Bandar Seri Begawan - Though local financial needs can be met by Syariah compliant means, research conducted by Universiti Islam Sultan Sharif Ali (UNISSA) has indicated that Muslims still turn to un-Islamic financing to cater to their needs.
In an interview with the Bulletin on the sidelines of the International Conference on Islamic Finance 2012 and the 6th Regional Syariah Scholars' Dialogue yesterday, Hajah Rose Abdullah, UNISSA Deputy Dean at the Faculty of Business and Management Sciences has described this financial phenomenon as the "biggest worry".
Referring exclusively to repaying loans provided by Islamic financial institutions for pawned jewellery the senior lecturer explained that some Muslims are known to resort to seeking alternative means to come up with finances in order to regain their gold accessories and goods that they have surrendered as collateral when they apply for microloans with Syariah compliant bodies that provide such quick services.
"For example," she explained, "if a customer pawns their gold, is loaned $2,000 and cannot pay this loan back when the grace period is over, they would then need to find the money for repayment elsewhere and this is where money lenders come in offering financial loans and charging for the loan, which is 'Riba' or interest and considered to be non-Syariah compliant."
These 'informal' lenders, she described, are actually not licensed to provide this form of services but instead have fronts such as other forms of legitimate businesses and, other times, such un-Islamic loans are provided out of good faith that are also subject to interest.
"Some lenders wait outside (the Islamic banking institutions that provide quick microloans) for their clients to come out so that they can ask for their loans back," she explained further and added that, "surprisingly, some of these lenders are goldsmiths."
The process of obtaining such loans, she said, "is unlike going to the bank as per the Islamic way", which typically takes a longer amount of time thus makes this form of alternate quick loans even more irresistible. This practice, she added, is in actuality, "rampant".
"What worries me is that they are practising the un-Islamic way whether they conduct it with or without knowledge of Islamic practices.
Sometimes, however, even if they are aware, they would have to do this because they need the money."
More researches and surveys, meanwhile, still need to be carried out into the mechanics of how these 'informal' loans take shape.
Recommending that "we have to find ways" to come up with solutions for those who resort to micro-financing comprising some from the low-income class and also from the middle-income class, "Islamic microfinance should be practised especially by formal institution", referring to banks and welfare bodies, "as well as informal institutions in accordance with our faith as Muslims".
It was, however, noted that government and government-related institutions do provide interest-free loans for those who are in real need.
The deputy dean yesterday delivered a paper on Microfinance Services in Brunei Darussalam and was part of a panel of other contributors to yesterday's session alongside other members.--Courtesy of Borneo Bulletin