Islamic Finance: Shariah and The Composition of Islamic Financial System

There are many Financial Institutions that plays a role in contributing to Islamic Finance. For my reminder, I choose one regulatory institution, CIBAFI (General Council for Islamic Banks and Financial Institutions). 
 
General Council for Islamic Banks and Financial Institutions (CIBAFI) is a nonprofit institution that is the umbrella for Islamic financial institutions worldwide. It was founded by the Islamic Development Bank (IDB) and a number of leading Islamic financial institutions, CIBAFI is affiliated with the Organisation of Islamic Cooperation (OIC). Established on 16 May 2001, in the Kingdom of Bahrain.

CIBAFI is recognised a key piece in the international architecture of Islamic finance. CIBAFI was established with the objectives of developing the Islamic financial services industry (IFSI) and promoting the industry in various fields through information and financial analysis, communication, awareness, human resources and rating of Islamic financial products. 

CIBAFI mission to support Islamic financial services industry (IFSI) by being the leading industry voice advocating regulatory, financial and economic policies that are in the broad interest of their members and that foster the development of the Islamic financial services industry and sound industry practice, CIBAFI is guided by its Strategic Objectives, which are:
1) Policy, Regulatory Advocacy
2) Research and Publications
3) Awareness and Information sharing
4) Professional Development.

Islamic Finance: Shariah Governance and Corporate Governance

Through this blog I would like to remind myself what I have learned and read about topic related to Shariah Governance and Corporate Governance. Just to educate myself and to keep learning, I simply compile it here in my blog for what I have searching through the internet about Shariah Governance and Corporate Governance. The topic is come from one course I take at openlearning. This is importance for me because I am not to easily forget what topic I have read.

Based on my searching, corporate governance is the system by which companies are directed and controlled and involves adopting structures and processes which incorporate the values of fairness, transparency and accountability, and corporate governance through shariah operation subject to an additional layer of compliance with shariah rules and principles.
 
Shariah governance consist of three components which are shariah board, shariah review and shariah audit. Every single Islamic Bank must have a Sharia Supervisory Board to assure that the Islamic Bank meets shariah compliance. Shariah Supervisory Board should be involved in Accounting policy. This statement is also supported by Abdallah (1994) in Syafei (2010), which the Shariah Supervisory Board is also responsible for running audit ex ante and ex post to justify whether the operation of Islamic bank already meets the sharia compliance. The Accounting and Auditing Organizaton for Islamic Financial Institution (AAOIFI) has provided standards on Shariah Supervisory Board, Shariah review and internal shariah review under its governance standards (AAIOIFI, 1999).

Meanwhile, at national level it has a National Shariah Board that have duties to issue fatwa on each Islamic finance products. The fatwa is also as their reference in giving opinions related with the bank's activities and transactions.
Shariah governance is part of corporate governance, thus, good and effective of Shariah supervisory board should reflect the issue of independence, transparent, accountable, responsible and fair.

The impact of good practice of corporate governance:

• Corporation: the corporation with better practice of corporate governance are more profitable and better performance
• Society: threre will be a great impact on the society with higher level of satisfaction that the transactions and business are being done under the shariah guidelines and the haram elements have been removed, it will bring society to close each other and social security would have been assured at greater extent.
• Economy: It will bring leaving very good signs on the economy with the sense of being purified economic activities and involving the factor of production at maximum possible level by efficiently utilizing the natural resources to boost the economic activities to get the level of economies of scale. Being harmonized with true islamic economic system corporate governance will be a pivotal tool and motivation for the factor of productions and participants of economic systems

Islamic Finance: Sources of Shariah

Based on my understanding, there are four sources of shariah:

1. Al Quran
2. Hadith of Prophet Muhammad (pbuh)
3. Ijma (Consensus of Mujtahid)
4. Qiyas (Analogical Reasoning)

Fiqh is human understanding or knowledge of shariah pertaining to human conduct derived from the sources of shariah.

Usul Al Fiqh known as principles of Islamic Jurisprudence which scholars used to derive the fiqh from the source of shariah. For example Ijma (Concensus) and Qiyas (Analogical Reasoning).

My analogies, a designer of hijab. She knows the material, colour, printed material and the design of hijub demanded by customers. She also provided the tutorial of how to wear hijub that looks fahsionable. This must be refer to Usul Al Fiqh. 

At the end, the complete wearing of hijub that satisfy the customers, this is refer to Fiqh.

As far as I know that Usul literally means the roots, it deals with the methods and one of part in the sciences of fiqh.

Islamic Finance: Shariah and Corporate Governance

 

Corporate governance is the system by which companies are directed and controlled and involves adopting structures and processes which incorporate the values of fairness, transparency and accountability, and corporate governance through shariah operation subject to an additional layer of compliance with shariah rules and principles.

Shariah governance consist of three components which are shariah board, shariah review and shariah audit. Every single Islamic Bank must have a Sharia Supervisory Board to assure that the Islamic Bank meets shariah compliance. Shariah Supervisory Board should be involved in Accounting policy. This statement is also supported by Abdallah (1994) in Syafei (2010), which the Shariah Supervisory Board is also responsible for running audit ex ante and ex post to justify whether the operation of Islamic bank already meets the sharia compliance. The Accounting and Auditing Organizaton for Islamic Financial Institution (AAOIFI) has provided standards on Shariah Supervisory Board, Shariah review and internal shariah review under its governance standards (AAIOIFI, 1999).

Meanwhile, at national level it has a National Shariah Board that have duties to issue fatwa on each Islamic finance products. The fatwa is also as their reference in giving opinions related with the bank's activities and transactions.

Shariah governance is part of corporate governance, thus, good and effective of Shariah supervisory board should reflect the issue of independence, transparent, accountable, responsible and fair.

The impact of good practice of corporate governance:

• Corporation: the corporation with better practice of corporate governance are more profitable and better performance
• Society: threre will be a great impact on the society with higher level of satisfaction that the transactions and business are being done under the shariah guidelines and the haram elements have been removed, it will bring society to close each other and social security would have been assured at greater extent.
• Economy: It will bring leaving very good signs on the economy with the sense of being purified economic activities and involving the factor of production at maximum possible level by efficiently utilizing the natural resources to boost the economic activities to get the level of economies of scale. Being harmonized with true islamic economic system corporate governance will be a pivotal tool and motivation for the factor of productions and participants of economic systems

Islamic Finance: Conventional Insurance and Takaful

Conventional Insurance

is a way to provide security and compensation to what is valuable in the event of its loss, damage or destruction based on risk taking and speculation. The practical aspect of conventional insurance includes elements qimar or maysir (gambling) and riba (interest).

• The premium is paid to conventional insurance and is owned by them in exchange for bearing all expected risk. Premium paid by the policyholder is considered as income to the company, belonging to the shareholder.
• In conventional insurance, risk is transfered from the insured to the insurance company (the insurer) in consideration of insurance premium paid by the insured. It contains an element of gambling i.e “maysir” in that the insured pays an amount (premium) in the expectation of gain (compensation/payment against claim). If the anticipated loss (claim) does not occcur, the insured loses the amount paid as premium. If the loss does occur, the insurer loses a far larger amount than collected as premium and the insured gains by the same.
• All surpluses and profits belong to the sharehoders only. The insured is covered during the policy period but is not entitled to any return at the end of such period.
• Funds are mostly invested in fixed interest bearing instruments like bonds, securities, hence these contains the elements of riba (usury)

Takaful

Islamic system of insurance based on the principle of “ta’awun” (cooperation) and “tabarru” (gift, give away, donation) where the group voluntarily shares the risk collectively.

• There is full segregation between the participants takaful fund acoount and shareholders' account. The portion of investment is based on an underlying contract of musharakah/mudarabah to invest in halal business and earn a halal profit. Any ratio of profit between the policy holder and managing partners (takaful company) can be determined on the basis of the principles of musharakah or mudarabah
• In case of insufficient assets and reserves of the waqf to compensate the policyholders of takaful, the takaful company may arrange a financing or re-takaful for the waqf as per rules of the takaful company wetted by the shariah supervisory board of the company
• Any surplus in the takaful fund is shared among participants only and investment profits are distributed among participants and shareholders on the basis of mudarabah or wakalah models
• The takaful fund, consisting of the contributions paid as tabarru, will be invested by the company based on the principle of islamic modes of trade, through which the element of interest (riba) will be replaced. The capital of waqf can be invested into halal and secured schemes of investment

Source: “handbook of Islamic Finance” (2017 edition)
ethica institute

Islamic Finance: Maslahah

Maslahah literally means benefit, the synonim of manfa'ah. Maslahah prioritize the needs of the public / public interest. Al - Ghazali defined Maslahah as the consideration which secures a benefit or prevent harm, but is, in the meantime harmonious with the aim and objectives of the shariah. Those objectives consist of protecting the five essential values:

1. Religion/ Ad - Din / Faith
2. Life
3. Intellect/ Aqal / Rationality
4. Posterity/ Progeny
5. Wealth / Property

Ladin (2006) scholar have divided Maslahah into three categories:

1. Maslahah Mu'tabarah - which the Qur'an and Sunnah has expressly upheld and has enacted a law for its realisation
2. Maslahah Mulgha - which the Qur'an or Sunnah has nullified either clearly or by indication that could be found in shariah, for example: the practice of usury in transactions
3. Maslahah Mursalah - can be observed in different enactments of the laws, which benefits the people and prevents them from harm, for example traffic regulations, regulations related to financial management, regulations related to family matters

In finance, application of Maslahah, for example collecting usury will lead to the exploitation of the rich against the poor which would worsen the state of society and proverty, Ghofur (2008), so that the prohibition of usury would lead to great Maslahah for the ummah, Al - Qadrawi (2001).

At the same time, to prevent harm/loss, for example in doing business, in case where Islamic banking and Finance are not available, Muslim are permitted to deposit their money in Conventional Bank as long as they not breach the shariah principles.

Another definitions says that Maslahah is the benefits or interests which are deemed necessary from shariah perspectives to protect and preserve the five darurah (Al - Mansul, Fakhruddin Ar - Razi, p.24)

Akad Ikatan atau kesepakatan antara nasabah dengan bank yakni pertalian ijab (pernyataan melakukan ikatan) dan kabul (pernyataan menerima ikatan) sesuai dengan kehendak syariat yang berpengaruh pada objek perikatan. Misalnya, akad pembukaan rekening simpanan atau akad pembiayaan.

Artikel ini telah tayang di Kompas.com dengan judul "Istilah Perbankan Syariah", https://nasional.kompas.com/read/2008/11/03/09230232/istilah.perbankan.syariah.

Usaha Kosan: Tata Tertib di Kosan

Sekarang banyak tempat tinggal keluarga yang dialihkan oleh pemilik menjadi bisnis kos - kosan. Salah satu alasannya karena pemilik sudah pensiun dan anak - anak semuanya sudah memiliki pekerjaan masing - masing, memilih untuk tidak tinggal di rumah atau memang pemilik bermaksud buka usaha kos - kosan.

Tempat kos yang terawat, bersih, nyaman, terjangkau dan memberikan rasa hommy pasti memiliki target pasar. Nah, saya salah satu yang tertarik dengan usaha kos - kosan ini. 

Berkaitan dengan resiko - resiko itu, pemilik pasti nya juga memiliki aturan - aturan yang harus diperhatikan oleh penyewa. Aturan ini terkadang ada yang hanya diucapkan, ada yang harus ditulis dan ditempel di sekitar dinding - dinding rumah. Inilah bagian terpenting yaitu ada kontrak antara pemilik dan penyewa. Jika kedua pihak setuju dengan kamar yang disewa, harga, aturan - aturan, dan kesepakatan antara pemilik dan penyewa sudah benar - benar deal maka kontrak sudah valid.

Tata tertib bagi penyewa kamar kos:

• • Rumah ini bebas narkoba, apabila ada yang ketahuan narkoba pemilik rumah tidak turut bertanggungjawab
  • Tamu (bukan penghuni rumah ini) dari lain jenis tidak dibenarkan memasuki kamar - kamar penghuni dan diharapkan sudah meninggalkan rumah ini paling lambat jam 23.00 (malam)
  • Tidak diperkenankan membawa tamu menginap di kamar kost, kecuali dengan ijin pemilik dan ketua RT/RW
  • Disediakan ruang tamu, harap tamu diterima di ruang tamu
  • Melapor kepada ketua RT/RW menjadi tanggungjawab penyewa dan dibantu pemilik rumah
  • Barang - barang bawaan pribadi penyewa menjadi tanggungjawab penyewa, kehilangan barang - barang pribadi menjadi tanggungjawab penyewa
  • Tidak diperkenankan memasak di dalam kamar
    
  • Tidak dibenarkan membawa mesin cuci
  • Tidak dibenarkan membawa microwave
  • Dimohon bertindak sopan
  • Tidak dibenarkan membawa binatang peliharaan seperti kucing, anjing dan lain - lain
  • Air minum disediakan pemilik kos 2 galon per bulan, selebihnya agar disediakan penyewa
  • Pemakaian elpiji agar ditanggung bersama yang memasak
  • Pembayaran uang kos dilaksanakan sehari sebelum memasuki/menggunakan kamar, pembayaran bulan berikutnya dibayar satu hari dihitung dari tanggal masuk
  • Menjaga kebersihan kamar masing - masing
    
  • 
  • Mencuci dapat dilaksanakan oleh pemilik rumah kos dengan menyediakan sabun cuci masing - masing dan disetrika dengan tarif kesepakatan harga
  • Kerusakan yang ditimbulkan oleh penghuni menjadi tanggungjawab yang bersangkutan
  • Tidak dibenarkan membuang pembalut/benda padat lainnya ke dalam lobang closet/wastafel
  • Harap mematikan AC / Lampu - Lampu dan kran air apabila tidak terpakai atau penghuni sedang bepergian
  • 
    Bila membawa kendaraan, penyewa bertanggungjawab atas kendaraan masing - masing termasuk mengatur parkir di area kos. Sehingga tidak saling mengganggu sesama penghuni
    
    
    
  • Setiap penghuni mendapatkan kunci pagar, kunci kamar, dan kunci rumah yang mohon dijaga oleh masing - masing pemegang kunci / penghuni

Tata tertib ini dibuat untuk dipatuhi bersama, demi keperluan bersama dan kenyamanan bersama.

Bagi pemilik kos aturan - aturan seperti itu seperti keharusan untuk menjaga keamanan dan kenyamanan dan kontrak sewa menyewa akan sah apabila ada kesepakatan dengan penyewa nya kan. Cheers

Islamic Finance: Istilah - Istilah dalam Perbankan Syariah

Menurut catatan yang diperoleh dari Bank Indonesia, ada 20 istilah yang  biasanya dipakai dalam perbankan syariah:

Akad - Ikatan atau kesepakatan antara nasabah dengan bank yakni pertalian ijab (pernyataan melakukan ikatan) dan kabul (pernyataan menerima ikatan) sesuai dengan kehendak syariat yang berpengaruh pada objek perikatan. Misalnya, akad pembukaan rekening simpanan atau akad pembiayaan.

Mudharabah - Akad yang dilakukan antara pemilik modal (shahibulmal) dengan pengelola (mudharib). Pada saat awal, bagi hasil atau nisbah disepakati. Sedangkan, kerugian ditanggung pemilik modal.

Musyarakah - Akad antara dua pemilik modal atau lebih untuk menyatukan modalnya pada usaha tertentu. Sedangkan, pelaksanaannya bisa ditunjuk salah satu dari mereka. Akad ini diterapkan pada usaha/proyek yang sebagiannya dibiayai oleh lembaga keuangan. Sedangkan, selebihnya dibiayai oleh nasabah.

Nisbah – Porsi bagi hasil antara nasabah dan bank atas transaksi pendanaan dan pembiayaan dengan akad bagi hasil (Mudharabah dan Musyarakah).

Bai almuthlaq – Jual beli biasa yaitu penukaran barang dengan uang. Uang berperan sebagai alat ukur. Bai almuthlaq dilakukan untuk pelaksanaan jual beli barang keperluan kantor (fixed assets).

Sharf – Jual beli mata uang asing yang saling berbeda seperti rupiah dengan dolar, dolar dengan yen. Sharf dilakukan dalam bentuk bank notes dan transfer, menggunakan nilai kurs yang berlaku pada saat transaksi.

Muqayyad – Jual beli dengan pertukaran yang terjadi antara barang dengan barang atau barter. Jual beli semacam ini dilakukan sebagai jalan keluar bagi ekspor yang tidak bisa menghasilkan mata uang asing(valas).

Murabahah – Akad jual beli tempat harga dan keuntungan disepakati antara penjual dan pembeli. Jenis dan jumlah barang juga dilejaskan rinci. Barang diserahkan setelah akad jual beli dan pembayaran bisa dilakukan secara mengangsur atau mencicil.

Salam – Jual beli dengan cara pemesanan. Pembeli memberikan uang terlebih dahulu terhadap barang yang telah disebutkan spesifikasinya. Lalu, barang dikirimkan kemudian. Salam biasanya dipergunakan untuk produk pertanian jangka pendek. Dalam hal ini lembaga keuangan bertindak sebagai pembeli produk dan memberikan uangnya lebih dulu. Sedangkan, nasabah menggunakan uang itu sebagai modal untuk mengelola pertaniannya.

Istisna – Jual beli barang dalam bentuk pemesanan pembuatan barang berdasarkan persyaratan serta kriteria tertentu. Sedangkan pola pembayaran dapat dilakukan sesuai kesepakatan (dapat dilakukan di depan atau pada saat pengiriman barang).

Mudharabah Muqayyadah – Akad yang dilakukan antara pemilik modal untuk usaha yang ditentukan oleh pemilik modal (shahibulmal) dengan pengelola (mudharib). Nisbah atau bagi hasil disepakati di awal untuk dibagi bersama. Sedangkan kerugian ditanggung oleh pemilik modal. Dalam terminologi bank syariah hal ini disebut spesial investment.

Musyarakah Mutanaqisah – Akad antara dua pihak atau lebih yang berserikat atau berkongsi terhadap suatu barang. Lalu salah satu pihak membeli bagian pihak lain secara bertahap.

Wadiah – Akad yang terjadi antara dua pihak. Pihak pertama menitipkan suatu barang pada pihak kedua. Lembaga keuangan yang menerapkan akad ini pada rekening giro.

Wakalah – Akad perwakilan antara satu pihak kepada pihak lainnya. Wakalah biasanya diterapkan untuk pembuatan L/C atas pembelian barang LN atau penerusan permintaan.

Ijarah – Akad sewa menyewa barang antar kedua pihak untuk memperoleh manfaat atas barang yang disewa. Akad sewa yang terjadi antara lembaga keuangan (pemilik barang) dengan nasabah (penyewa) dengan cicilan sewa sudah termasuk cicilan pokok harga barang. Sehingga pada akhir masa perjanjian penyewa dapat membeli barang tersebut dengan sisa harga yang kecil atau diberikan saja oleh bank. Biasanya Ijarah dinamakan Ijarah Waliqina atau Ijarah Almuntahla Bithamlik.

Qard - Pembiayaan kepada nasabah untuk dana talangan segera dalam jangka waktu yang relatif pendek dan dana tersebut akan dikembalikan secepatnya sejumlah uang yang digunakan. Dalam transaksi ini, nasabah hanya mengembalikan pokok.

Rahn - Akad menggadaikan barang dari satu pihak kepada pihak lain dengan uang sebagai penggantinya. Akad ini digunakan sebagai sebagai akad tambahan pada pembiayaan yang berisiko dan memerlukan jaminan tambahan. Lembaga keuangan tidak menarik manfaat apapun kecuali biaya pemeliharaan atau keamanan barang tersebut.

Hawalah - Akad pemindahan utang/piutang suatu pihak kepada pihak lain. Dalam lembaga keuangan, hawalah, diterapkan pada fasilitas tambahan kepada nasabah pembiayaan yang ingin menjual produknya kepada pembeli dengan jaminan pembayaran dari pembeli tersebut dalam bentuk giro mundur. Ini lazim disebut post date check namun disesuaikan dengan prinsip-prinsip syariah.

Kafalah - Akad jaminan satu pihak kepada kepada pihak lain. Dalam lembaga keuangan, biasanya, digunakan untuk membuat garansi atas suatu proyek (performance bond), partisipasi dalam tender (tender bond), atau pembayaran lebih dulu (advance payment bond).

Ijarah - Akad sewa menyewa barang antara kedua belah pihak untuk memperoleh manfaat atas barang yang disewa. Akad sewa yang terjadi antara lembaga keuangan (pemilik barang) dengan nasabah (penyewa) dengan cicilan sewa yang sudah termasuk cicilan pokok harga barang. Sehingga, pada akhir masa perjanjian, penyewa dapat membeli barang tersebut dengan sisa harga yang kecil atau diberikan saja oleh bank. Karena itu, biasanya ijarah dinamai "al ijarah waliqina" atau "al ijarah alMuntahia Bittamilik"

Sumber: https://nasional.kompas.com/read/2008/11/03/09230232/istilah.perbankan.syariah