided an avenue to educate our members on issues that affect them in all facets of life. The second aspect is welfare of our members where the privileged through Zakat programme and other charities touch people’s lives. My take away was from what obtains  in Malaysia where morality has been legalised which makes it  compelling that you don’t make it personal but legal, whereby you don’t do things just because but it has become a way of life but backed by the legal system.”

Dr Fatai Kayode Lawal, Managing Director, Sterling Assurance Nigeria Ltd, said what the erudite scholar has done shows a clear demarcation between what is both legally and morally required in Islam and that there is a thin line between the two.

“Those things that are morally required are not obligated or compulsory for Moslems, but for those who are legally required they can’t do anything about it.”

He emphasised that “when you are involved in the financial transaction or any other transaction you should be conscious of fear of God and be fair to your fellow human beings.”