CTU351 - Final Group Assignment PDF

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PROGRAMME CODE AND NAME:BA119: FACULTY OF BUSINESS AND MANAGEMENT DIPLOMA IN BANKINGCOURSE CODE AND NAME:CTU351: FUNDAMENTALS OF ISLAMIC BANKINGTITLE OF ASSIGNMENT:THE CONCEPT AND APPLICATION OF HIBAH IN ISLAMIC BANKING INMALAYSIAGROUP NUMBER:CTU3514ASUBMITTED DATE:23 MAY 2021PREPARED FOR:SIR RAZIZI...

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PROGRAMME CODE AND NAME: BA119: FACULTY OF BUSINESS AND MANAGEMENT DIPLOMA IN BANKING COURSE CODE AND NAME: CTU351: FUNDAMENTALS OF ISLAMIC BANKING TITLE OF ASSIGNMENT: THE CONCEPT AND APPLICATION OF HIBAH IN ISLAMIC BANKING IN MALAYSIA GROUP NUMBER: CTU3514A1 SUBMITTED DATE: 23 MAY 2021 PREPARED FOR: SIR RAZIZI RASMI PREPARED BY: NAME

MATRIX NUMBERS

MUHAMMAD AKMAL BIN MOHD YUSRI

2019418468

MUHAMMAD AKMAL HAIRI BIN MAHDZIR

2019223922

MUHAMMAD MAZLAN BIN AMPILIN

2019401034

MUHAMMAD HAFIZ BIN ISMAIL

2019806818

MUHAMMAD FIKRI IZRIN BIN ROSLI

2019216876

TABLE OF CONTENTS

CONTENTS

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INTRODUCTION AND CONCEPT OF HIBAH

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THE APPLICATION OF HIBAH PRINCIPLE IN ISLAMIC BANKING IN MALAYSIA

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SYARIAH OF HIBAH

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HIBAH IN ISLAMIC BANKING PRODUCTS

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CONCLUSION

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REFERENCES

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INTRODUCTION Hibah is one of the major instruments in Islamic property management. It is a process of granting properties from the contributor in efficient and effective way according to Syariah of Islam. The use of hibah concept is enlarging among the community of Islam in Malaysia due to its specialty as instance, the determination of the beneficiary and the specifically assets for grant. In the institution of Islamic Banking, they adopt the concept of Hibah to reward the qard (savings) and wadi’ah (savings with guarantee) depositors. Sometimes, Islamic Banking will be rewarding hibah to customers in specific cases, like when they are making an early payment in loan and so ever. This report discusses the hibah;s concept, its provisions, its application in Islamic Banking and its application in Hibah’s product. THE CONCEPT OF HIBAH Hibah is an Arabic word that comes from the verb “wahaba” which means tabarru’ or giving without expecting any return (al-Fayyumi,t.t). Based on Ibn Manzur analytical, Hibah is not just giving something and not intended to get anything in return, yet, without any other intention (Ibn Manzur, 2003). In Malaysia, the reality of Hibah is it involves the document of Hibah. This documentation is a special procedure that is implemented by the current giver (people who give hibah). According to CIMB Islamic Bank Bhd v LCL Corp Bhd & Anor case, when the judge has stated that hibah is transferring an owned asset without any returns of the current giver. Those assets transferred through the document of hibah that is named as hibah letter (grant letter). This document should ensure that the asset is given to the selected people without any possible by getting object by any heirs. From the aspect of terminology, hibah has the same meaning from the terms of language. It is defined as an agreement that contains tamlik (grant of property rights) as voluntary action against his/her property to someone else during his/her lifetime without expecting nothing in return (Ibn. Nujaim,t.t, al-Syarbini, t.t, al-Zuhaily,1989). In more detail, hibah is an agreement of transfer of title or property from one party to another without any intention in return (iwadh) during his/her life, and also not expecting any return in the hereafter or glorifying a person by using ijab and qabul. Hibah can also include gifts and sadaqah (alNawawi,t.t).

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THE APPLICATION OF HIBAH PRINCIPLE IN ISLAMIC BANKING IN MALAYSIA The implementation of hibah is as a supporting principle to the Islamic activities in Islamic Banking in Malaysia. The transfer from the original hibah to the current implementation of hibah would ensure that charitable acts would not be affected. There are four application of hibah as a supporting contract in Islamic banks in Malaysia, which is Wadi’ah Yad Dhamanah (Saving Account), Al-Ijarah Thumma Al-Bay’(AITAB), Qard Contract and Conditional Hibah (Hibahmu’allaqah). Hibah can be an instrument that can be an attraction to certain products offered in Islamic banking or better known as a selling point in business. Additionally, consumers will be more consistent in their financing payments due to the concept of hibah being an initiative and support to them. Furthermore, the principle of hibah is widely used by financial institutions to provide compensation or payment to customers. As a result, applying the concept of hibah to such conditions that cannot be resolved by ‘muawadat’ transactions or bilateral contracts can be a cover by hibah. Hence, the principle of hibah is ‘tabarru’ in nature where the contribution or discretionary grant from the bank which causes this principle is not given emphasis because Islamic banking is for profit. Nevertheless, it can be used as a supporting principle to the products offered by Islamic banking or agreement that is beneficial to the institution. Thus, hibah has become very important as a supporter instrument in Islamic banking. In principle, the Shariah Advisory Council of Bank Negara Malaysia (SAC-BNM) has authorized the use of hibah as a financial instrument under the bank Negara Malaysia policy document on hibah. According to the policy, the act of giving hibah is always at the discretion of the Islamic financial institution, but it must be based on strict shariah requirements. The Shariah Advisory Council of Bank Negara Malaysia is central to Islamic Banking in Malaysia in conducting banking activities and is bound by the decisions of SAC-BNM. As a result, the decision of SAC-BNM is binding on the bank and must be accepted by the banking institution where the decision of the form of prohibition is contrary to Islamic principles and does not comply with the structure or product. Thus, banks cannot violate the decisions issued by them. However, the structures that follow the principles of shariah can be applied in the product by the bank and are not bound by any decision as long as it does not violate the Islamic principles. In addition, SAC-BNM will be assisted by the bank's Shariah Advisory Council and be

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complementary to the SAC-BNM. They have the authority to make decisions that have never been made by SAC-BNM in the form of shariah product operations in their respective banks. SYARIAH OF HIBAH Hibah is refers to gifts, whether in the form of ain (tangible) or indeed, like gifts or charitable contributions. These three words all mean the same thing. The distinction is in the intent of giving, where alms is a gift intended to gain a reward in the afterlife and is usually given by the wealthy to the poor, while a gift is intended to glorify an individual and is usually connected to something. As per Shariah, hibah is an arrangement that includes the voluntary transfer of an individual's belongings to another individual over the course of the narrative for no transaction fee. Hibah is a grant of property from one party to another without reimbursement during life, willingly, without seeking a ward in the future or glorifying anyone, using the ijab and qabul or anything similar. Hibah is a form of beneficial agreement (tabarru). The intrinsic essence of a hibah is the unrequited transfer of ownership of a hibah asset from the donor to the recipient. In the case of conditional hibah, a hibah is revocable by the donor prior to the recipient taking possession of the hibah asset or fulfilling the condition stipulated in the hibah agreement. A Hibah contract will not be established until the following pillars and requirements are met: Penghibah (alWahib), where Penghibah must be a competent individual with perfect intelligence, puberty, and maturity (rushd). The grantor must be the owner of the donated items. Since the property owner has complete control over his property, Hibah can be made at any time and to anyone he wants, including non-Muslims, as long as the meaning does not violate Islamic law. Aside from the Grant Recipient (al-Mawhublahu). The Hibah can be given to anyone (both Muslim and non-Muslim) as long as he has the right to own land, whether mukallaf or non-mukallaf. If the Hibah Recipient is unable to accept the Hibah property because he has not reached puberty or is disabled, the Wali or Trustee will accept it on his behalf. The Grantee must recognise the property granted and have the authority to possess it. In other words, the Grantee must be granted ownership and control over the land.The next criterion is the goods or property to be donated (al-Mawhub), where the goods or property to be donated must fulfil the requirements such as halal and be a form of goods or property with value according to Islamic law. The goods or property must belong to the grantor, be assignable, exist, and be included in the grant agreement. Finally, is Sighah, which includes Ijab and Qabul. Sighah Hibah is a word

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or deed that carries the sense of giving and receiving Hibah where there is a relation and similarity between ijab and qabul and is not subject to any conditions or time constraints. There are several issues concerning gifts that cause some consternation in Muslim society, one of which is the issue of gift revocation, particularly because there are no specific written laws governing gifts in Malaysia that can be used as a guideline or reference if a problem or dispute occurs. The aim of this research is to investigate Muslim jurists' perspectives, as well as their proofs and reasons for reasoning, on the Islamic judicial judgement of removing the gift before and after operation of holding products, as well as the legal rule on a father's revocation of a gift intended for his child. According to the authors of the report, the majority of Muslim jurists conclude that when the receiver keeps the gift, the contract of gift is completed and successful. Except in the case of a gift from a father to his children, the donor has the right to cancel his gift if the recipient does not have evidence of acceptance. And according to Mazhab Hanafi, Imami, and Zaydi of thought, the donor of the gift has no impediment to revoke it despite the holding having occurred if one of the conditions that prevent the withdrawal of the gift is indeed not applicable. HIBAH IN ISLAMIC BANKING PRODUCTS There are four products of hibah as a supporting contract in Islamic banks in Malaysia, which is Wadi’ah Yad Dhamanah (Saving Account), Al-Ijarah Thumma Al-Bay’(AITAB), Qard Contract and Conditional Hibah (Hibah mu’allaqah). The application of hibah as a supporting contract in Islamic banks in Malaysia is Wadi’ah Yad Dhamanah (Saving Account). Wadiahyad dhamanah is the combination of dhaman (guarantee) and wadiah (safekeeping). This type of deposit facility is widely used in Islamic banks framework and deposits are the primary source of funds. The safe keeper has the right to exchange or use the deposit capital for some other purpose. Thus, the safe keeper is also entitled to take full advantage of the asset's use and is often solely responsible for any harm (ISRA, 2012). The element of guarantee (dhaman) is essential, since the bank is allowed to use the stores at its own expense. In any case, if the investors decide to withdraw their funds, the bank must provide a guarantee, which funds are made available upon request. The bank is the only one who benefits from the use of the deposit capital. In Malaysia, Islamic banks give hibah to wadiah depositors as a token of appreciation for their contributions to the

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organisations. This hibah is "acceptable" if the contract process does not resemble that of a wadiah deposit contract. Following that, Al-Ijarah Thumma Al-Bay (AITAB) is another application of hibah as a supporting contract in Malaysian Islamic banks. Al-ijarah is defined as a contract for the control of a specific utility or service in exchange for a monetary payment (al-Jurjani, 1988, al-Syarbasi, 1981). It is the sale of a profit, use, or feature for a price that can be fixed or variable. The most significant aspect in the meaning of al-ijarah is benefit. According to the majority of jurists, ali-jarah is more about the advantages than the object itself. This is because the core objective of al-ijarah is to profit from it rather than to own it (al-Ansari, n.d). By implication, AITAB covers leases, rentals, and leases that end in sales (Khir, K., Gupta, L., & Shanmugam, B. 2008). AITAB are also known as “al-Ijarahwal-Iqtina or al-Ijarah AlMuntahiyah bi al-Tamleek '' in Malaysia. This combines a rental and a trade arrangement into a single negotiating agreement, but the deals must be managed separately. The lessee would be required to pay the lessor a monthly rent for a defined length of time before entering into the lease agreement. The hirer then has the option of entering into a one-time contract to purchase the products at the end of the lease period. (El‐Din, S.I.T., & Abdullah, N.I. 2007). Hibah in “al-Ijarah Thumma al-Bay contract (AITAB)” is one of the incentives offered by Islamic banks in Malaysia to customers who pay their monthly rent based on a “prescribed schedule.” Customers are offered hibah by Islamic banks, and during the first year, they need make monthly rent payments without interruption. Then, 1 percent of the investment will be credited to the eligible customer account on the 13th month (Bank Negara Malaysia, 2007). After that, Qard contract has become one of uses of hibah as a backing contract in Malaysian Islamic banks. Qard contract is a trade ownership of exchangeable assets to a party to which it is official to return wealth similar to it. The aim of qard contract is to provide wealth or assets on loan to anyone who will profit from this act. By accepting the bid, the recipient party hires it and uses it for its own reasons before returning the equivalent interest (Irsyid,2007). The depositor is regarded as a loan to the bank in the qard structure used by Islamic banks, and the bank guarantees the depositor even though the bank is negligent or loses wealth (ISRA, 2012). If, the depositors collect hibah from the bank as a lender in this situation. On the condition that this practice (giving hibah) does not become normal and similar to a situation in a qard-based contract, the SAC resolution referred to it as "permissible."

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Another hibah in Islamic Banking Product is conditional hibah (Hibahmu’allaqah). According to this definition, a conditional hibah is a grant that is contingent on the occurrence of a certain event. Grants are only given out when the conditions are met. There are some scholars that regard conditional hibah for any future terms or conditions is invalid according to Shafii scholars, a view from Hanbali scholars, and Zahiri: hibah may be a deal that would end up being invalid due to ignorance. As a result, hibah must be absolute (to a future event) and normally comparable to the limitation of a contractual selling agreement (to a future event) (Al-Syarbini, n.d.). "Hibah, which is conditional on conditions, is null since hibah is a grant of possession (transfer of property) to a single recipient in his lifetime, so hibah can't be conditional like a contract of sale (which can't be conditional)," according to IbnQudamah (1997). There is some product that operates using conditional hibah is Sahabat Agro (AgroPrima S) by Agro Bank. The Sahabat Agro instrument is a marketing program offered by Agrobank Malaysia for the AgroPrimaS commodity that employs the Saving, Referral, and Gain Reward model. This product uses the Shariah principle of conditional hibah (hibahmu’allaqah), in which a payment or grant is offered to a member who follows the Bank's terms and conditions. This commodity is offered by Agrobank after being approved by the bank's Shariah advisors in terms of requirements and operations. CONCLUSION Hibah is a form of shariah contract that is used to fund major shariah contracts in Malaysia's Islamic banking and financial system. The use of hibah in Islamic banking products is all about offering an incentive for customers to pay their monthly rent according to the "prescribed plan" or as a form of gratitude for their confidence in the institutions. Hibah has been used in products based on the contracts of wadi’ah yad al-dhamanah, al-qardh, and alijarahthumma al-bay', according to current Islamic banking practise in Malaysia. While, the application of hibahmu'allaqah (conditional hibah) in Islamic finance. Hibah retains many Islamic characteristics in terms of avoiding interruptions in property distribution processes, but there are still disagreements and debates on this subject. In general, most contemporary scholars agree that such practises are permissible as long as they do not violate the original hibah principle.

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REFERENCES Al- Ansari, Zakariyya. (n.d). Qalyubi wa Umairah, ala Minhaj al-Talibin. Al-Mansurah: Maktabah al-Iman. Al-Fayyumi, Ahmad bin Muhammad. t.t. al-Misbah al-Munir. Kaherah: Dar al-Ma‘arif. Al- Jurjani, Ali B Muhammad. (1988). Kitab al-Ta‟rifat. Beirut: Dar al-Kutub al-Ilmiyyah. Al-Nawawi, Abi Zakariyya Mahy al-Din. 1985. Rawdat al-Talibin, j. 5. Beirut: al-Maktab alIslami. Al-Syarbasi, Ahmad. (1981). Al-Mu‟jam al-Iqtisadi al-Islami. Mesir: Dar al-Jayl. Bank Negara Malaysia (2010). Shariah resolution in Islamic finance. Bank Negara Malaysia El‐Din, S.I.T., & Abdullah, N.I. (2007). Issues of implementing Islamic hire purchase in dual banking systems: Malaysia's experience. Thunderbird International Business Review, 49(2), 225-249. Ibn Manzur, Jamal al-Din Muhammad bin Mukram. 2003. Lisan al- ‘Arab, j. 9. Kaherah: Dar al-Hadith. Ibn Nujaim, Zain b Ibrahim b Muhammad. (t.t). Al-Bahr al-Raiq Syarh Kanz al-Daqaiq. Beirut: Dar al-Makrifah ISRA. (2012). Islamic Financial system; Principle & Operations. Kuala Lumpur: ISRA. Khir, K., Gupta, L., & Shanmugam, B. (2008). Islamic Banking: A Practical Perspective, Pearson Longman, Petaling Jaya.

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