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Religious Guidance in the Subscription of Singapore Savings Bonds by Muslims (Part 2)
16 November 2018 3:24 am // Written by Suhaimi Zainul Abidin; Fazrihan Duriat;
The classification of Islamic products (as either deposits or investments) are as below:
Islamic Deposit(principal guaranteed contracts) |
Investment Accounts(non-principal guaranteed contracts) |
| Wadi’ah (custodian) | Mudarabah (profit-sharing) |
| Qard (interest-free loan) | Wakalah (agency) |
| Tawarruq / Commodity Murabaha (sale with mark-up) | Note: Islamic investments are not eligible for protection under PIDM or SDIC. |
| Note: Islamic deposits under the IFSA 2013 are eligible for Perbadanan Insurans Deposit Malaysia protection (PIDM). In Singapore, Islamic deposits will be protected under the Deposit Insurance Scheme by Singapore Deposit Insurance Corporation (SDIC) |
Pergas is of a preliminary opinion that the Singapore Savings Bonds (SSB) may fall within the ambit of Shariah principles but none seems to fit.
Possible Structures |
Main parameters |
Shariah Analysis |
| Wadiah yad dhamanah | Safe keeping contract with guarantee. The monies placed in custody is in monetary form and the custodian is allowed to utilise the money subject to the permission of the asset owner, hence, the rules related to qard (i.e. interest-free loan) need to be adhered to. | Although the issuer is able to return the principal in full, there was a pre-determined additional in the form of cash over and above the principal qard amount promised by the issuer, and hence, this is riba. Hibah is not justified because such returns to the lender (i.e. investors) should be totally discretionary (i.e. should not be pre-conditional) at the time of entering into the contract. |
| Wadiah yad amanah | Safe keeping contract based on trust. The custodian shall not be entitled to any revenue or any income from the monies placed in custody. Any benefits accrued from the monies placed in custody belong to the asset owner (i.e. investors). | The monies are supposed to be in custodianship only but it is utilised by the Singapore government and the actual returns generated was not disclosed.
The management and utilisation of monies was not explicitly detailed out. Hence, the usage of monies may be mixed with Shariah and non Shariah compliant activities. |
| Wakalah bil isthmar | A wakalah contract may be entered into for the purpose of investment. The investor will be the principal and the issuer will be agent managing the monies.
Under IFSA 2013, Products based on Wakalah bil Istithmar (agency for investment) will be classified as investment products instead of deposits. |
Products which apply the wakalah (agency) will be classified under IFSA 2013 as investment products instead of deposits
SSB is principal-guaranteed. The bonds is backed by the Singapore government – no capital losses. |
| Mudharabah | A contract between a capital provider (rabbul mal) and an entrepreneur (mudarib) under which the rabbul mal provides capital
to be managed by the mudarib and any profit generated from the capital is shared between the rabbul mal and mudarib according to mutually agreed profit sharing ratio (PSR) whilst financial losses are borne by the rabbul mal provided that such losses are not due to the mudarib’s misconduct (ta`addi), negligence (taqsir) or breach of specified terms (mukhalafah al-shurut). |
Products which apply the Shariah contract of Mudarabah (profit sharing) will be classified under IFSA 2013 as investment products instead of deposits. |
| Murabahah | A sale and purchase contract which is binding in nature. In a commodity murabaha, sale will involve selling of commodities at marked-up price between investors and issuers. Profits are determined upfront and will be paid to investors. | Operationally, there is no evidence of sale for SSB to justify the returns as profits (instead of interests) which should be based on Shariah compliant underlying transactions. |
Conclusion
Pergas has reviewed SSB based on Shariah requirements to conclude that it does not meet Shariah requirements.
In line with the legal maxim “What is prohibited [under Shariah] to take is also prohibited [under Shariah] to give”, as SSB is yet to be Shariah-compliant, Muslim community should find alternative solutions in Singapore where the structures are closer to the spirit of their religious teachings.
Guidelines for the Muslim Community
In facing this issue, Pergas would also like to call upon the Singapore Muslim community to deepen and strengthen various sciences of knowledge (including religious knowledge) as part of societal expectation and religious obligations as Singapore citizens. Should there be confusion regarding any financial issues, the community should seek clarification from our pool of ARS-accredited asatizah fraternity in-depth knowledge in fiqh muamalat or usul fiqh.
SOCIETY ISLAMIC FINANCE HALAL SAVINGS BONDS SINGAPORE ISLAMIC PERSPECTIVE MUSLIM LIFE
