Riyadh, Asharq Al-Awsat – When a financial institution is claiming that all its activities are compliant with Islamic Sharia and that it has appointed its own Sharia body to determine whether or not its products and contracts are Sharia compliant and to observe and scrutinize the institution’s activities and its accuracy with regards to Sharia law then this very institution fails to meet its obligations towards its clients and contests in a court of law the compliance of these contracts to Sharia law, this in itself contradicts Islamic Sharia. This is all so that the institution can evade its responsibility towards its clients even though the contracts were drawn up by its own legal department and approved by its Sharia body. How can we describe such conduct? What damage could it cause as a result? What does this indicate? What is the position of Sharia bodies towards this? To what extent are supervisory bodies responsible for this?
Without doubt, the least that can be said about this situation is that the behaviour is Machiavellian and is an example of following the principle of “the end justifies the means,” which Islamic Sharia has never approved and even considers immoral. Islam urged people to fulfil their obligations, to be honest and to never commit an act of treason even if a Muslim has himself encountered treason. Islam has also forbidden cheating and calls for honesty and clarity as the Quran says: ‘O you who believe! Fulfil (all) obligations,’ Surat al Maeda, Verse 1. It also says, ‘[The Believers must eventually win through]…Those who faithfully observe their trusts and their covenants,’ Surat al Mumenoon, Verse 8 and ‘O you who believe! Betray not the trust of Allah and the Messenger, nor misappropriate knowingly things entrusted to you,’ Surat al Anfal, Verse 27.
The Sunnah of the Prophet [PBUH] also reinforces such morals. On the authority of Abu Dawud, the Prophet said, “Render trust to whoever entrusts you and do not betray whoever betrayed you.” The Prophet also said, “Every traitor will have a banner on the Day of Resurrection,” and that the “signs of the hypocrite are three: whenever he speaks he tells a lie, whenever he is entrusted he is proved dishonest, and whenever he promises he breaks his promise.” Abu Huraira reported that one day the Prophet passed by a pile of food and put his hand into it, and his fingers touched something wet. He said, “Owner of the food, what is this? The man said, “It became wet from the rain, O Messenger of Allah.” He said, “Why did you not put it (the wet part) on top of the pile so that the people could see it? He who deceives us is not from among us.”
The financial institution’s interest, whatever that may be, is not a justification for the institution, which claims to be Islamic, to contest the legitimacy of a contract that it itself had drawn up the terms and conditions of and had it approved by its Sharia body. Why? It is because this is an indication of the institution’s dishonesty in dealing with its clients as well as its partners and it also a clear indicator that this institution prioritises worldly gains over Sharia. There are two possibilities here; either it was unconvinced from the start of the validity of Sharia decisions and accepted them for selfish reasons, or was convinced of the validity of the Sharia decisions but sees an escape from fulfilling its obligations by contesting their legitimacy. Both cases are forbidden by Islamic Sharia because in the former, the institution accepted a non-Sharia ruling, whilst in the latter, it abandoned Sharia ruling and accepted a contradictory law. In addition, by behaving this way, this institution is underestimating Sharia bodies and undermining their credibility by showing that they approved of contracts that are not Sharia complaint. Therefore, the damage caused as a result of such conduct is unlimited and only God knows the limits of this evil. It will also undermine the client’s trust in its contracts and products as well as of all Sharia bodies and the decisions they make. This will also lead to an increase in the cost of Islamic products, as many of the institutions that deal with Islamic financial institutions will have to resort to external Sharia consultancies to scrutinize their contracts with these institutions in order to ascertain the extent to which they are Sharia compliant or not. Above all, such conduct distorts the image of Islam and suggests that it is barbaric and materialistic and governed by profit and loss just like capitalism. Until recently, we believed that after the global financial crisis Islamic finance would present civilized and moral Islam to the world.
This and other examples should serve as a lesson to all Sharia bodies with regards to these institutions or those responsible for them not having good intentions, and to stress the importance of them doing their job with professionalism away from emotions and personal relationships and to not place so much trust in the officials responsible for them, and this is something we have always called for. I do not think that anything will change unless Sharia bodies are not held responsible for what they do. Furthermore, supervisory bodies are demanded to enact clear laws that do not require interpretation or explanation and that define the duties of Islamic financial institutions towards their clients, investors and supervisory bodies. These laws are necessary to compel Islamic financial institutions to fulfil their commitments and hold them responsible for any negligence and subject them to penalties in accordance with the law and based on the particularities of each situation to the extent that licenses are revoked if need be in order to protect this industry against intruders.