“Islamic” or “Islamizing” Banking Product? Reconsidering Product Development’s Approaches in the Malaysian Islamic Banking Industry
This study critically delves the approaches and challenges in developing Islamic banking products in the Malaysian Islamic banking industry from the perspective of Sharīʿah. In doing so, this study has three objectives. Firstly, the study examines the con-cept of product development and the application of Sharīʿah in developing Islamic bank-ing products. Secondly, the study deliberates on the adequacy of legal and regulatory in-frastructure in order to ensure the Islamicity of Islamic banking’s product development. Finally, the study scrutinizes the issues of ḥiyal (legal artifices) in Islamic banking’s pro-cess of product development. In order to integrate the theory and the practice, the study selected three Islamic banks in Malaysia with three products of the banks; namely May-bank Islamic Berhad, Bank Kerjasama Rakyat Malaysia Berhad and Kuwait Finance House (Malaysia). The products chosen are Islamic credit card, Islamic mortgage, and Is-lamic house financing. The study investigates the Sharīʿah contracts applied, Sharīʿah le-gal rulings, the structure and the contentious issues of the products to support the theoret-ical assumptions discussed in the study. This study utilizes two qualitative methods, namely content analysis and case studies, as the methodology. The study demonstrated that the Islamicity of Islamic banking products is based on the principles of Sharīʿah, namely to believe in the Oneness of God (tawhid), to conform to legal principles (fiqh) and to embrace the Islamic moral and ethical standards (akhlaq). These principles are then transformed to the objectives of Islamic economics and Islamic moral economy that aim to realize the socio-economic objectives and the creation of just and ethical society. Nonetheless, the study found that the current approach taken by Islamic bankers tend to Islamize or replicate conventional products in order to imitate the efficiency and effec-tiveness of the products, whereas the features of ribā (interest/usury) are still saliently ex-istent. This approach only emphasizes on the form rather than the substance of contract, where it could not ensure the Islamicity of Islamic banking products. In this respect, the legal and regulatory framework, which aims to provide the legitimate expediency and ef-ficiency of the product, is still insufficient in developing genuine Islamic banking prod-ucts that fulfil the Sharīʿah objectives and Islamic economic principles. Furthermore, the method of ḥiyal has been wrongly used to structure Islamic banking products to circum-vent the prohibition of ribā. Islamic bankers appear not to differentiate between the con-cept of prohibited ḥiyal and makhārij (jurisprudential exits), where the former are em-ployed interchangeably with the latter, in fact, the former are forbidden and the latter are permissible in the Sharīʿah. The three case studies proved the fact that the product devel-opers continuously employ the method as a model for product development. Consequent-ly, this will hinder Islamic banks from achieving the objectives of Sharīʿah and Islamic economic principles delineated in the theoretical framework of Islamic banking. Finally, the study proposed some recommendations to improve the processes, legal framework, and approaches for product development in the Malaysian Islamic banking.
Bin Abd Razak
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