By: Dr. Mohd Daud Bakar
There is no point of developing a standard, any standard for that matter, if it is of no use for the humanity or special community living on this planet. The same is true with a Shariah standard. Any standard which is to be developed must have a clear set of deliverables in terms of its relevance and impact. What are these deliverables? The following points are based on my own intuitive understanding or perhaps, to some extent, expectation and aspiration.
The most important aspect that this standard aspires to achieve is to dispel the prevailing understanding in the community that gold is a usurious or ribawi item, and nothing much can be done with this precious metal in financial dealings. Therefore, there is no need to work and devote on this kind of standard as most of the dealings with gold will be restricted if not prohibited. Not only the public is having this kind of misaligned thought, even some scholars would have the same line of thinking. Everything to do with financial dealings in gold is straightforward declared as unlawful. Period. This is a wrong approach in everything we do in life. First, we need to ascertain our own raw hypothesis against the sources and evidence of the Shariah and later with the data of life. Second, we need to free our emotions from pre-conceived ideas or conservatism as everything in the Shariah is deemed to be permissible unless proven otherwise. Even if gold has many Shariah complications in some of its transactions and dealings, it is worthwhile to have a Shariah standard for itself to guide the stakeholders what is permissible and what is not. In the same vein, there is no harm to provide a Shariah standard on riba (translated here as interest for the sake of simplicity of understanding as riba includes more than interest) or gharar (lack of knowledge which could be detrimental to one of the parties). This kind of standard will definitely help us to be guided of the very essence of both riba and gharar and not to be confused. There is a benefit of this kind of standard. Surely, a Shariah standard on gold would have many practical and far-reaching benefits and impact compared to both riba and gharar as we shall see later.
Next is value-added academic benefit. Our Shariah and practical knowledge of gold has been scattered and sometimes unsubstantiated, to say the least. We know some aspects about gold in our past reading and research but it has been haphazard and not-in-oneplace. The compilation and indexation of all relevant and pertinent Shariah principles and issues dealing with gold is a contribution by itself. It may not be complete and perfect but it can give the real flavour of how to deal with this precious metal – of course from the Shariah perspective – moving forward. Instead of working from ground zero, the stakeholders at all levels of the community can at least be guided on the basic parameters of Islamic teachings. For those who are analytical and inquisitive enough, they can use the standard to expand the horizons of dealing with gold and their permutation. Nothing can stop them because this is the work of any standard by providing broad and flashing principles for the industry to learn and expand further. Even if you were to ask any Shariah scholar, it will take him some time to put all relevant Shariah principles in his note and articulation. But now, the standard has covered that ground and the scholars will only need to further their research on any other issues which might be overlooked or may need different interpretations based on the data and technology and perhaps the convention of the practice.
The biggest beneficiary of this standard is the financial sector which has been keen to make gold as a Shariah compliant asset for their customers across the board. Obviously, the investors and the customers will also benefit from this offering but the Shariah standard on gold, being the first in the modern history of the gold industry, will motivate all financial houses and firms to align their current products offering if they are keen to have the wider market for their product, by being inclusionary. From the early days of the announcement of the work on the Shariah standard on gold by AAOIFI in collaboration with the World Gold Council, the industry in many parts of the world has responded well to this initiative. Stakeholders ranging from financial institutions to fund management to credit card providers to gold-based- platforms have embraced this movement. Why shouldn’t they? The standard will take of their worries of the issue of Shariah non-compliance as well as the international standard. What else can be better if a product or a service is both Shariah compliant and internationally compatible? The AAOIFI Shariah standard on gold, when officially issued, will play this function well in the eyes of so many stakeholders, not to mention customers and investors and public at large.
As for me, personally speaking, it is a good move towards mainstreaming Islamic finance in the 21st century. For many of us, mainstreaming Islamic finance means making Islamic finance products and services assessable and affordable for everyone in the community at both retail and corporate levels, as well as the government agencies to the effect that the market share of Islamic finance, cumulatively speaking, would be much more overwhelming compared to the conventional one. This is not wrong. This is still high on the agenda in many Islamic financial markets. Nevertheless, I have another theory of mainstreaming which is more impactful than the ‘classical one’. We can’t achieve the fullest sense of mainstreaming of Islamic finance unless we can bring the world best standards and practices to be embedded within our own Shariah architecture and design or vice-versa. The infusion of the World Gold Council standard in the AAOIFI Shariah Standard or vice-versa is a classic example of how the Shariah principles and standards are now compatible to some international standards by working together. This leads me to the next section of the paper.
Shariah and Technical and Prudential Standards of the World
I am not sure whether the Islamic finance community has actually overlooked or has not given much credence and importance to other international technical standards of the world. In any case, the Shariah is a global word and it is meant for global community and humanity in many dimensions of life. Financial is one of these dimensions but the financial world has close correlation to many other issues such as environment, anti-money laundering act, corporate governance, corruption-free, social finance towards caring society, growth and sustainability, financial stability, etc. The great minds of the world community have put many robust and prudential standards to govern the conduct of human to achieve a better, safer and more sustained life on this planet for EVERYONE to enjoy. We need to work and collaborate together for this noble objective. We can’t work in isolation, can we?
Working together can bring down the cost collectively such as the case of fighting against global warming and deadly virus spread. It can also provide a more effective and speedy implementation of anything which is cross-border in character. I am neither suggesting nor implying here that the Shariah community and fraternity must accept all of these standards without having the proper discussion and Shariah due diligence. All what I am trying to articulate and impress is the need to engage more actively with all the relevant standard setting bodies and agencies in all dimensions of life; finance, environment, trade, mining, resources, sustainability, governance, social finance and even media and image consultant providers.
In the beginning of the engagement, it will be difficult to have a common script and narrative between the Shariah and these various industries and their care takers. Engagement is much harder than disengagement in all what we do. We just need to persevere. However, in the due process, a new frequency of communication could be discovered as we have seen in the case of a collaboration between AAOIFI and WGC. If people in the past – before they discovered the language – can survive in their communication using body language that is the universal language, surely we can be better than them. The Shariah language is quite universal as well. The language of karat and other technical worlds in the gold industry are not new to the Shariah. These have been discussed in the books of the classical Islamic law literature using the same language and nomenclature but having the same essence of the intended meaning. Surely, the language of international trade financing or mining or even governance can be found between the lines of rich Islamic law literature. It just needs to be made trendy and fashionable so that people in 21st century would understand without looking at any technical dictionaries.
In short, the AAOIFI and other relevant agencies in Islamic financial space must also go out and engage with other international agencies and bodies in addition to producing the Shariah standards from within typical Islamic practices and issues in the Muslim community. This will bring the Shariah articulation and algorithm to another level altogether. Perhaps to bring the Shariah principles of life from middle ground to high ground to become the overarching template for all international standards and conventions in all business, trade and finance matters. It may be too late now to re-write these standards and conventions but we have all the time and liberty to infuse the good articles and practices of these standards and conventions to our Shariah standards and conventions. I call this infusion as the synthetic infusion which is good enough to create the linkage between the Shariah and the world at large.
Views and opinions expressed by the author of this paper are those of the author’s and do not necessarily reflect or directly or indirectly represent the official policy of AAOIFI, the WGC and any other institutions the author is affiliated with.