The lead facilitator for CIIF’s Chartered and Fellowship Masterclass (CFM) was a man by the name of Dr Mohamed Ashraf Iqbal – a man with many skills and knowledge.
While spending the early part of his career as a mechanical engineer and a consultant, he then joined the Islamic Finance scene as a Board and Shariah Committee member of an Islamic Bank, backed by a Ph.D in Islamic Finance from INCEIF.
He is a walking knowledge house for sure, with the amount of books he read and his ability to connect so many implicit parts of the world, naturally connecting them to the financial system – I was amazed.
During the masterclass, he takes a rather unconventional approach of probing the participants’ view on today’s Islamic Finance, pulling back to the fundamental basics then provoking everyone’s mind to reflect on what’s next for us in this industry we love.
The conversations can be rather heavy and heated at times. However the objective was not for us to find a full proof solution during the masterclass, but to come out of it having that “reflective” mind that would continuously challenge the current way we do things – finding that refreshed soul in Islamic Finance.
But if there is one key reminder that I would take back and share with everyone is on the basic issue that Islamic Finance attempts to address – debts.
The Debt Problem
Let’s be honest, debts leaves us shivering whenever we think about it especially if we have lots of it.
It’s probably true what was mentioned in class; besides the 3 honorable professions: doctor, nurse or teacher, if it wasn’t because of the debts we owe, most of us would probably be doing something more meaningful with our lives instead of being stuck with the 9 to 5 job we are having.
It’s these debts too that forces us to be cautious in our day-to-day work dealings, careful with our choices of words and actions, having that thought at the back of our mind, there is always that possibility of us losing our source of income, which would then take away our ability to service our debts.
The “Debt Impact”
So, what’s at stake when we are unable to service and pay our debts:
#1 our lifestyle; and
#2 our peace of mind.
We have seen how relationships, be it friends and families, no matter how close, got broken due to debts – both on the receiving or giving end. This heartbreaking process, without any exception causes heightened emotional stress due to the internal and external struggles of dealing with it.
This is how much debt can influence our lives. The root of many of our life problems is not really money so much as many think, at least for the majority of us – it is debts.
Debts in Islam
As Muslims, we know managing and settling debts is of utmost importance in Islam. A soul will be stuck from going to the next life if debts in this world are not settled:
“The soul of the believer is suspended because of his debt until it is paid off.”
Narrated by al-Tirmidhi
Basically, Islam doesn’t have any issues with debt; as much as it is a burden, debt is a necessary financial tool for human’s social system.
However, Islam does have serious issues with how it is being given and managed as debts transacted in the wrong way (which is the case in most debt transactions today) would not be free from riba i.e. usury – the father of all that is evil.
This was the key message that Dr. Ashraf was reminding the us about.
You’ll be surprised of how detailed Islam goes in providing guidance and laying down rules on debts management. It covers the transactional aspect (how it need to be written regardless the amount, role of the scriber and witnesses, the right on the debtor to set the terms etc.) as well as the social aspect of it (how debtors should be given time to pay off what is due if they don’t have enough, the social call to help settle debts of others, etc.).
The foundation of this guidance falls back to the longest verse in the Quran (literally it takes up a full page) – verse 282 of Al-Baqarah, dedicated to explaining the concept of borrowing. It just shows how much Islam emphasizes the importance of transacting debts in the right way.
The Takeaway
I don’t remember all the technical details on debts management (I’m not a banker by profession) and this posting would probably end up as an academic paper if I ever attempted to do so, but the key takeaway from all of this is the fundamental need for debt to be managed in the right way.
At a macro level, if we want to solve the financial system problems of the world (probably it will solve the social, political and economical problems too), in order to build a more balanced financial ecosystem with fairer diversification of wealth: where the rich doesn’t get richer at the expense of the poor getting poorer, we will need to start exerting real efforts to change the current way of managing debts, on honest terms with ourselves.
The key word we need to consider in solving this problem is “balanced”, which falls back to Islam’s concept of moderation (wasatiyyah) in whatever we do. In this case, at the core of it is moderation in profits, expense – in other words in the design of the overall debt product solution.
At an individual level, each of us will need to find ways of managing our debts be it in the instruments we take up and the debts we actually take on (which the latter I admit is super hard). It would take a lot of control and effort to battle over desires as many of the debts created are not really on what we “need” but instead on what we “want”.
Similarly, the solution to personal debt management is really going back to basics of moderation, of which only each of us individually can be honest to ourselves in doing so – if you get what I mean.
Freedom and Peace
So – these are some of the key points to ponder on the issue of debt. If we really want to achieve “financial freedom” in our financial system (continuous freedom from riba and all it’s evil friends) as well as our personal books (no more debts to worry about anymore), then we will need to first start somewhere and then just keep on trying.
Ultimately what we want to achieve by doing all this is that “peace of mind” that our soul has been longing for.
All the best to us!