Friday, July 15, 2005

Al-Hisbah as a Social Institution

The application of Hisbah in the Malaysian context should be based on how it (i.e. Hisbah) was institutionized in the early days of Islam. It should not be misconstrued to run on an economic and commercial orientation alone.

The concept of Hisbah lies in the Quranic injunction “enjoining the good and forbidding the evil” amr bil ma’ruf wannahi ‘anil munkar” All persons with an Islamic authority actually acted on the same principle as above. As described by Ibn Taimiyah these include:

Greater military authority (wilayat al-harb al-kubra) like:
the Prime Minister (niyabat al-saltana)

Lesser authority such as:
1. police (shurta),
2. the magistracy (wilayat al-hukm) or
3. the financial authority (al-dawawin al-maliya)
4. the hisba authority

In this sense the Hisba authority complements the other authorities and not overriding them.

The overall objective of the Hisbah is to facilitate society to perform the ‘Ibadat (i.e. worshipping Allah swt). This “Ibadat can be categorized into 3 categories as given below with the respective Hisbah functions:

1. those relating to the rights of God such as religious/ritualistic activities – punctuality of prayers, organization of Jumaah/Friday congregations and maintenance of mosque.

2. those relating to the rights of people such as community affairs and behaviour in the market like accuracy of weights and measures and honesty in dealings
those related to both such as municipal administration such as keeping the roads and streets clean and preventing the building of a factory or dwelling place that may damage community interest.

The practise of Islamic financial transactions today may need some degree of monitoring as it must reflect true label. The Hisbah system can be examined closely and some principles can be extracted from it (i.e. Hisbah) to make way for a transparent system of check and balance in the Islamic financial landscape. The public should be given an avenue to relate their experiances and also critique of current practices. Some may include Islamic banking practices such as:

1. charging al-bai bithaman ajil customers with higher profit rates than interest-rates.

2. selling assets without effecting transfer of title

3. Buying assets from customers with a condition that the latter must buy it back

4. imputing penalty charges similar with conventional instruments

5. Conducting leasing (ijarah) without liability of ownership

For more information, kindly contact the author. This is a paper in progress. Copyright @saifulazharrosly


Anonymous Anonymous said...

By virtue of the Islamic Banks’ practices which are viewed to be quite similar to the conventional practices as mentioned by Dr. Saiful in his article previously, the deficit-fund units, i.e. customers who are the main user of banking services and products, must therefore be given a say in relating their experiences, critique and frustrations when they have some dissatisfactions with the current system of Islamic Banking. The Hisbah system provides such an avenue, though indirectly, in providing a transparent check and balance in monitoring the Islamic financial transaction and practices. Since the public Maslahah is one of the main objectives of Syariah which must be observed by any organization in conducting its business, therefore Islamic Banking should give priority in providing services that is in conformity to the public interest. If Islamic Banking violates this in any way that gives harm to the public, then the public has the right to say directly in protesting the defective practices. Islam has provided such an avenue that has been the practice of the people of pre-Islamic Arabia before the Prophet Muhammad SAW had made it legal in the eyes of Islam. This practice is Syura, i.e. mutual consultation. In this practice, a group of distinguished, knowledgeable and trustworthy people represent the public in having a say in arising matters concerning the public’s interest. No need to say more, the current Islamic banking has its own selective Syariah Council that comprise of Islamic Jurists who give legal advise as to whether certain products conform to the Islamic value. However, whether the advise really takes into account the public interest or not, this requires a vast knowledge of economics and finance in devising products and services while conforming to the Syariah values. The Syariah council as representatives of the public should therefore act and make the decisions that in no way affecting the public. They must see and monitor effectively what the current Islamic Banking products have in effect to the customers and rectify immediately any defects observed.
As a conclusion, besides the Hisbah system, Syura is another avenue in making the public voices heard in which the Syariah Council of the Islamic Banking has been formed to give legal advise in validating the products and services of the banks. This Syariah council should therefore comprise of people who have the public in their interest and vast inter-disciplinary knowledge so that they really act and perform their duties according to the path of Allah.

10:55 PM  
Blogger siti hajar samsu said...

Al Hisbah as a social institution is a great contribution from the earlier islam age. However, one thing came across into my mind when read the article, is that about funds for financing such institution. As it is well known that funds is the most problematic subject in running any institution or organization. Thus, to ensure Al Hisbah is able to accomplish its big task to society and at the same time as a social intermediary, we must very clear about the finance issue. Otherwise it would bring a problem to the organization one day.
According to the function that has been mentioned, it seems that Al Hisbah played a more or less important role in a way to shape our society behaviour towards several issues i.e the current islamic finance system, ibadah, moral and social, welfare and many more. Collectively, We believe that the establishment Al Hisbah in the pre islam age, must be a big advantages to a muslim generation. Yet, i think the functioning of Al Hisbah should concurrent with modern style of life in order to fit with contemporary style. Nevertheless, it does not means that we have to sacrifice the shariah principles in running the organization. The islamic rules particularly from revealation sources there is no space of tolerance. In other words, revealation knowledge wont change, life style should changed to fit into the islamic rules. For the sake of next generation, Al Hisbah institution place a foundation for the future development, from the islamic perspective. Like a wise man say a long journey is started with one wise steps from all of us. If not us, who else going to take care of our welfare in muslim country, no one will interested, except we as a muslim.

3:46 AM  
Blogger eghutapea said...

In the economic sphere, al-Hisbah in the early days of Islam conducted a focal role in ensuring ‘amr ma’ruf wa nahi munkar” to be implemented in the market. It was there to correct market imperfection, to reduce negative elements from the market, to ensure availability of necessary goods in the market, to protect property right, to eliminate hoarding activities, and to remove unfair business practices.

Currently, in the context of Islamic financial system (i.e. Islamic banking), did we have a genus of institution that carried out the role of al-Hisbah?
In my view, yes we had. Regrettably, it is not perfect yet. Optimistically, we are able to promote it as the best candidate to exhibit the substantial role of al-Hisbah.

In the Islamic banking context, should one look at the roles of al-Hisbah stated above, one can easily find that their exactly similar with any measures should be taken to ensure the shariah compliance of Islamic bank’s operation.
Having that insight, we can find those roles are jointly played by shariah supervisory authority and banking supervisory authority. The problem now is how to make those roles more apparent.

To bring this idea into the reality, I share akin of opinion with sr. hajar that budget constraint is still a problem with us to construct a new body for this duty.
If we had candidate then why should we start from the nil. We don’t have to reinvent the wheel. So, to me, the most feasible and effective way to do is to choose the best candidate between the two. Without any intention to undermine the capability of shariah supervisory authority, the best choice for present day is to give this responsibility to banking supervisory authority to handle the role of al-Hisbah.

My consideration based on a list of considerations.
1. Empirical evident shows that shariah supervisory authority still lack with technical abilities on how to audit Islamic banks to ensure that all shariah principles are implemented as required by “fatwa”. They are still inadequate in resources with auditing skills and this constraint is not easy to remedy in a medium term. Unclear of institutional setting of this authority in the regulatory framework of banking system make financial resources become a constraint to handle the task. Differently, based on those criteria, banking supervisory authority has a necessary and sufficient condition to tackle this duty.
2. Is it possible to banking supervisory authority to handle this responsibility since more or less this task will touch shariah matter? Hopefully yes. Should a country has Islamic banking industry then banking authority is required to equip its resources with an understanding about “a to z” of Islamic banks, in order to perform well of his job. Our experience in Indonesia showed that our banking supervisors and banking examiners (as they trained ‘a to z’ about Islamic banks) were able to tackle shariah audit task and they did it alongside with financial audit.
3. To make the role of al-hisbah as an evident, it is important to adopt all of the shariah principles governing Islamic banks (currently it is only ruled by fatwa) to become a rules and regulation under jurisdiction of banking authority. Why is it so? Since the banking industry is regulated by civil law, any violations to fatwa are unforceable. The things we can do only moral suasion and request to comply with the shariah principle. Having a situation where the shariah principles are adopted in the rules and regulation of banking authority will give a power to enforce any deviation from shariah principles. This is one of keys factor to ensure the compliance with the shariah principles. As in early days of Islam, any deviations from the shariah principle are enforceable. Without law enforcement is difficult to hope this idea will be workable. In my experience, moral suasion is not strong enough to make Islamic banks inline with the shariah principles.

Another point I want to raise in this discussion is: how to adopt the “fatwa of ulama” to become a rule and regulation of banking authority?

This measure will be against at least by three opponents: i) those who are unhappy with development of Islamic banks, ii) those who are worry to be enforced, and iii) those who are narrow minded and feels this is a threat for their income sustainability.

But to me, any measures to ensure and to realize the compliance with the shariah principles are a must since it was the basic reason for having Islamic banks. Otherwise we are better of with conventional banks. The later we take those measures the more people will be lost of their confidence on Islamic banks, and it is always more difficult to get the second chance.

Wallahu ‘alam bissawab

Erwin Gunawan Hutapea-G.0422765

5:03 PM  
Blogger weni said...


The concept of Al-Hisbah institution is good if they are really apply the concept in society. Like the concept of Hisbah lies in the Quranic injunction 'enjoining the good and forbiidding the evil'amr bil ma'ruf wannahi ' anil munkar' all persons with an Islamic authority actually acted on the same principle as above.

Unfortunately, for the application, sometimes the Hisbah institutions are not really serious in servicing the ummah. In other words they are seldom to focus for the welfare of the ummah.

We still remember that there are many legal dispute cases happen in Islamic banking and the settlememnt of thoses cases are not through shariah court but through civil court. In this case, the hisbah institution should play an important role in handling those cases such as first, asking the Islamic banking and shariah advisor to cooperate to make the legal and substantive framework for islamic banking to reduce the legal dispute cases, second the Islamic banking must be transparant to the public about the Islamic products and their system, especially for the profit that they get from Islamic products such as BBA, aitab and others. In this case, the Hisbah institution is expected to monitor the syatem of Islamic banking so that they don't cheat the ummah with their products.

The Hisbah institution also is expected to take care seriously toward the poor people by giving donation in the form of money, food, scholarship and others. They can cooperate with the other social institutions to help those poor people. They are required not only take care about the palces of ibadaat but also required to take care about the welfare of the ummah, especially for the poor people. Thank you.

12:56 AM  
Blogger Bilal Mohd Parid (G0428469) said...

In general meaning with Al-Hisbah I agree with Br. Erwin opinion that we already have certain bodies that monitor the activity of Islamic banking in Malaysia. We can divide these bodies that take Al-Hisbah role into 2 categories :

1)Organization that represent the society like Persatuan Pengguna Islam Malaysia (PPIM).
2)Organization formed by the government like Syariah Advisory Council in BNM.

Both organization need to cooperate together to overcome the problem arise in Islamic Banking. The government need the society to voice their concern over the problematic issues and take action base on their complain. Likewise the society needs the government bodies to execute their concerns over the bank. Legal power belongs to the government bodies made their involvement very important. Another issue related is how to channel the concern. The role of academician and expertise in areas related is considered vital. They form as a frontline group that will express the idea because of their deep understanding of the problem.

What is the role of Syariah Advisory Council appointed by the banks? They should take a brave and proactive move to ensure that the practice of the banks and their product are Syariah compliance. I was afraid that the appointment is only to enable the banks to get the Islamic product license from BNM. They should express their stand clearly to the banks on the problematic issues and I believe that it is what they are doing right now.

1:38 AM  
Blogger sueraya said...

The Hisbah is a religious institution under the authority of the state that appoints people to carry out the responsibility of enjoining what is right, whenever people start to neglect it, and forbidding what is wrong, whenever people start to engage in it. The purpose of this is to safeguard society from deviance, protect the faith, and ensure the welfare of the people in both religious and worldly manners according to the Law of Allah. Allah has made it obligatory upon all Muslims to enjoin good and forbid wrongdoing to the extent of their knowledge and abilities.
Allah says:
"Let there arise from you a group calling to all that is good, enjoining what is right and forbidding what is wrong. It is these who are successful."(Q.3:104)
Allah's Messenger (may the peace and blessings of Allah be upon him) said: "Whosoever among you sees an act of wrong should change it with his hands. If he is not able to do so, then he should change it with his tongue. If he is not able to do so, then with his heart, and this is the weakest of faith."
We have already mentioned that the Hisbah is a religious institution, meaning that it is one of the official offices of a Muslim state, one that specializes in fulfilling the obligatory task of enjoining what is right and forbidding what is wrong. The Hisbah is the official means of carrying out this duty.
The Hisbah is essentially organized around safeguarding the limits of Allah from being violated, protecting the honor of the people, and ensuring public safety. It also includes monitoring the marketplace, craftsmanship, and manufacturing concerns to make sure that the laws of Islam are upheld by these entities. It must also ensure that quality standards are maintained. The Hisbah carries out these responsibilities in conjunction with the appropriate government agencies and other relevant establishments. The importance of the Hisbah in the overall Islamic order: Islam aims to bring about a stable and secure society filled with love, whereby the members of society work together in righteous and wholesome activities. Such an environment allows everyone to carry out the responsibility of being Allah's vicegerent on Earth and to fulfill their purpose for existence, which is to worship Allah. Allah says:
"I did not create Jinn and mankind except to worship me."
People are constantly in need of order in their lives and, consequently, they are in need of some authority to ensure that order. Because of this, there must be someone there to remind the people of this order and to keep tabs on how well they are adhering to it. This is why enjoining what is right and forbidding what is wrong is so important.
Sueraya bt Mohd Alwie

11:13 PM  
Blogger kamruzzaman said...

I agree that the Islamic banking systems do need a form of check and balance but I would also have to agree that institutions that are very similar to Al-Hisbah currently exist in Malaysia. It struck me that if institutions that act as a check on the accountability of our Islamic banks exist then why are Islamic banking malpractices occurring?

We have to bear in mind that Al-Hisbah in the past played the role of a general keeper of the peace. In other words if there were unethical and unislamic activities occurring in the community the Hisbah would try to remedy such a problem if it was within its capacity. In this modern day and age I believe that setting up an Al-Hisbah institution would make it redundant and non-pragmatic. To deal with highly technical matters such as finance and banking, as well as the legality of the products produced by these banks according to Islam, you would need a special institution that has the expertise to deal with such matters. Hence you already have the various federal and state run religious departments such as the Syariah Advisory Council, JAIS, JAKIM and etc. for the various different states to deal with this. In addition you have NGOs such as Persatuan Pengguna Islam Malaysia that also deal with this matter. It is also strange to consider that these organizations lack the technical capabilities to conduct audits of Islamic banks when they have a bunch of Shariah jurists and highly capable accountants especially in the Shariah Advisory Council that cooperate with the shariah advisors from these banks to approve Islamic Financial Instruments that are derived by the bank. Plus Islamic audits are run concurrently with financial audits in Malaysia too otherwise you can’t call the bank “Islamic”.

So if the check and balance is there why are some of these Islamic banking malpractices occurring?

The possible reason for this might be because closing a blind eye on such measures taken by the Islamic banks are the only way that the government feels will actually sustain them or that these bodies themselves feel that the products are Islamic. It is clear that the banks are capitalist entities and as such require profit to sustain themselves. The question is to examine the products produced by these banks and see whether they are Islamic. Since so many checks and balance already exist then there can be only one assumption that the products are indeed Islamic.

For those who have read my earlier comments in Making loan (qard) is not the way to make profits, I argued that some may see conventional banking as being a fair system since it doesn’t really overburden the consumer or even if it does then Islamic Financing is just as burdensome. Simple capitalistic economics says that any organization works on the basis of self interest to earn profit. Looking at conventional banks they have set interests rates on their lease and loan schemes to be as attractive as possible to the consumer while at the same time making sure that it is profitable to provide such loans (that means that the loan is payable within the lifetime of the borrower). Obviously Bank Islam and Co. are also Sdn. Bhd. which wants to make money, hence devise financial instruments that provide the same functions as conventional ones with an Islamic twist. The bottom line is however both models give the same end result to the consumer. Depending on which perspective you look at you can say that both instruments are Unislamic or alternatively claim that both are Islamic depending on which view you take (conventional loans no longer enslave people as a result of a default in payment).

Thus for Islamic banking to be truly Islamic it would have to be run on the basis of Qardhul Hassanah, which means in business terms non profitable loans. If this was the method taken by Islamic banks today we will see a collapse of the Islamic financial system despite the existence of Al Hisbah. So its either “burdensome” Islamic financial instruments or none at all.

2:35 AM  
Blogger Adeila Radzlein Ahmad said...

Al-Hisbah is an important part or role to play in any country. This is not only in the point of economics but also in politics. Like it was stated and also like our sister edzalina wrote in her comment, said that it is more to the welfare of people.
Wthout al-hisbah there will be discriminating in this world. Such as there will be frauding and hoarding in the business industry. No correcting if there is any market imperfection. People will do things that they are not suppose to do.
Like sister HAjar said, al-Hisbah also plays role in building the ummah.

1:56 PM  
Blogger nurnadia said...

There is no doubt that al-Hisbah is important to Muslim as a social institution in order to facilitate society to perform their worship to Allah-the Creator.

I do agree with Dr Saiful that public should be given an avenue to moot out their experiences, critics as well as opinion of the current Islamic Banking practices. As all of us agree that Islamic Banking products (in Malaysia) are no more different from the conventional one. A quick actions should be made so that we are not out of track ( still on the true path of Islamic way).

But, the major problem that I saw among the public is they don’t even understand about the Islamic Banking concept. They simply accept whatever offered by Islamic Banking without questioning about the permissibility. Thus, I think the public should be well informed about the concept as well as the products of Islamic Banking first. In this sense I saw, more opinions could be raised up for Muslim Society’s benefits.

8:10 PM  
Blogger siti rubiah said...

Theoretically, al-Hisbah would be among the best institution that supports of the other authorities namely police (shurta), the magistracy (wilayat al-hukm), the financial authority (al-dawawin al-maliya) and even the greater military authority i.e. Prime Minister. The author has stated on that note, the Hisba authority complements the other authorities and not overriding them. Fair enough. But I would like to raise the issue of the effectiveness of these Hisbah institutions. Having said that, I concur with Br. Kamruzzaman’s comments. The eagerness to set up new institutions without really exploring the current established bodies’ capabilities when say, one issue occur, seems to be the practice of Malaysian authority. So much so that it is believed we have too many institutions that each deal with too little matters. Besides that, lack of transparency in these institutions also has been identified as one of the root cause for the malfunction of the Hisbah system. As public is not really aware of the malpractice of the Islamic banks, it is these Hisbah institutions that should play their role to the best in informing the public rather zipped their mouth and merely focused on economic and commercial orientation per se.

3:04 PM  
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11:27 AM  

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