Understanding Islamic Debt Concept based on Ages : a Study among Government Servant in Malaysia

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1 Understanding Islamic Debt Concept based on Ages : a Study among Government Servant in Malaysia Mohd Kamal Azman Jusoh, Ph.D, Mohd Daud Awang, Ph.D, Sabri Yusoh and Atikullah bin Abdullah, Ph.D Abstract In 2009, a total of 1,086 public servants had been declared bankrupt by the Insolvency Department. The existence of bankruptcy cases not only has tarnished the image of the public sector, but it also greatly affects the individuals involved. The bankrupt employees will lose their pension benefit when they are retired. This phenomenon is very shocking as the concept of Islamic debt has been discussed thoroughly in Islamic jurisprudence. It is the main foundation and guidance to the Muslim debtor and creditor. With that a study should be conducted to identify the level of understanding of the public servant regarding the concept and ethics of debt prescribed in Islam. This paper will discuss the comparative understanding of ages in government servants in UiTM regarding the debt concept in Islam. Data in this paper is obtained from the questionnaire involving 690 respondents in UiTM Shah Alam, Pahang and Penang, which consists of academic and administrative staff who are Muslims. Data is analyzed using the Statistical Package for Social Science (SPSS) version 19. The results have shown that the level of understanding employees in 40 years and above is higher compared to 39 years and below. One Way ANOVA test shows a significant relationship between the concepts of Islamic debt understanding with ages. Keywords: Understanding of Islamic Debt, Government Servant. 51

2 Introduction In today's modern life, having debt has become a norm. There are some people who think that by borrowing they can fulfill the needs of daily living. With today's modern lifestyle which is complex, human s needs are increasing. The modern and latest of the current transaction such as the introduction of credit cards and installment payment scheme facilities have facilitated a debt society. Additionally, with the attractions and promotion of financial institutions that offer debt financing scheme which has influenced the society being trapped into the midst of serious debt, especially for debtors who are over-lust and do not have a proper plan in making debt. In 2010, the Malaysian community household debt is the highest in Asia increased by 76.7% of Gross Domestic Product (GDP) from the year 2009 (Utusan Malaysia, 2010). It increased in 2011 with the increasing by 5% from 2010 (Utusan Malaysia, 2011). This effect will contribute to the debt payment problems in the community. When the debt is not paid, bankruptcy cases will increase. The cases of serious indebtedness has been damaging the public service image in Malaysia. Based on Management of Public Services Disciplinary (Public Service Department of Malaysia, 1993) for the first quarter of 2009 which is from January to March 2009, there are some cases involving serious offenses of financial indebtedness. A total of 80% of cases involving serious indebtedness of the support group, while 20% involve the management and professional group. To make matters worse, in the same year a total of 1,086 civil servants are declared bankrupt by the Insolvency Department with 72.74% among men (Utusan Malaysia, 2011). The existence of other bankruptcy cases tarnished the image of the public sector, it also greatly affects the individuals that involve in such cases. The government employees who are bankrupt will be lost the pension benefits when they are retired (Utusan Malaysia, 2011). This paper will discuss the concept of Islamic debt which includes debt concept, the evidence, law (hukum), Islamic ethics (akhlak), and the implementation of Islamic debt contracts. The discussions will be focused on a comparative study of government servants in UiTM on their level of understanding based on ages about the concept of debt in Islam. Definition of Debt in Islam The word that refers to the debt is in the Quran, Hadith and fiqh are al-dayn, al-qard and al-salaf. The debt in Islamic financial institutions presently is referring to the word al-dayn. The plural form, Al-duyun referring to the creditors and debtors (Naziah Hammad, 2008). In al-wasit Mu'jam, dayyana is an adjective which refers to the debt (Ibrahim Anis, Ab Halim Muntasar, Atiyyah al-sawalihi & Mohd Khalafallah Ahmad, 1972). Da'in refers to someone in debt, while daynan is source (Masdar) for da-na is the loan or debt. There are two opinions among the fuqaha of al-dayn term which are: 52

3 a) According to Imam Hanafi, al-dayn is the property that must be borned (paid), whether resulting from the exchange contract (muawadhah), or of goods or by way of itlaf 2 or debt (qard). b) According to Maliki scholar, Shafi'i and Hanbali, al-dayn is something that the responsibility (zimmah) against the property in the event of a debt transaction (Mausuat Fiqhiyyah, 1992) between the creditor and debtor. Based on the above explanation, al-dayn can be defined as everything that is responsible (to be refunded) whether the debt is obtained by means qard through money or benefit. Debt in Islam and Evidence Evidence of debt that is related to Islam is in the Qur'an, the Sunnah of Rasulullah (SAW), ijma 'and qiyas scholars. For example, evidence in Surah al-baqarah, verse 282, which means, O you who have believed! when you deal each other, in transactions involving future obligations in a fixed period of time, reduce them to writing. The above verse is the proof of a must regarding muamalat debt in Islam. It also includes salam debt, and purchasing and selling transaction via installment pricing (Abd Rahman bin Nasr al-saudi, 1410 H). Ibn Abbas interprets the above verse is revealed specifically for the salam, which is the practice of purchasing and selling by the people of Medina. It then covers all kinds of other debts (Al-Qurtubi, Abi Abdullah Muhammad bin Ahmad al-ansari, 2000). Debt in Islam and The Law Based on the evidence from the Quran, Sunnah, ijma' and qiyas, it can be concluded that giving loans to other people is rewarded (mandub) (Mustofa al-khin, Mustofa al- Bugho and Ali al-syarbaji, 2000). Law of the debt can be changed depending on the benefits or damage incurred as a result of muamalat debt involving either creditors or debtors. If the debt is intended to destroy then it is forbidden or makhruh depending on the action taken. Conversely, if its purpose as daruriyyat (Al-Ahkam al-adliyyah, 2002) the ruling is mandatory (Ahmad As ad Mahmud al-haj, 2008). Among the law of debts are: a) Forbidden (Haram) : occurs when the creditor to the debtor and the creditor is known that the debt will be used for illegal purposes, for example giving the money or the loan to the debtor for gambling and adultery purposes. As well 2 Itlaf in literal meaning is damaged or destroyed. Based on the Fuqaha term, al-kasani states that of any good that has been used by finishing or damaging it by ordinary custom (Mausuat Fiqhiyyah (1992) v 1, Wizarah wa al-awqafal-islamiyya Syuun, Kuwait, Chapter Itlaf, p such as food and drink. See also Muhammad Rawwas Qal'aji and Hamid al-sadiq Qunaibi (1996) al-lughat Mu'jam alfuqaha ', Dar al-nafais, Beirut, p. 19.) 53

4 as providing debt with the condition of interest rate or for business purposes that are prohibited like lottery for the gambling business. b) Disliked (Makhruh) : can occur when it is used for purposes that is considered makhruh such as debt for the purpose of tobacco processing for cigarette industry. Similarly, creditors know that debt will be used to show off. c) Mandatory (Wajib): occurs when the creditor knows the debtor is required to meet the needs of debt and family life and there is no other way to obtain the necessities of life except debt. If the debt is not given, it causes harm to himself and his family. For example, when someone is in extreme hunger or in severely ill and they do not have any property to cure their condition. While creditors are those who have a lot of properties (Mustofa al-khin, Mustofa al- Bugho and Ali al-syarbaji, 2000). The Implementation of Islamic Debt Contracts Human traits extremely adores the property and they will feel calm when there is a method that guarantees the property will return to them again. Implementation of a fair debt contract will prevent fraud, injustice and conflict between debtors and creditors relating to their debt. There are two implementations of a fair Islamic debt contracts which are through: a) Written debt agreement b) Witness of the debt contract c) Collateral of the debt Islamic Ethics in Islamic Debt Transaction Close relationship between the shari ah and akhlak that are integrated with the beliefs (aqidah) create the relationships between human and God and relationships between people with other people. Every Muslim s practice is guided by the behavior of the permitted or prohibited. The guidance is based on five categories of fiqh ruling consist of mandatory (wajib), rewarded (mandub), permitted (jaiz), disliked (makhruh) and forbidden (haram) (Rafik Issa Beekun, 1997). Each of the prohibited subjects have a clear reason such as unlawful debt practices that consist of riba for human justice. Similarly, practices that are permitted like provide debt and welfare benefits so that people always help each other. Thus, akhlak plays an important role in the practice of transaction debt as to ensure human relations are always based on the truth. For the sake of justice for both parties, Islam has provided specific guidance in relevant practices based on akhlak in debt transaction. Debtors and creditors must comply with these practices that will give them the goodness and justice. These debts transaction are categorized into two types: a) Good transaction in Islamic Debt (Mahmudah transaction or Praiseworthy transaction) b) Bad transaction in Islamic Debt (Mazmumah transaction or Blameworthy transaction) 54

5 Among the mahmudah transaction in Islamic debt are: Determined to Pay Debt Being Good While Paying Debt Having debt for Life Needs Fulfilling the Promise And Not Defer Payment Praying for Creditors wellness Having debt from good party While mazmumah transaction in Islamic debt are: Involved With Riba (interest) Deferring payments while capable to pay the debt Not pay the debt Debt Wasting Having Debt with the merciless party Comparative Analysis of Understanding Between Ages Analysis of understanding ages based Islamic debt shows there are significant differences in two out of five categories. There are mahmudah akhlak (F = 3.589, df = 3, 686, sig = 0.007) and mazmumah akhlak (F = 2.410, df = 3, 686, sig = 0.048). The total of understanding with in ages also significant (F = 3.486, df = 3, 686, sig = 0.008). Based on Table 1, it is found that a higher mean score (3.75) in 40 to 49 years old, followed by 50 years and above (3.71). While a lower mean score (3.63) for 21 to 29 years old and 30 to 39 years old (3.64) Table 1 Understanding the Islamic Debt by Ages Concept Ages Mean Std. Dev. Sample Size Test-F Sig. Definition of Islamic Debt Law of Debt Mahmudah Akhlak in Islamic Debt 21 to to to and above to to to and above to to * 55

6 40 to and above Mazmumah Akhlak in Islamic Debt Islamic Debt Contracts Total 21 to to to and above to to to and above to to to and above * * * Indicates significant at α = 0.05 level The above analysis shows that age also influence the level of staff understanding. The data collected show that the young folks between the age of 21 and 39 had the lowest min score on their understanding of Islamic debt system compare with other age level. This group had a higher risk of being involve in debt situation. This fact support the statement delivered by the Chief Execitive Officer of the Centre of Consumer Research under the auspice of the Malaysian Consumer Association (FOMCA) which acknowledge that those under the age 35, in Malaysia ad a tedency of being in a debt crisis. On average 41 person had been declared bankrupt each day. Summary of Finding Some inevitable situation some will get entangle in a debt situation. In this matter, Islam does not prohibit one from borrowing or making a debt arrangement. However Islam does not see it as a good thing both from the economic and religious perspective. Islam does not encourage people to always take a debt to cover daily livelihood. Despite all this, Islam does provide a financial system whereby one can fulfill their need and at the same time which can deter them from falling into an economic crisis due to debt. All this can be achieved if one can really understand the concept of Islamic debt system. In this modern day this school of thought seems to be vanished due to greed and failure to understand the Islamic debt system. The young folks in Malaysia seem too eager to borrow in order to satisfy their greed and living style which is not a necessity. This phenomenon seen obvious among these 39 and below. As a result these groups are those who suffer a lot due to debt crisis. For this 56

7 very reason, this young folks need to be made to understood on the best practice provided by the Islamic financial system on how and when debt is allowed. Recommendation From the analyses that have been discussed, there are some suggestions to the responsible authorities pertaining Muslim consumers debt management affairs which related on the indebtedness of government servants. Below are the suggestions: a) The Policy makers which is government, through the Public Service Department (PSD) should establish training regarding the integrated debt management enhance understanding of the Islamic debt and public employees. At the same time emphasizes on the current debt management skills via handson training. b) Based on the analysis, the target group that needs to be stressed in reducing cases of serious debt is employees under 39 years old. c) More seminar and workshop must be exercised by the relevant government agency such as The Credit Counselling and Debt Management Agency, or commonly known as Agensi Kaunseling dan Pengurusan Kredit (AKPK) to enhance the understanding of all government servants with focus on the goodness of Islamic debt concept which can be a good alternative to the conventional loan system. d) The government of today need to acknowledge that there are a significant increase household debt due to increase of price of daily domestic goods and services. Thus requiring the need to increase the overall salary figure of the government servants so that they are more in a sustainable income figure. Reference Abd. Rahman bin Nasr al-saudi. (1410 H). Taisir al-karim al-rahman fi Tafsir Kalamal-Manan. v. 1. al- Riasah al-amah li al-idarati al-buhuth al-ilmiayyah wa al-ifta wa al-da wati wa al-irsyad: Riyadh. Abdullah Lam bin Ibrahim. (2003). Ahkam al-aghniya. v.1. Dar Nafais : Jordan. Abdullah bin Muhammad al-thayyar, Abdullah bin Muhamad al-muthlaq and Muhammad bin Ibrahim al-musa. (2004). al-fiqhul Muyassar Qismul Muamalat, Mausu ah Fiqhiyyah Haditsah Tatanawwalu Ahkama al-fiqhi Islami Bi Uslub Wadhih li Mukhtasin Wa Gharimin. Translation, Miftahul Khairi, Madarul Wathan Lin Nasr: Riyadh. Abi Husin Ahmad bin Faris. (1991). Mu jam Muqaayis Lughah. v. 2. Dar al-jil: Beirut. Ahmad As ad Mahmud al-haj. (2008). Nazriyyatu al-qard fi al-fiqh al-islami. Dar al-nafais: Jordan. Al-Quran al-karim 57

8 Al-Qurtubi, Abi Abdullah Muhammad bin Ahmad al-ansari. (2000). Jami al-ahkam al-quran. v. 3. Dar Kutub al-ilmiah: Beirut. Ibrahim Anis, Ab Halim Muntasar, Atiyyah al-sawalihi and Mohd Khalafallah Ahmad. (1972). Mu jam al-wasit. v Qaherah. Jabatan Perkhidmatan Awam (JPA). Pengurusan Tatatertib Perkhidmatan Awam berdasarkan Peraturan Peraturan Pegawai Awam (Kelakuan dan Tatatertib) 1993 dan Akta Badan-Badan Berkanun (Tatatertib dan Surcaj) (Public Service Department of Malaysia, Management of Public Services Disciplinary based on rules of public officer (behavior and discipline) 1993 and The Statutory Bodies (discipline and surcharge) 2000). Kharufah, Ala al-din. (1982). Aqd al-qard fi al-syariah al-islamiyyah wa Qanun al- Wad i. Muassasah Naufal: Beirut. Lay Yoon Fah and Khoo Chwee Hoon. (2009). Introduction To Statistical Analysis In social SciencesResearch. v.1. Ventom Pblishing: Selangor. Mausuat Fiqhiyyah. (1992). v 1-2, Wizarah wa al-awqafal-islamiyya Syuun: Kuwait. Md Akhir Yaacob. (Trans.). (2002). Al-Ahkam al-adliyyah. Dewan Bahasa dan Pustaka : Kuala Lumpur. Muhammad Rawwas Qal'aji and Hamid al-sadiq Qunaibi. (1996). al-lughat Mu'jam al-fuqaha'. Dar al-nafais: Beirut. Mustofa al-khin, Mustofa al-bugho and Ali al-syarbaji. (2000). al-fiqh al-manhaji Ala Mazhab al-imam al-shafie. v. 3, Dar al-qalam : Damshik. Naziah Hammad. (2008). Mu jam al-mustalahah al-maliyah wa al-iqtisadiyyah fi Lughati al-fuqaha.dar al-qalam: Damsyik. Rafik Issa Beekun. (1997). Islamic Business Ethics. International Institute of Islamic Thought, Herdon: USA. Rohi Baalbaki. (1992). Qamus al-mawrid. v. 4, Dar al-ilm Lilmalayin: Beirut. Utusan Malaysia. (2010, 20 October). Utusan Malaysia. (2011, 3 March). 58

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