Donation for medical equipments

written by Gerry Octaviano, S.Sos, MBA

GR 93 & MoF 76 do not govern properly regarding the donation for medical equipments. It simply regulates the donation for social infrastructure but does'nt explain properly whether it is only for build a place such as hospital or the medhical equipments included as well in this defintion. Since the spirit of the regulation is the donation for the society therefore medhical equipments should be included and can be deductible expenses.

Tax Payer's purpose is to help society and assists Indonesia for the health. Ministry of Health should collaborate with Ministry of Finance to design the tax incentive for this issue.

Allah Wa' Alam.

VAT on cross border transaction

written by Gerry octaviano

Indonesia adopted both origin and destination principle, it can be seen from the SE-145 which revoked SE-08 concerning VAT on trading services. This regulation explains clearly vat imposed where the service is performed (origin principles) and where the service is received.

The question is if the customer from Indonesia (Mr.A) and service provider from US (mr.b).

Mr.A goes to US to consult regarding his financial corporation.

1. Should  Indonesia has the right to impose the VAT?
...............


How about e-commerce transaction i.e agoda, etc...?????.....


Allah Wa'Allam

How to deal with taxation for Islamic Finance Products

Written by Gerry Octaviano

In order to design tax regulation for Islamic Finance products required the people who are expert in both (tax and Islamic Finance). It will not work if only expert in tax or only Islamic Finance.

Those people should know the purpose of Islamic Finance which to boost the real economy and downsized the financial economy.

I am so disappointed once I knew mostly (more or less 80%) Islamic Financial Institutions earned income from murabahah (which similar to conventional but fixed rate - more towards for consumption) instead of parnership (mudharabah or musharaqah).

The prevailing tax regulations shows that Islamic Financial Institution in substance similar to the conventional products. Indonesian Tax Authority ("ITO") does not impose any tax on the Islamic Finance scheme with the reason it is simply to fulfill Sha'riah principle.

Those people who expert in both (tax & shari'ah) should be hired by Government to design the proper tax regulation and Islamic Banking with Bank Indonesia in order the purpose of the Shariah can be fulfilled.

Allah Wa'Alam.

Does the tax Treatment show the impurity of islamic finance?

Written by Gerry Octaviano, MBA

According to prevailing tax regulation VAT does not impose on  islamic finance scheme if it is simply to fulfill the shariah principle.

The VAT only impose on the delivery of taxable goods from the party who owns the taxable goods (the real seller) to the party who really needs the taxable goods (the real buyer).

From the above explanation, we can raise the following questions:

1. Does it mean the existing islamic finance only unreal translations where actually the goods and/service, parties do not exist?

  And.....

2. Who are the parties that can fix the situations?  

.................. It could be you.......

Allah Wa'Allam

We should influence an unhealthy environment...

By Gerry Octaviano , S.Soc, MBA.

I just wanna give brief story about an entrepreneur (Mr.A) ask to his Ustadz or Moslem Scholar abous his business.

Mr. A has a small hotel in Jogja and he said the environment is really unislamic, he is afraid his hotel will facilitate for people doing Zinah.

Afterwards, He asked an Ustadz whether he has to sell the hotel and find the other business.

Ustadz says it is better you influence this unhealthy environment to become better not the other away around.

Usatadz said, if you (Mr.A) move and this environment will be worst than ever.

It is better if you buy more hotel and create healthy environment which in line with Shariah Principle.

The point is we should influence an environment not environment influence as long we are still in line with Shariah Principle.

Hopefully, can add value for your life. Just wanna inform that in learning MBA Islamic Banking and Finance we learnt that Shariah not only talking about Economic but all aspects eg. medications, technology, philosophy... You can see many Non-Moslem Countries implement Shariah Principle in some cases.

Deceive and deceive....

Deceive and deceive,,

Written by Gerry Octaviano

Never say yes before you do research as much as you can. People who are vulnerable to be cheated, as follow:

- Lack of information

- Judge from the cover (appearance or look such as handsome or beautiful)

- Family or even close friend is not guarantee they are always honest

- Not close to Allah (swt)

- close minded

Hopefully, in any decision you should smart in collecting information prior to decide it. Open your mind and just trust Allah (swt) by reading Quran and Sunnah.

Allah Wa'Allam

We should focus on our own problem not others'!

We should focus on our own problem not others'!

Written by Gerry Octaviano

Moslem countries' are no longer focus on their problem but others', I didn't notice this thing before my professor told this thing in the class. You should do a little bit research about how much money that we have spent for AIDS? Do you think this is our problem if our life still in line with Qur'an and sunnah.

While in our own problem which is malaria is only few dollars we spent for doing research about it and we have to aware that how many people in moslem countries cos of this thing? The problem is tropic country not only cos of we can't keep clean which is suggested by Quran and Sunnah.

Do some research about it and fix our mindset.

Islamic banks and finance institutions should have a comprehensive law to regulate their activities, make their products Shariah-compliant and win in

By P.K. ABDUL GHAFOUR | ARAB NEWS

Published: Mar 28, 2011 23:55 Updated: Mar 28, 2011 23:55

JEDDAH: Islamic banks and finance institutions should have a comprehensive law to regulate their activities, make their products Shariah-compliant and win investor confidence, according to a professor at the Department of Economics in the International Islamic University, Malaysia (IIUM).

"At present there is no law defining what is Islamic banking and finance. We need a complete set of rules and regulations. In the absence of such a law, discrepancies will continue," Muhammad Yousuf Saleem told Arab News.

A comprehensive law would bring about dramatic improvement in the quality of Islamic banking and finance services, he said. There are now thousands of Islamic banks and financial institutions across the world, dealing with more than $1 trillion in deposits and assets. "These institutions are in need of a substantial law defining Islamic banking products and banking activities," said Saleem, who holds a doctorate degree in law from IIUM.

He added that many Muslim scholars are not happy with the present Islamic banking system due to the absence of a comprehensive law. The law would create public confidence in the system and encourage more Muslims and non-Muslims to deal with it. "Islamic banks should prove that they are totally different from conventional ones to attract faithful Muslims," he pointed out.

Saleem said Islamic banks should invest in real economy such as industries and agriculture to boost the development of countries and create more job opportunities. "They should take care of not only the interests of shareholders, but also those of common people," he said. He attributed the progress of the Islamic banking sector in Malaysia to strong central bank control.

The IIUM professor demands greater independence for Shariah boards that monitor the activities of Islamic banks and financial institutions. "At present, the board members are appointed and paid by the banks where they work. This is one of the weaknesses of the present system. The power of appointing and removing a board member should be vested in the central bank."

Saleem does not favor the opening of Islamic finance windows at conventional banks. "We can only approve these windows as a transitional step, not as a permanent system, because we don't know how they separate their transactions and use their funds. Traditional banks should open separate branches for Islamic banking to avoid mixing of funds," he explained.

Professor Saleem is optimistic about the future of Islamic banking in the world. "There is a good future for Islamic banks, provided they improve services and focus on real economy, infrastructures and SMEs, and do not invest in credit cards and derivatives," Saleem said. "Conventional banks encourage people to spend more. Islamic banks can put a break on this negative trend," he added.

Pancasila

written by Gerry Octaviano, S.Soc, MBA

Nowadays, not many Indonesian can recall 5 of Indonesia's principle or what we called Pancasila.

I will help you to remember.

1. Ketuhanan Yang Maha Esa (star)

2.Kemanusiaan yang adil dan beradab (banyan tree)

3.Persatuan Indonesia (Chain)

4.Kerakyatan yang di pimpin oleh hikmat kebijaksanaan dalam permusyawaratn/perwakilan (bull head)

5.Keadilan sosial bagi seluruh rakyat Indonesia (paddy and cotton)

InsyaAllah, you are not only remember those principles but you should implement as guideline in your social life besides Qur'an and Sunnah.

Allah Wa'Alam

Put the right person in the right place..

Written by Gerry Octaviano, S.Soc, MBA

Put the right person in the right place..

This is the basic problem in any organization. We can take an example, first in Indonesian National Football team, if you change position Cristian Gonzales ((striker)and Markus (keeper), I am sure 100% that Indonesia can not beat Philipines, 1- 0, like what happened today. Therefore, you should put the right person in the right place.

That is one of the foundation in the organization. Another point is in football if you can not score by yourself, you should pass to your partner since his position has better chance to make a score. In Indonesia, in many public and private organizations, we never pass the ball and oftenly do own goal and many times tackling each other.

This explaination is also problem in Islamic Banking. Hopefully, Bank Indonesia can strengthen Islamic Banks. Their officer should know properly what supposed to be, not what it is... We should change our mind set from capitalism (to maximize shareholders' wealth) to follow shariah principle.

Allah Wa'alam

People will not do worship If there is no heaven and hell,, is that true?

Written By Gerry Octaviano, S.Soc, MBA

People will not do worship If there is no heaven and hell,, is that true?

In fact ,,,, this is true. You can ask yourself, do you usually pray Tahajjud in the midnight when your body is really tired? InsyaAllah, you are one of the people who like to pray tahajud.

Tahajjud is sunnah and it is not your obligation but it is really good deeds if you do. It means if you are not praying tahajud it is ok, you will not enter janah or hell.

This is one of the example that people will not do that thing if that you do not do that thing, you will not enter janah or hell. InsyaAllah, you still follow Quran and Sunnah as your way of life. I am also still have a lot of weaknesses.

As you know, salat is making your body really takes a rest. It has proven in some research, one of them which was conducted by Abu Sangkan and some qualified doctors. All the diseases and other problem either physic or mental problem can be cured by doing the right salat. You can find out more detail about salat khusyuk by visiting Abu Sangkan Salat center in Jakarta. I already proved that Salat can cure any problem.

Allah Wa'alam

Bank Indonesia should educate Islamic Banking officer and investor or indonesia citizen about muamalah or syariah properly,,

Written by Gerry Octaviano, S.Soc, MBA

As long Islamic Banking still using fiat money, we can not say Islamic Banking is Islamic since fiat money or money creation or in the bank we know the term multiple deposit creation that is the root of the evil.

However, in legal maxim we know that we should choose lesser evil or in the other word rather than we go to conventional banks, we should go to Islamic Banks.

Actually, Islamic Bank has the pure Islamic Products (partneship) which are mudharabah and Musharaqah. Before, I come to the issue I would like to explain briefly about mudharabah and musharaqah product.

Basically, mudharabah is the partnership agreement between 2 parties or more which consist of rabbal mal (investor) and mudharib (entrepreneur) and at the beginning of contract they already agreed ratio in sharing profit. But, the loss is burden to rabbal mal (investor) if the loss is not because of mudharib's negligent . The concept in here is sharing profit but loss is burden to investor if loss is not because of mudharib's negligent. The basic concept in shariah is investors can not guarantee their capita, that's why riba is haram since investors guarantee their income, as consequence, they can relax sit on their luxury sofa and wait the interest comes to them by charging fix or fluctuate interest rate is the evident.

In practice, Islamic Banking covers themselveswith the name of mudharabah but actuall they offer interest rate like conventional banks do.

There is the story about an innocent Islamic Bank officer went to Investor's office. At the beginning, this innocent officer was going to explain his bank's mudharabah product but this investor can not really understand and this investor asked about how much interest rate per yer or equivalent ratethat this guy can give to this investor. Then, this officer called his marketing manager and then this manager told him to give fix rate 9.5% p.a. for example. Eventually, this investor agreed.

From this real story we can see that Indonesian people is lack of knowledge about Islamic Product which is the mudharabah and musaharaqah are the solution of the global crisis which was mentioned by US and other westers countries economic experts.

Bank Indonesia and media should support Islamic Banking in educating Indonesia citizen without charge. In order to implement properly Shariah principle in Islamic Banking we should focus on Research and Development (R&D).

Allah Wa' Alam

Malaysia and Indonesia should love each other

Educated our people to love each other

I am so disappointed about relationship between Indonesia and Malaysia became unhealthy. It is because the human nature such as greedy, pride, and behind that there is game that created by politicians and involved other countries.

Why don't forgive each other, all the things in this world belong to Allah SWT and we are just act as trustees. Thus, this fight should not happen.

We should make the big problem becomes smaller and the small problem becomes nothing.

Historically, we were one land (satu rumpun). Please don't proceed this fight, and do not mock each other even small thing.

by gerry octaviano

Short Selling

Short Selling

written by Gerry Octaviano

Have you heard about these two words??
I am sure by typing those words in uncle google you can figure out what short selling is.

I wanna raise the issue about short selling transaction that usually occurs in the secondary market.

from the words itself u can understand the meaning of short selling.

1. It means u only borrow stock from the broker that u will know it will depreciate (decrease the value);
2. then u sell it to other parties and sell it at par value;
   
3. after sometimes the value of the stock is depreciated then u buy from the secondary market;
   
4. lastly, u return the stock to the broker;
5. The aim is to get profit from that, but u have to give a fee to the broker.
   

for example:

• firstly, u investigate the stock that will depreciate (the price decrease) after some days in the stock exchange.
• Now, u borrow that stock from the broker.
• 23 July 2010, Gerry borrows stock A from Kinan (broker) with value of RM 3/ share.
• 23 July 2010, Gerry sells that stock A to Helmi at RM 3/share.
• 24 July 2010, the stock A depreciate (the price decrease) and it becomes RM 2/ share
  
• 24 July 2010, Gerry buys stock A from other parties.
• 24th July 2010, Gerry returns the Stock A to Kinan including the fee.
• Gerry gets profit (RM3 -RM 2= 1, can u imagine the stock can be thousands unit).

As we know, the price of the stock is fluctuated.

According to the Qur'an and the sunnah it is prohibited to sell property that u are not own. In this case you only borrow the stock and sell it.

Another reason, it creates injustice to other people that u know the price of the stock will decrease but u sell to other person.

It does not describe the shariah compliant since it is only buy and sell stock not really for investment. Short investment for long term investment can create inefficiency and many problems.


I will not put the specific hadith and what surat in the contract that related to my papers unless i get request from u. thanx

Allah Wa'alam

PENALTY in Islamic Perspective

written by Gerry Octaviano


Do you think penalty is halal or haram ?
It can be both depends on the way you implement penalty.

Usually, companies already set up the amount of penalty in the beginning of the contract and it is agreed by mutual consent. However, it is prohibited to set up the penalty by bilateral agreement.

What is it supposed to be?
1. It is supposed to be by unilateral (set by creditor) ;thus, can not be included in the contract.
2. It depends on the situations
3. You have to give more time to your debtor
4. If still does not pay, you can impose penalty
5. But, you have to justify the penalty is it for.

for example:

A (seller) sells a car to B (buyer)at deferred payment (4 years installment).
After 4 years B still can not finish it the payment.
A has to respite or give more time to B.
If, B still does not pay, B can impose penalty.
However, B has to justify the amount of penalty.
Since, A does not deserve profit more than they have to get. Hence, the penalty belongs to CHARITY.

Wa Allah A'lam

Economic Global crisis

By Gerry Octaviano, S.Soc

May, 2010

The root of the economic global crisis is subprime mortgage crisis (2005-2008) in the US. The impacts were the collapse of RBS and Northern Rock in UK, collapse of Merryl Lync, Pimco, BOA, HP AIG AND Merryls Lynch and Lehman brothers in US, and all financial institutions around the world got affected due to globalization made them interrelated and created cascading effect to non financial institutions.

It started from the US president Bush from republic party (capitalism) replaced Clinton from democrat party (socialism) in the end of 2000. Bush was emphasis on the free market and deregulation by reducing the interest rate, reduce the credit requirement and enable the low income and no credit history to borrow money to get own house, it called “subprime mortgage”. It is really risky and those shifted the risk to all people by shifting the subprime mortgage to Mortgage Backed Security (MBS), sold to the secondary market and foreign and local investors bought it since it is guaranteed by Fannie Mae and Freddie Mac which are established by US Government. The problem came when the interest increased (in 2005-2006) and the subprime borrowers default and it leaded to increase in house price since low demand and many supply (no liquidation) and it harmed all the investors (local and foreign financial institutions) all around the world until right now since US does not have regulation system to control the subprime mortgage crisis. US’s citizen is the most consumptive and the least saving in the world and it led to high rate in borrowing (same habit like other countries).

At the glance, it seemed the failure of capitalism but it was not since the subprime mortgage was to create distribution of wealth (humanism) and the existence of central bank and Fannie Mae and Freddie Mac also the evidence of the socialism. One of the solution is to implement shari’ah economy system (investment in real sectors , sharing profit and loss) which prohibited interest and create a society of investor and entrepreneurs even Jewish also prohibited impose interest among them and also Christian prohibited to shift your risk to other (interest in bank).

Legal and Beneficial Ownership

1.0 Introduction

All things in this world belong to Allah (swt); we are merely the trustees of His belongings, and shall be accountable for all of our conducts. Qur’an and Hadith explained the kind of properties (mal) that we are allowed and not allowed to possess and use for our necessity, and what kind of person who can and cannot own properties. It is the human nature that never be satisfied for what they have, although it is sufficient. Sometimes humans are blinded with material pursuit (greed) and will do anything regardless of whether it is permissible or not to achieve and fulfill their desire. Among others, it is important to recognize that the pursuit for material wealth and power resulted in people fighting one another for scarce resources; those who own resources or properties are considered superior than others in the society. Therefore, it is important to analyze the issues concerning legal and beneficial ownership as these issues are ubiquitous in today’s lives.

For the sake of the paper, we have identified three main issues in legal and beneficial ownership namely legal and beneficial ownership in trust cases related to waqf, legal and beneficial ownership in lease cases and legal and beneficial ownership in mortgage or charge cases.

2.0 Legal and Beneficial Ownership

Ownership is defined as “a right over a property, which excludes others and enables the owner to make use of the property itself or its usufruct (manfa’h) in the absence of any legal hindrance or to take compensation for its loss[1]”. It means the owners can exploit the properties without legal obstacles with the condition that the owners are not minor, lunatic, prodigal (sufha) and bankrupt. In case that the owners belong to one of the category mentioned above, a guardian or an agent can be appointed to manage and protect the ownership of the properties on behalf of a minor, insane or a prodigal person. Ownership can be acquired through contract, inheritance and the rule of first possession of natural resources.[2] It can be further divided into three categories which are ownership of assets (Milk ul’Ain), ownership of debt (Milk ud Dayn) and ownership of usufruct (Milk ul Manf’at)[3]. Milk ul’ Ain is when the owner acquired both the rights and manfa’h from the possession of a property. The ownership is definite and not related to time while Milk ul Manf’at is related to time, meaning that usufruct of any asset against rental can be taken or given for a specific period of time. This could also be referred to as beneficial ownership.

It is important to recognize the differences between legal and beneficial ownership as the type of ownership determines the liability, right, risk, and reward for possessing the properties. Legal ownership can be categorized as a complete or incomplete ownership whereas beneficial ownership can be classified as incomplete ownership. In practice, there are two terms of incomplete ownership such as follows:

● Legal control is an ownership of legal title only. A person with legal control can buy and sell an asset but will never own or enjoy the benefits of ownership (such as income or usage).

● Beneficial ownership on the other hand, allows a person to enjoy the benefits of ownership (including usage, income, profits etc.) even though the legal title is in another person’s name.[4] Beneficial ownership arises when an asset is owned by one person (the "legal owner") who has a duty to use it on behalf of another; one person holds assets as trustee for another.[5]

For example, when Gerry buys a new car and he has the choice of either to use his name or uses another person’s name as the legal owner. In addition, he can lease that car or use it for himself. He has the choice of either complete ownership (to own the property and its usufruct) or incomplete ownership (to own the property). However, sometimes they do not use their name as a legal owner in order to avoid tax and other negative purposes or other negative thing will happen when the beneficial owner misuses his or her right.

2.1 Legal and beneficial ownership in trust cases related to waqf

To illustrate, legal and beneficial ownerships can best be comprehended in trust cases. Trust is a fiduciary relationship in which one person, known as a "trustee", holds the title to property or assets for the benefit of another person, the beneficiary.[6] Anglo-American law recognizes the division of ownership between the power to manage property and the privilege of receiving the benefits from it, known as the trust.[7] One of the most important issues in trust is also related to Waqf. The concept of Waqf is rooted to the Quranic injunctions, which deal with charity. The spirit of charity in the Quran suggests:

"And in their wealth the beggar and outcaste had due share"(26:19)

"Ye shall never attain to goodness till ye give alms of that which ye love, and whatever ye give, of a truth God Knoweth" (3:86).[8]

Waqf means freezing the capital or property, and not disposing it by selling, giving or inheriting, or in any other way, so that any income or earnings are to be disposed of in the manner dictated by the person who initiated the waqf, for charitable purposes and the like.[9] Although the foundation of waqf is laid down in the Islamic teaching, there are still some gray areas especially when it comes to the implementation and enforcement of the waqf itself.

The Concept of trust can be used in waqf, for example, Camelia and Fairus Corporation give a land as a waqf to IIUM, and in this case the trustee is IIUM (beneficial ownership). IIUM is given the trust to exploit this waqf land and Shariah court can appoint a manager (mutawalli or nazir) to manage and administer that waqf land in this case is can be one of the IIUM’’s officer. The issue in here is IIUM does not has right to sell, mortgage, or change the ownership of waqf property without the permission of the shariah court. In addition, IIUM cannot borrow money for spending on this land except with court permission. It is because IIUM is not the legal owner of that land. The main basic of the waqf is shifting from private property to public property, therefore, IIUM can develop the waqf land lawfully (in line with shariah) such as to construct a building IIUM makes a contract of Istisna’ with bank and bank make a second Istisna’ with developer. The issue is IIUM cannot lease in long term to other private institution to develop the waqf land (such as Hukr which already abolished in several countries) which will convert to private property since it will use for commercial purpose not for public interest anymore.[10]

Nowadays, all waqf land must be registered even though the ownership of waqf property is versted in Allah S.W.T. Currently, in August, 2009, there was a current legal issues on waqf in Selangor, Malaysia, a waqf land was claimed by Mr.B as his land. The story was Mr.X (original legal owner) a few years ago gave his land as a waqf to Majlis Agama Islam Selangor (MAIS) that to be used for Muslim burial ground. However, the land has not been gazetted as waqf by the Land Office pursuant to section 62 of the NLC (National Land Code) (civil law) which is higher than shariah law (MAIS). In addition, the cause of this problem is that there is no similar provision of section 13(e) of the Wakaf (State of Selangor Enactment) 1999 in other states, except Malacca there is ‘A wakaf is invalid if…(e) it is inconsistent with Hukum Syarak or any written. The issue arises when the son of Mr.X (original legal ownership) sold the land to Mr.B and it has been notarized according to civil law without informing MAIS, as a result, MAIS dispute with Mr.B in the Shah Alam High Court. Legally, the civil law is higher compared to shariah law (MAIS) and the case happened due to negligence of the MAIS’s officer not to proceed the process quickly. Eventually, Mr.B won the case since civil law is higher than shariah law in Malaysia. Therefore, there is a need for an efficient administration and clear law governing waqf and its validity. Without such legislation, it is unlikely that waqf will achieve its mission of alleviating poverty and protecting the general interest of the society as it was intended to be.[11]

2.2 Legal and beneficial ownership in lease cases

Another issue concerning the legal and beneficial ownership can best be examined in lease cases. Lease is a written agreement in which a property owner allows a tenant to use the property for a specified period of time, in return of a monthly payment (rent).[12] Ijarah (lease) derived from Al-’Ajr which means compensation, substitute, consideration, return or counter value (Al’Iwad). As a contract, it refers to hiring or renting of any asset/commodity to benefit from its usufruct. It also encompasses the hiring of labour and any contract of work against a return (wage).[13] In addition, the definition of Al-Ijarah is an agreement (aqad) of transferring usufruct (intangible manfaah) of goods and services through compensation without being followed by the transfer of legal ownership (milkiyyah) of the goods itself.[14]

The issue in Ijarah (lease) rises in the case of sublease where the lessee leases the leased asset to another person without the lessor’s permission. This transaction is not permissible since legal ownership is not transferred through leasing, but only the beneficial ownership (transfer of usufruct). Another concept in the modern leasing is “head leasing”, in which a lessee sub-leases the property to a number of sub-lessees, and then invites others to participate in scheme by sharing the rental revenue received from the sub-lessees. In order to receive the rental revenues, the lessee will charge a specific amount of fee from his “partners”. At a first glance, the arrangement looks genuine as if there is nothing wrong with the transaction. However, if we scrutinized it further, we still found that this transaction is actually unlawful. He has passed on the usufruct to his sub-lessees by sub-leasing the property to them. Now, he does not own anything, neither the corpus of the property nor its usufruct. What he has is the right to receive rent only. Therefore, he assigns a part of this right to other persons. It is already explained in detail that the right cannot be traded in, because it amounts to selling a receivable debt at a discount is one form of riba, thus prohibited by the Holy Qur’an and Sunnah. Therefore, this concept is not acceptable.[15] Another issue is that according to the Hanafis, usufruct is non-heritable, but in today’s urbanized society where land is scarce, scholars say that tenancy right can be inherited otherwise it will create hardship.

The last issue in ijarah is employment specifically in employees’ contracts where they prohibit employees from working for other companies while having their tenure in the company. However, the economic crisis and high inflation might force people to find additional income in the form of part-time job to fulfill their basic needs. Thus, there will be issues arising regarding the legal and beneficial ownership because employees are by default legally binding to the company that they are hired but these employees enjoy the benefits offered by both companies that they are working which are against the agreements that they have signed with one of the company earlier.

2.3 Legal and beneficial ownership in mortgage or charge (Al-Rahn)

Finally, the legal and beneficial ownership can also be looked from the perspective of mortgage cases. Mortgage (Al-rahn) literally means to pledge, pawn or retain whereas in terminology, it refers to a contract of pledging or depositing a property as a security for a debt so that the debt may be taken from the property should the debtor failed to settle the debt.[16] The Quran states: “If you are on journey, and cannot find a scribe, a pledge with possession (may serve the purpose). And if one of you deposits a thing on trust with another, let the trustee (faithfully) discharges his trust, and let him fear his Lord” (2.283). In Addition, the Quran also states that Rasulullah (SAW) bought some food from a Jew and mortgage (give collateral) a hauberk (HR Bukari no.1926, kitab al-bayu, and Muslim). [17]

It is clear that the main issue in sale for deferred payment (bay’ bi-thaman al-aajil) when the customer is default, and the bank cannot increase the price. The question is whether the bank is entitled to take back the house from the customer or not. The problem here is that the legal ownership of the house has already been transferred to the borrower or customer, even in practice, the customer does not need to be the registered owner of the property to be able to sell it to the bank under BBA. However, the bank will do legal action to possess the house since the bank requires a customer to execute registerable charge that acts similar to a pledge registered under the virtue of section 241 of the National Land Code, and in case the customer defaulted, bank has the right to sell it to another customer regardless of whether the mortgagor is alive or dead, and bank is entitled to receive the outstanding amount and should return the balance to the customer. The main issue in here is there is no clear cut there is no specification of the value of the pledged property stated under the principles of al-rahn. [18]

Another issue is whether the mortgagee entitled to benefit from the pledge. For example, if the pledge is a house, can the mortgagee reside in it? This question needs to be delineated in detail. If the mortgagee (lender) seeks permission from the mortgagor (borrower) to dwell in the house, and even if the mortgagor gives this permission (in the case of a pledge against a debt), then the mortgagee is not entitled to dwell in the house. This is because using the house in this case would be a benefit resulting from a loan. The Prophet (PbAbuh) stated, "Every loan resulting in a benefit is usury;" thus it is illegal. If the pledge is a house, and the mortgagee hires it from the mortgagor for an adequate rent without favouritism, the rent is correct and legal. It would be different from the mortgage contract and would be considered a rent contract. This is the opinion of Imam Ahmad. On the expiry of the rent the mortgage goes back to its origin, and the mortgagor is not entitled to dispose of the house by way of selling, renting or by another mortgage except with the permission of the mortgagee.[19]

3.0 Conclusions

The conclusions are, as follow:

1. In waqf case, the trustee (mutawalli) is the manager and not, an owner- either legal or beneficial owner, cannot act as a legal owner; thus, everything should get permission from shariah court law, can develop the waqf property in line of public interest and principle of shariah. Moreover, waqf land must be registered in shariah law and civil law as soon as possible after the waqf property is given.

2. In lease case, it is only transfer the beneficial ownership from lessor to lessee. Therefore, lessee does not has right to sublease to other parties without lessor permission.

3. In mortgage or charge cases, in BBA such as for financing house the legal of ownership belongs to customer or borrower not the bank even developer. However, the bank requires a customer to execute registrable charge that acts similar as a pledge and if customer is default bank has right to sell it to another customer regardless whether the mortgagor was alive or dead and bank is entitled to receive the outstanding amount and should return the balance to the customer. Mortgagee (lender) cannot get benefit from the mortgage property if the borrower is not default even get permission from mortgagor (borrower).

4.0 Recommendations

There are four recommendations, as follow:

1. Government should make the clear laws (Shariah laws and civil laws) in waqf rules and similar in all its states to avoid uncertainty and to protect the waqf land for public interest. Government should train its officers to work fast and reduce the hierarchy in government to make the process fast and to avoid the current case in Selangor, Malaysia repeat.

2. There should be strict rules (shariah law and civil law) in leasing to avoid the lessee abuse his or her right to sublease the leased asset to other party without lessor’s permission to protect the lessor’s right.

3. There should be specification of the value of the pledged property stated under the principles of al-rahn to create justice and certainty.

4. Muslim jurists and Muslim Government Entity such as MAIS (Majlis Agama Islam Selangor) should give the knowledge to people about muamalat not just about ibadah since many people do not know about what they should do in business according to principle of Shariah and Government should support and facilitate them.

---

[1] Muhammad Yusuf Saleem, An Introduction to the Theoritical Faundation of Islamic Transactions, p.59.Selangor: Ilmiah Publishers. 2009.

[2] Ibid

[3] Muhamad Ayub, Understanding Islamic Finance, p.102. Southern Gate: John Wiley & Sons Ltd. 2007.

[4] Melvin, Tony, http://www.flyingsolo.com.au/p214015644, Beneficial ownership: Saving through the other deductible rule.2006.

[5] http://moneyterms.co.uk/beneficial-ownership/.

[6] http://dictionary.reference.com/browse/trust

[7] http://www.britannica.com/EBchecked/topic/479032/property-law/28527/Other-forms-of-divided-ownership-trusts-mortgages-and-security-interests#ref=ref927937

[8] R.Upadhyay, http://www.southasiaanalysis.org/%5Cpapers12%5Cpaper1136.html.Waqf (Charitable Islamic trust) -Under sustained controversy in India?.2004.

[9] Abd al-Kareem al-Khudayr, http://www.islam-qa.com/en/ref/10646. The difference between Waqf and Endowment/trust fund .2010.

[10] Muhammad Yusuf Saleem. A Handbook On Fiqh Mu’amalah in Banking and Finance. P.45.Gombak: International Islamic University Malaysia.2010.

[11] Nuarrual Hilal Dahlan. Current Legal Issues on Waqf in Malaysia, http://nuarrualhilal.wordpress.com/2009/08/18/current-legal-issues-on-waqf-in-malaysia/.August 2009.

[12] http://www.investorwords.com/2749/lease.html

[13] Ayub.Op.Cit. p.279.

[14] Muhammad Syafii Antonio, Bank Syariah dari Teori ke Praktik, edition 1. pg.117.Jakarta: Gema Insani.2007

[15] Maulana Muhammad Taqi Usmani. An Introduction to Islamic Finance.New Delhi: Idara Isha’at-e-Diniyat (P) ltd.2005.

[16] Ibrahim et.al, The Objectives of Al-rahn and Their Achievement in Charge/Mortgage in Islamic home financing: an Analysis. Gombak: International Islamic University of Malaysia.

[17] Muhammad Syafii Antonio, Op.Cit, 128-131.

[18] Ibrahim, et.al.

[19] http://www.islamicmortgages.co.uk/index.php?id=296

The masters episode 2

Gesa was really tired after the meeting that took almost 5 hours and then he was going back to his hostel but suddenly that saudi arabian called him and asked cahaya's phone number but he even did not ask gesa's number at all.

Gesa was really really freaking out about that roti canai guy cos he always says everything is ok and exagerrating tell story about him self to everyone. That curry guy said that his age around 24 but all of them are not stupid and blind, Gessa could not stand with that guy anymore and he ran away from him and suddenly met some freakier guys. Gesa met a student who asked something to receptionist,, that girl says, " Could I get the braw...sah,,? the receptionist says, "I beg you parden, mam? that girl says , Braw....sahhh,, the receptionist says, "Oh, you meant brownies? the cakes? you can get in the canteen,, That girl says, "nop,, ok letah..." receptionist says, What did you say , I am latah,, do you wanna fight with me ha?? the girl says, no I say letah,,, Amazingly, the receptionist jump to the top table and challenged that girl to fight with her but gesa tried to hold that receptionist and explained to her that she means about braw,, sah,, is brochure and letah mean later (coz the receptionist is chinese and doesn't know that girl's accent). Eventually, the receptionist gave the brochure to that girl. The girl thanked to Gesa and she introduced her name. Her name is Ozi,, she was born in canada but did her undergraduate in Perth.

Gesa said to himself (what happened to me? what a freak day). His nightmare has not finished yet,, he met someone that was not stop typing his handphone. His voice really soft and the way he walks like a hopeless guy. He came to gesa and asked where gesa lives, gesa says, ''I live in IKUC's Master hostel", that guy says, " my name is Ali, I live there as well, could we go back together?, Gesa says, "my name is Gesa, definately Ali, nice to meet you''. On the way to hostel they did not talk anything but Gesa tried to open the conversation but Ali was really busy typing his gadget and he ignored what Gesa says. Gesa just can talk to himself and dreaming during the trip to hostel.

Continue.....

Gerry octaviano

The Masters

the next episode is coming soon,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Release on 7th May 2010

Banking Practices in Prophet Muhammad PbAbuh (peace and blessing of Allah be upon him) Era

I am so interested in learning Islamic Banking and Finance. I started by reading some Indonesian's book. Until right now, I am still like a baby in learning this knowledge. Now, I would like to share to you about the history of Islamic Banking.

All of you know the 3 functions of Bank:
1. Accepting deposits
2. Giving Finance
3. Giving Service

The question is whether Bank is new concept in Islam or already exist since Prophet Muhammad PbAbuh????

As we know, Prophet Muhammad PbAbuh well known as al-Amin which means reliable in Makkah citizens for saving their assets (deposits). As a consequence, before he moved (Hijrah) to Madinah, he asked Ali Bin Abu Thalib r.a. to return all of Makkah citizens' assets (deposits) without charging anything. In this concept, the party who are entrusted the assets (depositos) could not use the assets (deposits).

A Prophet Muhammad PbAbuh's best friend (sahabat), Zubair bin al-Awwam r.a., chose did not accept the deposits. He prefer accepted that as a LOAN. Zubair 's action appeared different implication:
1. By taking the deposits (money) as a loan, hence he has right to use it.
2. Since its form is a loan, he obliged to return it intact (not more or less).

In another history, Ibnu Abbas r.a. ever send money to Kufah and Abdullah bin Zubair r.a. sent money from Makkah to Mis'ab bin Zubair's little brother who lived in Irak.

Using check also already well known simultenously with increasing trades between Syam Country and Yemen. In addition, in his reign, Khalifah Umar bin Khattab r.a. used check for paying allowance to them who reserved the right. Besides that, he used the check to take wheat in Baitul Mal that was imported from Egypt. Moreiver, giving finance based on sharing profit such as mudharabah, muzara'ah, musaqah already implemented in the Muhajirin and The Anshar.

It is clear that Banking function already implemented in Prophet Muhammad PbAbuh, eventhough they did not implement all of Banking function. What they did, as follow:
1. Accepting deposits
2. Sending money
3. Giving Finance

In some term in modern Banking are derived from Fiqh, such as credit (giving finance) was derived from qard (giving finance based on trust). Check (a usual tool for transaction in market) for was derived from suq (market).



reference:
Karim, Adiwarman. 2009. Bank Islam Analisis Fiqih dan Keuangan. Jakarta: PT.Raja Grafindo Persada.
by Gerry Octaviano