Prize-giving to the premium Savings Certificate holders: a Shari’ah compliance review on the Bank Simpanan Nasional (National Savings Bank) in Malaysia

Considering the popularity of the premium savings certificate (PSC) of the National Savings Bank of Malaysia (Bank Simpanan Nasional (BSN)) the paper aims to justify the Shari’ah compliancy of this product by analyzing its underlying contracts and to propose a Shari’ah compliant savings certificate,...

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Main Authors:	Md. Sawari, Mohd. Fuad, Hassan, Razi, Abdullah, Md. Faruk
Format:	Article
Language:	English
Published:	Emerald Group Publishing 2011
Subjects:	HG1501 Banking
Online Access:	http://irep.iium.edu.my/8627/ http://irep.iium.edu.my/8627/ http://irep.iium.edu.my/8627/ http://irep.iium.edu.my/8627/1/Prize-giving_to.pdf

id	iium-8627
recordtype	eprints
spelling	iium-86272011-12-22T03:53:49Z http://irep.iium.edu.my/8627/ Prize-giving to the premium Savings Certificate holders: a Shari’ah compliance review on the Bank Simpanan Nasional (National Savings Bank) in Malaysia Md. Sawari, Mohd. Fuad Hassan, Razi Abdullah, Md. Faruk HG1501 Banking Considering the popularity of the premium savings certificate (PSC) of the National Savings Bank of Malaysia (Bank Simpanan Nasional (BSN)) the paper aims to justify the Shari’ah compliancy of this product by analyzing its underlying contracts and to propose a Shari’ah compliant savings certificate, if the current practice is invalid in the Shari’ah. Inductive methodology is first used to obtain a basic understanding of this product and the characteristics of Shari’ah approved contracts as well as the views of the jurists. Interviewing method is also used to acquire first-hand information when the inductive method is not sufficient. Afterwards, an analytical approach is adopted to justify the validity of this contract with the Shari’ah principles. Finally, an innovative methodology is used to propose a Shari’ah compliant savings certificate.The paper argues that the underlying contract used in PSC violates the conditions of wadi’ah contract, as in wadi’ah, the bank is not allowed to spend the money for investment, but in practice, BSN uses the money for investment. Therefore, the underlying contract in PSC turns into qard (loan) contract. Since the scholars unanimously declare that giving any kind of benefit like prizes to the creditor is riba, then PSC is considered as invalid according to the Shari’ah. On the other hand, although PSC might seem like gambling, it is different from gambling as the prizes given to PSC are from a third party. The paper proposes implementing mudarabah contract in PSC where the bank is allowed to invest according to its interest and the depositors share the profit and loss but the huge fluctuation of profit and loss could be shrunk by a special fund method. Emerald Group Publishing 2011 Article PeerReviewed application/pdf en http://irep.iium.edu.my/8627/1/Prize-giving_to.pdf Md. Sawari, Mohd. Fuad and Hassan, Razi and Abdullah, Md. Faruk (2011) Prize-giving to the premium Savings Certificate holders: a Shari’ah compliance review on the Bank Simpanan Nasional (National Savings Bank) in Malaysia. International Journal of Islamic and Middle Eastern Finance and Management, 4 (3). pp. 259-270. ISSN 1753-8394 http://www.emeraldinsight.com 10.1108/17538391111166485
repository_type	Digital Repository
institution_category	Local University
institution	International Islamic University Malaysia
building	IIUM Repository
collection	Online Access
language	English
topic	HG1501 Banking
spellingShingle	HG1501 Banking Md. Sawari, Mohd. Fuad Hassan, Razi Abdullah, Md. Faruk Prize-giving to the premium Savings Certificate holders: a Shari’ah compliance review on the Bank Simpanan Nasional (National Savings Bank) in Malaysia
description	Considering the popularity of the premium savings certificate (PSC) of the National Savings Bank of Malaysia (Bank Simpanan Nasional (BSN)) the paper aims to justify the Shari’ah compliancy of this product by analyzing its underlying contracts and to propose a Shari’ah compliant savings certificate, if the current practice is invalid in the Shari’ah. Inductive methodology is first used to obtain a basic understanding of this product and the characteristics of Shari’ah approved contracts as well as the views of the jurists. Interviewing method is also used to acquire first-hand information when the inductive method is not sufficient. Afterwards, an analytical approach is adopted to justify the validity of this contract with the Shari’ah principles. Finally, an innovative methodology is used to propose a Shari’ah compliant savings certificate.The paper argues that the underlying contract used in PSC violates the conditions of wadi’ah contract, as in wadi’ah, the bank is not allowed to spend the money for investment, but in practice, BSN uses the money for investment. Therefore, the underlying contract in PSC turns into qard (loan) contract. Since the scholars unanimously declare that giving any kind of benefit like prizes to the creditor is riba, then PSC is considered as invalid according to the Shari’ah. On the other hand, although PSC might seem like gambling, it is different from gambling as the prizes given to PSC are from a third party. The paper proposes implementing mudarabah contract in PSC where the bank is allowed to invest according to its interest and the depositors share the profit and loss but the huge fluctuation of profit and loss could be shrunk by a special fund method.
format	Article
author	Md. Sawari, Mohd. Fuad Hassan, Razi Abdullah, Md. Faruk
author_facet	Md. Sawari, Mohd. Fuad Hassan, Razi Abdullah, Md. Faruk
author_sort	Md. Sawari, Mohd. Fuad
title	Prize-giving to the premium Savings Certificate holders: a Shari’ah compliance review on the Bank Simpanan Nasional (National Savings Bank) in Malaysia
title_short	Prize-giving to the premium Savings Certificate holders: a Shari’ah compliance review on the Bank Simpanan Nasional (National Savings Bank) in Malaysia
title_full	Prize-giving to the premium Savings Certificate holders: a Shari’ah compliance review on the Bank Simpanan Nasional (National Savings Bank) in Malaysia
title_fullStr	Prize-giving to the premium Savings Certificate holders: a Shari’ah compliance review on the Bank Simpanan Nasional (National Savings Bank) in Malaysia
title_full_unstemmed	Prize-giving to the premium Savings Certificate holders: a Shari’ah compliance review on the Bank Simpanan Nasional (National Savings Bank) in Malaysia
title_sort	prize-giving to the premium savings certificate holders: a shari’ah compliance review on the bank simpanan nasional (national savings bank) in malaysia
publisher	Emerald Group Publishing
publishDate	2011
url	http://irep.iium.edu.my/8627/ http://irep.iium.edu.my/8627/ http://irep.iium.edu.my/8627/ http://irep.iium.edu.my/8627/1/Prize-giving_to.pdf
first_indexed	2023-09-18T20:18:24Z
last_indexed	2023-09-18T20:18:24Z
_version_	1777407942481412096

Prize-giving to the premium Savings Certificate holders: a Shari’ah compliance review on the Bank Simpanan Nasional (National Savings Bank) in Malaysia

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