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Islamic Financial Institutions: Between Values

Inculcation and Profit Maximization
By : Ezry Fahmy

1.0 Capitalism Worldview

Leading an organization relates directly or indirectly with the worldview that drives
the organization. Capitalism recognizes the need to achieve efficiency, as for the
'unlimited' demand that we get, we will always have 'limited' resources. That, we can say
'noble'. However, need to be understood that behind the ‘noble’ objectives of this
worldview, they puts profit maximization as main objective above all cost1. A sustained
growth due to the profitability gained by the organization however reflects absence and
proves how problematic 'classical' capitalism worldview is hence you have to deal with
such issues like exploitation of labor, disregard for society, deterioration of the
environment and so forth.

Scientific and technological revolution had also played a big role in shaping industrial
revolution. Protestant ethics also does help. It is being impregnated with enlightenment
values that are humanist and secular in nature. Moreover, idea of Darwinism spillover
effect unto economics thinking added the chaotic elements into the equation. This issue
being highlighted by Prof. Syed Muhammad Naquib Al-Attas in many of his writings,
whereby Western civilization is like broken mosaic 2! So we must understand how these
many pieces come and made up into a big picture. Thus we must go back to the
fundamental discussion of how we should perceive the correct worldview.

If we wanted to conclude by saying sustainable growth and profitability of the

organization is a valid measurement to value the effectiveness on the organizations
inculcating the values, I doubt it. Since the values inculcated by the organizations should

1
Shutt. H. (2005). The Decline of Capitalism: Can a Self Regulated Profits System Survive?. Malaysia: SIRD.
2
Syed Muhammad Naquib Al-Attas. (1995). Prolegomena to the Metaphysics of Islam: An Exposition of the
Fundamental Elements of the Worldview of Islam. Kuala Lumpur: ISTAC.
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be seen from various aspects. Western economists like EF Schumacher, Theodre

Roszack, Paul Hawken and so forth have already elucidating many good points about it.
But the fact is Western big organizations with big amount of profit still having problem
to adjust with the main problem they faced- which is inculcating correct values to their
organizations before they end up with failure of ethic-management despite the fact of
having good system of management. Some may take this issue as a serious problem while
some others may still views growth of the organizations as their main objective although
have shed people's blood and undermining the environment for mere profit making.

2.0 Important of ethics

Western economics have teaches the important of ethics through ecological

economics. Due to this some organizations which practices 'modern' capitalism includes
other 'costs' into consideration, thus look at the socio-economic and environmental
impact of its operation. But if you go deeper to the root cause, one will find the problem
of worldview that can never be solve merely by introducing ecological economics. It
needs the touch of faith-based system which we could firmly believe as a comprehensive
system that includes value inculcation. A faith-based system that we believes able to
shows the way of simplicity, active and real redistribution of wealth, with that the needs
of society can be satisfied.

The question that we should not look back is whether in the context of IFIs, values
inculcation in any of IFIs should be taken seriously since so called Islamic organizations
shall not fall into this worldly trap of making money out of people's livelihood.
Effectiveness of values inculcation on organizations should be measure from many
aspects whereby not only emphasizing more on cost effectiveness, efficiency but rather
how often do people consider things like equity, accessibility, availability, quality and so
forth.

Ethical issues in IFIs should be viewed and considered as ‘cost’, or at least it is in the
equation, and it yields positive results. Most people think that jump into the field of
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finance or the likes just the matter of getting a hold of a job in the IFIs and make money.
Are we go to universities for such objective! Then what about the importance of ethics
and the fiqh muamalah? Of this catastrophic we face now, IFIs responsible to have
illuminated Islamic worldview to be implemented in the fundamental of business
operations.

3.0 Profit maximization in Islam

Profit maximization indeed recognized in Islam, however it is not the ultimate

objective of how Islamic organizations should be operates. Interesting to note here, Tan
Sri Muhammad Ali Hashim's idea on ‘Jihad Business’, CEO of Johor Corporation with
his idea reflects an interesting idea of how Islamic organizations should be operated. The
idea of jihad in doing business is such a unique idea and reflects that religion should,
ideally, lower the standards of the believer, that they should be satisfied with less,
differing the idea on how the Western view economics with the worldview of ‘unlimited
wants’ that driven the market with the idea of profit maximization3.

Ethics, is a way a validating actions. IFIs are being understood to be govern by

Shariah, where actions are categorized into valid, invalid, disliked, recommended, or
indifferent. Thus without understand and have full knowledge of religion boundaries
(Shariah framework), IFIs can’t easily validate some pretty sick stuff that will later on
jeopardize their image as Islamic organization. Example is when validating such products
or services that lead to the economic destruction in the name of market 'justice' and
efficiency; this is not how the spirits of IFIs should look like.

Value inculcation in IFIs shall be given extra attention from those in leadership
positions in IFIs to start to affect the type of change needed to prevent dysfunction in the
organization as laid out by Patrick Lencioni which he sees from the matters of trust,

3 “Jihad Biisnes” Satu Pendekatan Strategik Ke Arah Pemerkasaan Ekonomi Ummah, Kongres Ekonomi Iislam Ke
Tiga (Ke-3)
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commitment, conflicts, accountability and results-driven4. Effective value inculcation in

IFIs can be seen from the products and services that being offer to the society as a whole.
This is where the Maqasid Shariah plays its role in their functions.

4.0 Maqasid al-Shariah in IFIs

The prime objectives of Maqasid al-Shariah is centralized on the objective of

accomplishing the development of both the spiritual and socio-economical well-being of
Muslims. Adl or Justice is another very important principle and objective of the Shariah
and its purpose is to create and maintain equilibrium within a society. “The goal of
Shariah is the good (maslahah) of human being as vicegerent in the society he lives in,
accountable to Allah who made him in charge for establishing justice and fairness,
ensuring intellectual and social wellbeing and psychological contentment for every
member of the ummah.”5.

The fulfillment of justice can bring social and moral uplift in the society in which
there is no crime, life security, honors that could bring peace in the society. Thus IFIs
should play its role by serving social objective, not only an individual objective. The
noble vision to promote social welfare of the society is in need to develop a welfare
economics oriented paradigm, and he also believes that the social justice and ethical
norms can be exercised.

Despite that fact, IFIs are equally expected to play a leading role in promoting social-
welfare. Their opinion are supported by the majority of the Muslim economists who posit
that Islamic banking is much more than offering Shari`ah compliant products. It is a
system which aims at making a positive contribution to the fulfillment of the socio-
economic objectives of the community at large6.

4 Lencioni, P. M. (2007). The Five Dysfunctions of a Team: A Leadership Fable. Singapore; John Wiley and Sons
(Asia) Pte Ltd.
5 Shidiqi, Nejatullah (2006), Islamic Banking and Finance in Theory and Practice: A Survey of State of The Art,
Journal of Islamic Economic Studies, Vol.13 No. 2, p. 6.
6 Asyraf Wajdi, and Nurdianawati Irwani Abdullah. (2006). The Ideal Of Islamic Banking: Chasing A Mirage?
Retrieved January 16, 2009, from www.asyrafwajdi.com/download.php?f=0013(downloaded-fromasyrafwajdi.
com).pdf
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From the discussion above we must understand that the value inculcation may be
cultivated through top-down approach, or/and with grassroots approach. Approaches that
encompass 2-level of bottom-up development which is in terms of individuals and the
organizations themselves.

The individual aspect relates to something that within human’s spiritual domain;
development of aql (reasons), qalb, nafs. This will help to determine one’s attributes;
mazmumah, mahmudah. These feeling of inward relation are between individuals with
God via faith and piety and the outward relation with mankind by good attributes.
Cooperation shown merely to support such fardhu kifayah systems form a sustainable
relationship as mentioned in the Quran; ‘wa Hablum Minanas wa Hablum Minallah’.
These reflect the senses of belongings that will never be found in any other worldview
other than faith-based system7.

In a small scale of IFIs, it is something that potential and manageable to be

implemented and surely something will that later on result an effective management.
Development of human inner sphere is considered to be more important than profit
maximization. We believe that Islamic development afresh within human inner-self
Islamic development paradigm can help the individuals to survive side by side with
existing conventional development system. Moreover, the system able to provide
comprehensive Islamic development model which elastic enough to expand to state level
wherever possible. This is what we believe as the power of grassroots approach if the IFIs
successfully implementing it.

7
Muhammad Suykri Salleh and Choudhury, M.A. (1996), 'Grassroots Approach to Sus- tainable Development',
Humanomics, Vol. 12, No. 3.
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