THE PRINCIPLE OF MASLAHAH AND ITS APPLICATION IN

ISLAMIC BANKING OPERATIONS IN MALAYSIA.

In terms of regulation, Malaysia has been identified as the most developed

country in the world promoting Islamic finance through a comprehensive legal framework.
The Islamic Financial Services Act 2013 (IFSA) is one of the examples how seriously the
Malaysian government promotes Shariah compliance in Islamic financial instruments. In
other words, IFSA provides a comprehensive legal framework that is fully compliant
Shariah (Islamic law) in all respects. However, some are not in line with international
bodies Other Muslims, and not practiced by Islamic banks in other Islamic countries,
especially Middle Eastern countries. For example allows bay 'al-'nah (sales and
repurchases), uniformity of interest rates (compensation) and settlement clause ibr a '
(rebate) in the financial agreement. Given the issue of Islamic banking is enough complex
and some of them cannot be taken directly from classical works jurisprudence, maslahah
has been one of the main approaches to dealing with modern issues. Each practice is
justified based on the maslahah (public interest), every explanation of maslahah should
be considered by regulator.

Maslahah can be defined as the seeking of benefit and the repelling of harm.
Maslahah is becoming more important in modern times, with the sudden change in
technology, society,politics and economics, may be an important role in reforming Islamic
practices. This includes addressing new issues such as banking and finance, politics,
medical problems and issues related to the Muslim minority. It cant denied , today there
are many resolutions from Islamic bodies, fatwa and Islamic rules based on Maslahah. A
case study of Malaysia. Based on the concept of maslahah there are few cases of Islamic
banking operations in Malaysia are analyzed hereunder. In modern Islamic banking
operations, One of them are bayʿ al-ʿīnah . Bayʿ al-ʿīnah is used both as a direct financing
method between Islamic banks and their customers, or as a combination with other
contracts such as bayʿ bithaman ajil (deferred payment sale), known as BBA, and
organized tawarruq (monetization ) .
 Bayʿ al-ʿīnah has received criticisms from both classical and contemporary Muslim
scholars regarding its Sharīʿah status. While the majority of scholars rejected bayʿ al-
ʿīnah, claiming it to be a trick to circumvent to the prohibition of riba (interest). In terms of
modern discussions, this contract is not favored by many Islamic bodies. The International
Islamic Fiqh Academy (IIFA), for example, in its resolution on muawadah (bilateral
promise) in a financial contract, mentioned that an agreement from the contracting parties
in order to circumvent the prohibition of riba for example, bayʿ al-ʿīnah . BNM has
developed a different approach by authorizing the bay 'al'nah for Islamic banks in
Malaysia. On July 8, 1997, the SAC was decided that the issuance of a Negotiable Islamic
Debt Certificate based on the concept of bay 'al-'nah is allowed. This decision is justified
by the general clause authorizing the sale of the Quran, as well as the views of the early
scholars who approved the contract.

Through this issue, it is known that the application of maslahah must do realistically
to avoid adverse effects. Despite that there is no denying that bay 'al-'nah is a
controversial contract in terms of status, but it have Maslahah. Therefore, it is important to
concern with this issue, it is important to keep working on it impact on the Islamic banking
industry. Moreover, it's important to note that it's technical issues in Islamic banking cannot
be exaggerated. Islamic banking and principles in Malaysia from my perspective
maslahah . Although Malaysia is leading the Islamic banking industry is in many aspect.

From the above discussion, i found BNM has sought to consider the problem in
Islamic banks and their customers within its rules. In the case of bay 'al-'nah, this contracts
help ease the liquidity of banks and help meet the needs of the people. Therefore, it can
be concluded that the implementation of maslahah intended to maintain the viability of
Islamic banks and ensure justice and convince consumers to use Islamic bank products.
 The Changes of Product Structure in Islamic Banking: Case Study of Malaysia

The establishment of Islamic banking is very important in the

Islamic world generally and Malaysia specifically. Islamic banking is one of the
components in Islamic financial sector that plays very vital role to generate the growth of
economic, beside Islamic capital market, takaful (Islamic insurance) and mutual fund. It
could be as alternative fund sources to non-Muslim and as imperative to all Muslims who
are engaged in the economic activities. The emergence of Islamic banking had eliminated
the roles of riba, (usury or interest), maisir (gambling) and gharar (uncertainty) which were
implemented by conventional banking system. On the other hand, Islamic banks can
generate on halal activities, promoting profit lost sharing, quest for justice.

The purpose of this study is to different Islamic banking

principles between Malaysia and GCC Countries . What is GCC ? GCC is a Gulf Countries
Council. The countries involved are Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and
United Arab Emirate. There are several studies that have been reviewed by Mohd Bakir
(2008) J Sudin Haron (1999) and Saiful Azhar (2005) in discussing the principles applied
by Islamic banking in Malaysia and GCC countries. From these studies, the number of
Islamic banking principles used in GCC countries is less than that of their counterparts.
Another interesting finding is the rejection of two popular principles by Malaysian Islamic
banking i.e bay al-innah and bay al-dayn by GCC countries. Some GCC members apply
the principles of tawarruq in their Islamic banking operations.

Bay al-inah and bay al-dayn have long been debated among
scholars from the Middle East and Local. Only the Mazhab Syafiee accept bay al-inah and
bay al-dayn in carrying out Islamic financial transactions. Other mazhab reject the use of
both principles in Islamic finance, restrict the rules and place them as ordinary people who
are permitted by usuliyyin to practice whatever sect they like.
 While GCC scholars have the opportunity to practice fiqh
comparative teaching methods to identify legal principles or Shariah principles that are
valid for Islamic finance regardless of their scholar. Niyyah matter is debated by the
scholars regarding the permissible of bay al-Inah. For Shafi's, He regards this as valid as
the one has the right to sell goods at any prices he wants to. In this case, asserts that
Malaysia Islamic banks are more progressive to conventional bankers and more efficient
but yet too liberal to GCC scholars.

In addition, the differences in the principles used by both GCC

countries and Malaysia have weakened some of the ways of promoting Islamic products
and services in Malaysia to be accepted globally. Among other things that need to be done
is to align the differences between scholars and to create new innovative products with
equity financing to meet current demand.and provide some solution of suggestions on how
Malaysian Islamic products and services are globally acceptable
 THE NEGATIVE EFFECTS OF UNDEVELOPED MONEY MARKET

Insufficient progress in the development of money markets

has resulted in Lack of appropriate interbank instruments, Insufficient utilisation of
securitisation technique, Non-availability of risk management instruments and Lack of a
comprehensive and integrated approach to the expansion of money and securities
markets.

In general, the Sharī‘ah-compliant money markets are based

on Mudarabah principles or linked to commodity markets and are inappropriate for
interbank trading and government finance operations. However, there seems to be an
avenue for further progress due to the issuance of Islamic securities in domestic and
international markets.The excess liquidity situation has discouraged commercial banks
from using techniques of asset securitisation to manage the range of maturities and risks
of assets and liabilities.

Therefore, the lack of improvement in Islamic markets has

dampened the incentives to securitise assets and manage risks by trading in such assets
to balance the maturities and risks in the balance sheet. Risk management tools linked to
hedging instruments are still limited for IFIs.

The growth of Sharī‘ah-compliant hedging instrumentsrequires efficient

active spot markets in commodities and hedging contracts that are both Sharī‘ah-
compliant and economically feasible. Various legal, institutional and accounting issues
need to be resolved to achieve this. Also, the development of Sharī‘ah-compliant hedging
instruments requires that the limitations on risk management caused by the lack of Islamic
money markets be removed. Lack of a comprehensive and integrated approach has
hampered the application of asset securitisation to assist the growth of Islamic capital and
money markets. This methodology has the potential to promote efficiency in Islamic
money markets and the creation of benchmark rates of return based on central bank
operations. An inclusive approach to nurture money and securities markets and alleviate
risks is needed.
REFERENCES

Muhammad Shahrul Ifwat Ishak ( 2018 ) The principle of maslahah and its application
in Islamic banking operations in Malaysia

https://www.emerald.com/insight/content/doi/10.1108/IJIF-01-2018-0017/full/pdf?title=the-
principle-of-italicmalaahitalic-and-its-application-in-islamic-banking-operations-in-malaysia

Zakaria bin Bahari The Changes of Product Structure in Islamic Banking: Case
Study of Malaysia

file:///C:/Users/hp/Downloads/regulation%20pdf%202.pdf

NDr. Ahmed Iskanderani, Program Director, Dr. Khlaifa M. Ali ( 2017) Islamic
Money Markets and Sukuk

https://www.edx.org/course/islamic-money-markets-sukuk-irtix-ifcm103x