ASB/ASN Investment from the Maqasid al-shari ah Perspective. Assoc. Prof. Dr. Mohamed Azam Mohamed Adil Deputy CEO, IAIS Malaysia.

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1 ASB/ASN Investment from the Maqasid al-shari ah Perspective Assoc. Prof. Dr. Mohamed Azam Mohamed Adil Deputy CEO, IAIS Malaysia.

2 Introduction Lately, debate over the permissibility of ASB/ASN occurs again. Ever since ASB(1990) and ASN(1978 ) were introduced by PNB (1978), the government faced many challenges. Bear in mind that majority of Malays/ Muslims are not used to invest in unit trusts.

3 Introduction In the early stage, the government made a massive campaign including in the month of Ramadhan to convince Malays/Muslims that PNB is a reputable agent that can elevate their economy through ASN investment. Later, in order to give a better return for the Malays/Muslims, ASB was introduced by PNB in 1990.

4 Introduction The National Fatwa Council has issued a fatwa in 2008 that investing in ASB/ASN is considered permissible from the maqasid/macro perspective. But if one wants to judge a product merely from the micro view, the maqasid approach that to preseve the maslahah of the ummah would not be achievable.

5 Introduction Problem arose recently when the Securities Commission (SC) categorised the investment of ASB/ASN as Shari'ah non-compliant simply because 30% of PNB shares are in Malayan Banking Berhad.

6 Introduction The Shari'ah Advisory Council of Bank Negara (BN) and Securites Commission (SC) are the highest Shari'ah authorities in determining whether a product is Shari'ah compliant or not. Any investment that involves less than 5% in unislamic activities is considered as Shari'ah compliant whereas above 5% is regarded as non-shari'ah compliant.

7 Introduction From the surface, there is a conflict between the fatwa issued by the National Fatwa Council and the SC that leads to confusion among Muslims in Malaysia. Bear in mind that there are 8.6 million Malay/Muslim investors in ASB which amounted to RM137 billion (PNB-ASB Report, 2014). Where shall they put their money should they pull out from investing in PNB?

8 Fundamentals of Maqasid al- Shari'ah Maqasid al-shari'ah is to serve the interests (jalb al-masaleh) of all humankind and to save them from harm (daf al-mafasid). Al-Ghazali: concerned with safeguarding of 5 objectives faith, life, intellect, posterity and wealth.

9 Fundamentals of Maqasid al- Shari'ah Al-Shatibi: stressed on epistemological (aqidah) dimensions to free man from the grip of his own whims, so that he may be the servant of Allah.. Ibn Ashur: broader angle to preserve the social order of the community and to ensure its healthy progress by promoting the well-being and virtue of the human being.

10 Principles of Maslahah To promote public benefit and to prevent social evils or corruption. Al-Ghazali reinforced the importance of preservation of the ends of the Shari ah as the fundamental meaning of maslahah.

11 Principles of Maslahah Al-Shatibi: maslahah is a principle which concerns the subsistence of human life, the completion of man s livelihood and the acquisition of what his emotional and intellectual qualities require of him, in an absolute sense. Maslahah as being the (only) overriding objectives of the Shari ah comprise all measures that are deemed beneficial to people.

12 Characteristics of Maqasid al- Shari ah (MS) i) To serve the interests of all human beings and save them from harm. ii) MS are universal, aiming to serve the interests of mankind and requiring the adherence of all human beings. We have not sent you (O Muhammad) except to mankind as a whole (34:28).

13 Maqasid al-shari ah in Investment Majority Muslim scholars have agreed that the ultimate MS is to serve human interests and to avoid harm. This main objective of Shari ah is governed by the principles/concepts of mercy and guidance (al-anbiya, 21:107) & (Yunus, 10:57). Based on the maqasid am the main aim of investment in Islam is to preserve one of the five dharuriyyat (essentials/ necessities), i.e. the preservation of wealth.

14 Maqasid al-shari ah in Investment This can be seen in the following legal maxims Acts are judged by intentions Necessity renders prohibited things permissible.

15 Maqasid al-shari ah in Investment MS are inclusive (absolute) covering all human acts. It encompasses all human acts whether they are related to ibadah or mu amalah. MS are definitive they have not been derived from only one text or item or evidence, but from a multiplicity of texts and different aspects of evidence.

16 Maqasid al-shari ah in Investment In the context of preservation of wealth, products and services offered by Islamic institutions must not circulate among wealthy groups only. The Qur an has clearly mentioned the need to prevent wealth from remaining in the hands of certain people: Whatever (spoils taken) from the people of those villages that God has turned over to His Apostle (all of it) belongs to God and the Apostle, the near of kin (of deceased believers), the orphans, the needy, and the wayfarer, so that it may not be (a benefit) going round and round among such of you as may (already) be rich (59:7).

17 Maqasid al-shari ah in Investment In one hadith, it is reported that the Prophet SAW said: Whoever monopolises a commodity with the intention of overcharging Muslims is a wrongdoer (Musnad Ahmad, 2:351, no in al-maktabah al-shamilah).

18 Maqasid al-shari ah in Investment On this note, it is very important that wealth must be circulated in the community as many hands as possible without causing any harm to those who have acquired it lawfully. Thus, this preservation of wealth through its circulation (Rawaj) is to ensure that the poor and needy also get benefits.

19 Maqasid al-shari ah in Investment The wealth circulation can guarantee a balanced and harmonious society and ensure sustainable economic development. Promoting investments and prohibiting hoarding of wealth. Prohibiting all types of manipulation and monopolisation the channeling of wealth to a small group of wealthy people at the expense of the majority.

20 Maqasid al-shari ah in Investment From the fundamentals of MS point of view, the three objectives of Shari ah namely dharuriyyah (essentials), hajiyyah (complimentary) and tahsiniyyah (embellishment) are very important priorities set up by Muslim scholars. Protection of wealth is largely embedded in the mu amalah, and therefore listed under the priority of dharuriyyah which is a basic necessity in MS.

21 Maqasid al-shari ah in Investment Because the nature of the complimentary (hajiyyah) objectives is secondary, it supports the safeguarding of the 5 objectives promoted under dharuriyyah. In an attempt to avoid difficulties, rukhsah is introduced in Islamic law for the sake of normal life.

22 Fatwa on ASB/ASN Investment The National Fatwa Council (3 February 2008); the Federal Territories Fatwa Committee (27 May 2008); and the Kelantan Fatwa Committee (27 December 2009) concluded: putting an investment in ASB/ASN is permissible mainly because it is the only institution that can provide Malay-Muslim investments the highest profit, taking into consideration the low and poor economic background of the majority of Malays.

23 Fatwa on ASB/ASN Investment If PNB which is the agent of ASB/ASN pulls out its share from Maybank which is considered the largest bank in the Asia Pacific, it will easily harm the economy of the Malays who are Muslims. What is so important is that, PNB does not invest in gambling and liquor activities.

24 Fatwa on ASB/ASN Investment In its investment, PNB has managed to invest 70% of its investment activities which are Shari ah compliant. The remaining 30% invested in Maybank, which is non-shari ah compliant, is strictly monitored by the Shari ah Advisors appointed by PNB under the Special Project.

25 Fatwa on ASB/ASN Investment According to the National Fatwa Committee: Muslims are permitted to invest in companies that invest in both halal and haram activities under certain circumstances based on public interest (maslahah ammah). The Committee is of the view that protecting the interest (maslahah) of Muslims is more important, and avoiding harm (mafsadah) should be the main criteria in this regard.

26 Fatwa on ASB/ASN Investment Taking into consideration on the maslahah of the ummah does not mean that the National Fatwa Committee rejects the Islamic principles. Preserving maslahah is also one of the Islamic principles considered in determining a ruling.

27 Fatwa on ASB/ASN Investment Islamic principles that are based on maqasid al-shari'ah should safeguarde the five objectives faith, life, intellect, posterity and wealth must be preserved. If any of these five objectives is neglected, it could tarnish the reputation of Muslims and the religion of Islam itself.

28 Fatwa on ASB/ASN Investment However, the States of Selangor and Penang have prohibited it because, ASB/ASN investment was apparently found to be involved in interest (riba) transactions and thus non-shari ah compliant. They shared the same argument pointed out by the SC, basically based on the companies in which they invested.

29 Fatwa on ASB/ASN Investment Based on these investments, SC, Selangor & Penang Fatwa Committee have concluded that investing in ASB/ASN is haram. This has led to a conflict of fatwas between the National Fatwa Committee and the State Fatwa Committees. As a result, it leads to confusion among Muslims in Malaysia.

30 Fatwa on ASB/ASN Investment At the time being, PNB has an important responsibility to elevate the economy of the ummah. On this note, to serve the interest of the ummah and save them from harm is given the priority. At present, no other institution other than PNB can take this role.

31 Conclusion PNB as an agent established by the government has been playing a major role in elevating the economy of Malays/Muslims. Since its establishment in late 1978, PNB has proven to be the most successful agency that has achieved its objectives.

32 Conclusion But if one wants to look at the macro perspective, preserving maslahah and avoiding mafsadah of the ummah must be given the priority. One should not make a ruling merely on Shari'ah compliant per se because Shari'ah is universal and progressive.

33 Conclusion PNB has been rewarding its customers a compatible return of dividend and bonus from 20% in its early years to almost 9% lately. If we were to combine both Bank Islam and Tabung Haji, they are not capable to take up the huge fund managed by PNB.

34 Conclusion From the maqasid perspective, investing in ASB/ASN is permissible. Arguments that investing ASB/ASN is haram simply because PNB has invested in non-shari'ah compliant activities is basically based on a micro view, mainly looking at the investment per se.

35 Conclusion My humble view is that, since the economy of the Malays/Muslims is really backward, elevating the economic status for this group is a must from the maqasid perspective. Lastly, it is our duty to safeguard the wealth of the ummah which is under the dharuriyat (essential) category.