Islamic financing: a study on the perception of religious scholars towards Islamic private debt securities (IPDS) in Malaysia

Abstract

This research elaborates the issues pertinent to bay al-inah and bay al-dayn. The subject of the research is the perception of Malaysian/uqaha` towards the application of both instruments in the issuance and trading of Islamic private debt securities (IPDS) or Islamic bonds in Malaysia. The contentidh between Malaysian jurists and the Middle-Easterns regarding these contracts has some effect to the ability of Malaysian capital market to attract foreign Islamic funds especially from the Gulf countries. While there are claims that Malaysian jurists support the practice, there is no empirical evidence that support such claims. This research attempts to prove that such argument has some bases. A survey was conducted on various categories of fuqaha` consisting individuals having knowledge in fiqh al-muamalat. Amongst the findings, it shows that generally, Malaysian/uqaha` support the use of bay al-lnah in the initial issuance of IPDS. The similar view is also evidenced in bay al-dayn - although not as obvious as it is in bay al-lnah. This might support the claims that the Malaysians are of the same view of supporting the use of bay al-lnah and bay al-dayn in IPDS trading in the country. This does not mean however that the application of both contracts in the Islamic financial system in the country should last forever, since the critics against both instruments are quite harsh, especially from the MiddleEastern jurists. Therefore, alternatives should be presented for Islamic debt securitization to furthermore enhance Islamic debt trading in Malaysia.