As the Islamic financial markets in Malaysia and in the rest of the world are developing fast, there are some issues raised by the public that need to be attended to by Shariah scholars. The issues include the Islamic banks’ and Takaful’s start-up capital. One might ask: Capital for these Islamic banks and Takaful operators would have come from their parents’ conventional financial services operations, thus is it permissible to start a purely Islamic bank and Takaful with these types of funds?
The simplified response to these questions will be as follows:
a) Money is not forbidden in terms of its ‘ain (the item itself), but it becomes prohibited if it is acquired in a manner that is not in line with Shariah requirements. (Ahkam al-Mal Al-Haram, Dr Abbas Al-Baz, pg 265)
b) The parent bank’s and company’s original fund and profit are not wholly from non-Shariah-compliant businesses, as it might also come from individuals and other organisations, including the Government and private institutions, then the money from both Shariah-compliant and non-Shariah-compliant sources are mixed. However, in this case, the bank typically declares that the fund that is used to establish the Islamic bank or their Islamic window is from the halal fund portion.
Furthermore, from the Shariah stand point, there is a dispute among the Shariah scholars:
- Majority of the ulamas like Hanafis, Ibn Qasim from Malikis School, Hanbalis and Ibn Taymiyah have stated that it is permissible to deal with the co-mingled fund owner or seller if a major portion of the fund is from halal sources.
- Imam Ibn Nujaim states: “Whenever majority of his/her funds are ‘halal’, then there is no problem at all to accept their gifts and eat their meals as long as there is nothing to show that they are ‘haram’, however, if majority of the funds is ‘haram’, then do not accept the gifts and eat their food, except if it is declared as from halal sources (refer Ibn Nujaim, Asybah wa An-Nazair, page 125).
- Imam Ibn Qaddamah said: “... if you know (or is declared) that the commodities or goods are from his/her halal fund, then it is halal.” (Al-Mughni, 4/334)
- Imam As-Syawkani and al-Muhasibi are of the view that it is totally allowable to deal with the owner of mixed fund, whether the halal portion is the smaller or the larger portion (refer As-Saylul Jarar, 3/19; Al-Makasib wa al-Rizq al-Halal, pg 116).
Therefore, is it incorrect to regard the entire fund of the conventional banks or their shareholders as non-Shariah-compliant and can not be used to start an Islamic operation. It is agreed that it is a great obligation for the bank to make sure that only the halal portion is being used to establish a separate fund for Islamic division operations or Islamic bank and Takaful subsidiaries. However, if there is still a minor portion from the non-Shariah-compliant fund that is used to strengthen the paid-up capital for the Islamic subsidiaries, I am of the view that it can also be considered as lawful based on Qard Hasan (benevolent loan without interest) from their parent company.
In the event that the company gains any profit later on, they can pay out some percentage from the profit portion to clean up their doubtful fund. If this is also prohibited, how can a bank or company be converted into an Islamic entity and business? Therefore, in line with Maqasid As-Shariah (the objectives of the Shariah), it must be allowed for converting even though there are some impure funds involved at the starting point.
Other than the above, our traditional Shariah scholars have discussed thoroughly the Sariah ruling on the profit obtained from impure fund investment, for example, investing stolen monies in a Shariah-compliant investment or using it as a capital for one’s personal business. At this juncture, Imam Malik, Imam As-Shafie, Imam Abu Yusof and Syeikh Zufar agreed that the thief is entitled to the profit, but he must return the stolen money that has been used as a capital in the investment. (Bidayatul Mujtahid, Ibn Rusyd, 2/241; Rawdah at-Tolibin, An-Nawawi, 4/211; Al-Hawi, al-Mawardi, 7/337).
In light of this view, we can assume that the Islamic bank could have the profit even though it happens to be non-Shariah originated funds are being used as capital