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Syria's Mufti, Sheikh Ahmed Hassoun on Islamic Banking's Future
By Mohamed Al-Hamazani
25/04/2010
Damascus, Asharq Al-Awsat- Syria's Mufti, Dr. Ahmed Hassoun edict to rename Islamic banking as "partnership" has caused an uproar in the world of Islamic finance and its followers. Dr Hassoun justifies his call for renaming them as "partnerships" by the fact that he is afraid of hearing in the future of "Jewish banks" or "Christian banks," because now there are those who call for establishing "Hindu banks."
In an interview with Asharq Al-Awsat on the future of Islamic banking, Dr Hassoun says: "We have to think of universality before we are taken and crushed by globalization. The banking and financial dealing is impartial and is subject to the rulings of Shariaa. Therefore, by preserving it, and by mastering its ways of investment, when we talk about partnership in business we want the institutions to be based on ethical values and faith." Dr Hassoun adds: "We want the institutions to be based on ethical values and faith, and not on funds and their magnitude."
Syria's mufti continues: "We have no problem with engagement in dealings with the various banks, as long as this is according to the principle of partnership. Financing that combines traditional banks and Islamic banks is allowed if it is based on partnership. Faith descended from God to serve man, and not to exploit him; let faith facilitate the life of man, and not to shackle his life."
[Asharq Al-Awsat] What is your assessment of the latest Islamic banking conference in Syria?
[Hassoun] Since the issuing of the legislative decree approving the establishment of Islamic banks, Syria has started to convene specialized conferences to keep pace with the issue, and to bestow a scientific character upon the actual practices of the banks operating in Syria. This is the fifth conference of Islamic banks and financial institutions.
Scientific conferences increase the cultural awareness of the observers and of those interested in the subject. Through the conferences, experiences are exchanged, in addition to the exchange of theoretical scientific research, and hence the roles are integrated, and the circle is closed in pushing the economy forward in the right and correct direction.
On the basis of the fact that the convening of conferences has not ceased since the work started in Islamic banks and financial institutions in more than one Arab and Muslim country, and on reading the situation of these banks, the Islamic financial institutions achieve many benefits by sponsoring scientific conferences. Moreover, the conferences pave the way for the institutions to get acquainted with the experts - be they in the field of science and knowledge, those who have practical expertise, or even those involved in economic activities.
Recently, Syria has entered the field of economic and banking operations that are based on partnership between the financial capital and work; this comes under the headline of diversity in economic activities, and expanding the economic action.
In Syria we have the public sector and the joint [public-private] sector. Now, the private sector has started to play its role in society in the comprehensive development operation. These partnership financial institutions and banks play their important role in attracting domestic, regional, and international investment, particularly in the light of the expanding capital movement among the world countries. We hope that will have a positive reflection on man in general, and on the people of the region in particular, and on Syria, which has opened its doors for sound investment.
[Asharq Al-Awsat] What do you think of the performance of the Islamic banks in recent years?
[Hassoun] Security is a survival requirement of man. Security is divided into bodily health security, and financial material economic security; the total sum of this leads to the psychological and faith security. This is taken from God Almighty's saying to Adam, peace be upon him, in Paradise: "There is therein (enough provision) for thee not to go hungry nor to go naked, nor to suffer from thirst, nor from the sun's heat [Sura Taha, Verses 118 and 119]." To satisfy hunger is the body security, saying "nor from sun's heat" there is a reference to health security, and in the complete verses there is a reference to psychological security.
In my talk about the banks, I call them partnerships, because I want these institutions to perform their work out of the desire to exchange benefits, and to fulfill joint interests, and not to exploit the others. Partnership in business and gains makes man secure in his life, because in this case God Almighty will be by his side as it came in the Divine Hadith [Divine Hadith is a Hadith attributed to the Prophet in which God address man]: "I am the third of the two partners as long as neither of them betrays his colleague, and if one betrays the other, I will leave their partnership.
This was what the Prophet, God's prayer and peace be upon him, did in the beginning of his commercial activities in the winter and summer trips. He was a speculating partner offering his effort, work, and expertise in partnership with the money of Khadijah [the Prophet's first wife], the businesswoman of her time who was looking for someone to invest her money and who is honest and trustworthy, until she found our beloved Muhammad, God's prayer and peace be upon him.
If the basis of the work of the Islamic banks and financial institutions is not honesty and trustworthiness in partnership and in business, the fate of these banks will be the same as that of others, they will stumble and this might lead to bankruptcy.
It has been noticed that the Islamic banks and financial institutions have avoided to some extent the world financial crisis as they have not sunk themselves in debt, and have not engaged extensively in mortgages. However, the impact of the world economic crisis on them has started to be seen on the horizon, unless they move from the concept of keenness to regain their capital quickly to the concept of cooperation in business, and linking the deposits to long-term investments that benefit the society and achieve development.
[Asharq Al-Awsat] There is criticism that the Islamic banks have not brought anything new in the field of high profit-sharing [the interest the Islamic banks charge], and also because of their limited social contributions and their limited contribution to offering financial solutions to those on limited income. Do you agree with this opinion? How do you see the reality of the Islamic banks as they are expanding and spreading?
[Hassoun] First of all, let us agree that the Islamic banks and financial institutions are based on partnership in business, and sharing the results of investment according to agreed percentages, and hence they are partnership banks.
This nomenclature (partnership banks) gets us out of the limited framework into wider horizons in which man participates with his fellow man in business, financing, and investment.
Despite the fact that the Islamic banks have not excluded anyone from dealing with them because of his religious or ethnic belonging, the mere name or word [Islamic] might give non-Muslims the impression that these institutions exclude a sector of people from dealing with them.
The criticism leveled at the Islamic banks is a real criticism that cannot be ignored, and it needs a great deal of contemplation. This is because people expected these institutions to help them in their businesses, and not to be a heavy burden that prevents them from achieving their aspirations, or at least part of these aspirations.
The criticism does not only concern the high [profit-sharing] percentages, but also even the other financing methods, such as renting that ends up with ownership [mortgages] and similar methods in which the beneficiary from these contracts is burdened with additional costs and expenses on top of the profits that the bank wants to achieve, such as the expenses of transfer of ownership, despite the fact that the arrangement of the contracts dictates that each side shoulders these expenses for his own property.
In the profit-sharing of buying [a property], the bank ought to transfer the ownership to itself, shoulder the responsibility of the property, and guarantee its risks so that the contract becomes a correct one, and not just a formality, and hence it should shoulder the costs and expenses of the transfer of ownership; in this part, it is wrong to burden the beneficiary with these expenses.
We are working to resolve this problem (repeating the costs of transferring the ownership) with the authorities concerned so that if the transfer of ownership from the bank to the beneficiary takes place within a certain period, the costs should be shouldered by one party, and should not be repeated.
The same applies to the costs of expenses of the contract of renting that ends up with ownership, as in the case of the first ownership by the bank, and receiving the property from the original owner, and before delivering it as letting that ends up with ownership to the client, the costs and expenses should be born by the bank, and it is wrong to burden the beneficiary with them.
With regard to the financing of those with limited incomes, the Islamic banks have not yet reached this level of wide dealing with the various sectors of the society.
If the other banks deal only with those who have capital by giving them credit facilities in exchange for guarantees they can afford, the Islamic banks have not been able - except in a limited way - to get over this obstacle to reach social and economic strata that are less capable.
The technical justification for this is the preservation of the funds of the Muslims and of the depositors. The database necessary for such expansion is still not sufficient. The level of risk might be higher, but we say: The Islamic banks will not be able to achieve the aims of all sides, especially those dealing with them; it is not sufficient to take into consideration those who have capital, as those with scientific qualifications and expertise also ought to have a share in the Islamic banks' plan of action.
[Asharq Al-Awsat] Some schools of jurisprudence or Shariaa organizations are reproached for being too complacent with the Islamic banks. How true is this? How do you explain the membership of some Sheikhs in a number of banks? Do you think that the Shariaa organizations have enough time to study the products offered by the Islamic banks?
[Hassoun] In the jurisprudence interpretative judgments in general, and in the interpretative judgments of the financial dealings in particular, it is noticed that there are two schools: the school of establishing the origin, and the school of justification. We believe that each school has it place and intellectual arena. Before undertaking an action, the school of establishing the origin ought to prevail, and explain the Shariaa ruling based on explicit and clear evidence without exceptions or justifications, because the fatwa here gives strength to the aim and its achievement from the beginning.
However, if something is done, with the doer neglecting the Shariaa origin, and then he looks for a fatwa to rescue him from what he has fallen into, at that time, the mufti looks for a way out, even by relying on weak evidence or far-fetched justification, to rectify the deed of the person who did the wrong thing.
This division of fatwa between origin and justification is more suitable in the cases of individual people than it is in the cases of institutions, which are supposed not to start any action except after ascertaining its Shariaa origin away from justifications and excuses. This is particularly true as there are Shariaa supervision organizations on whose fatwas these institution rely, and the decisions of the Shariaa organizations are binding for the Islamic banks and financial institutions according to the law in some countries, such as Syria.
Therefore, the boards of directors of the Islamic banks and financial institutions do not need to operate according to the justification school, as this might be similar to these boards trying to deceive the Shariaa organizations. The jurisprudence rule says: "Judging something is a part of configuring it."
The configuration of the incidents and events is presented by the executive board of directors to the Shariaa supervision organization to know the Shariaa ruling on the issues. It is said: "A well-asked question is half the answer." The more credible and transparent the presentation of the issue, the clearer the explanation of the Shariaa ruling from the organizations responsible for following up the work and the guidance of the honorable Shariaa will be.
As for the schools of establishing the origin, we consider them to be extremely necessary, but they need the presence of a department for deep research and studies linked to the Shariaa supervising organization. The duty of such department is to establish new products and innovative methods of financing and investment on which the department gets the approval of the Shariaa organization, which in its turn presents them to the executive administration to work according to them.
Here, we point out that the new products might not have intellectual property rights protected by Shariaa and preserved by law.
As for being complacent with the Islamic banks and financial institutions, the issue is no more than that the Shariaa organizations act according to the jurisprudence rule: "the origin in issues and dealings is permission," as the prohibited issues in dealings are limited. The prohibited issues are represented by usury, treachery, lack of knowledge, deception, fraud, and similar things. As for the field of what is allowed, it contains much more than that. This shows that the Shariaa organizations allow the board of directors to act in some allowed deeds in a way that might be seen by the outside observer as some kind of complacency.
As for the presence of members of the Shariaa supervision organizations in more than one financial institution, this has its positive and negative aspects. The positive aspects are represented by the long practical experience and the sense of jurisprudence enjoyed by these individuals, which motivate the institutions to benefit from their presence; the positive aspects become greater if the Shariaa supervision organizations include individuals of expertise and high qualifications together with new individuals who benefit from being together.
Perhaps the negative aspects of the issue are represented by the deprivation of the Islamic banks and financial institutions of the youthful energy and the new scientific qualified people, and hence these groups do not find the opportunity to express their hopes and aspirations through offering finance and investments products; thus the banks and institutions become deprived of sources of funds and results of work that remain imprisoned in the ideas of the new generation.
I suggest that a suitable number [of financial institutions] should be allocated for every Shariaa economic expert, the same as it is done in scientific and academic research, and in supervising the scientific theses at universities, as no supervisor is allowed to have more than a certain number of students to supervise their work in order to protect the time of the supervisor, and to ensure the quality of the work. In the same way, a number of Islamic banks and financial institutions ought to be determined for the experts and the members of the Shariaa supervision organizations in the Arab and Muslim world.
Today, in Syria the Shariaa Advisory Council of the Council on Money and Credit (Syrian Central Bank) has been established. It is a higher commission that supervises the work of Islamic banks, and follows up the sessions of the Shariaa supervision organization at every Islamic bank. The aim is to reduce the disparities in fatwas between the organizations and to ease the situation for the people. Syria has started from where the others have ended, benefited from their experience and expertise, and is leaping forward confidently, masterfully, and well-deservedly.
[Asharq Al-Awsat] There are differences between one Islamic bank and another in fatwas and in approval of some products. How do you see these differences, such as the organized banking bonds, which are banned by the Islamic Fiqh Academy, but allowed by some Sheikhs?
[Hassoun] One of the challenges facing the Islamic banks and financial institutions is the issue of fatwas and the difference in opinion between the Shariaa supervision organizations in each of these banks. The difference in fatwas is natural everywhere and in any era, because all people should not be compelled to do the same thing. This has been axiomatic since the era of the Prophet, and it will remain so until Doomsday. The overall fundamentals and general principles are agreed upon, but the side issues and partial details are subject to disagreements.
This justifies the number of schools of jurisprudence, eight of which are approved by the Islamic Fiqh Academy. These schools are approved, and it is allowed under special circumstances to work according to interpretative judgments from schools other then these eight.
I believe that in the same country there should not be diverse fatwas on the issue of financial dealings followed by the Islamic banks. This is in order that the beneficiary does not feel that there is contradiction in the work of the banks, and fatwas do not become one of the means of competition that might be dishonest, and which merely aims to achieve more profits. The banking fatwa is not an issue for individuals, each working on his own, but it is an issue of the collective and the society.
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