Inconvenient Truths: Syariah-Compliant Insurance and Investments

It is a tough world for a Muslim living in a mock Muslim country called Malaysia, where the lines of Halal and Haram is often blurred and the government is incompetent enough (or doesn’t care enough) to do what needs to be done.

Lately I have been trying to look for a place where I can set aside some money on a monthly basis for future use ie my kid’s (or kids’) future school fees, house renovation, inflation etc, so I started looking around, asking around and did some research. It was shocking to find a few things that we took for granted as Muslims, especially on Islamic finance here in Malaysia. Of course, there are not many ways around a house and car loan, most of us even me are stuck with conventional loans that definitely are not Syariah-compliant. (actually I’m trying to convert my house loan to Syariah-based but I’m tied to a 5 year contract with the bank, therefore I have to wait another 4 years before I can switch) But the subject of matter for me this past week has been insurance and investment.

The first shocking truth was that ASB is not Syariah-compliant. Although exclusively for Bumiputera who 99% of the time would be a Muslim, the scheme does not meet Syariah standards because of these investments:

1) 37.3% in conventional banking (Maybank) which allows riba’

2) 1.11% in Commerce Asset Holdings Berhad (Conventional)

3) 1.07% in British American Tobacco Berhad

4) 0.89% in Malaysian National Reinsurance Berhad (Conventional Insurance)

Explanations and arguments can be found in these links, including on riba’(interest) and gharar(uncertainty) elements of ASB: here, here, here, and here.

Point no 4) in the above paragraph lead us to the second inconvenient truth: Life insurances are already fatwa-ed as Haram by a majority of ulama’. This became a hot topic in my mailing lists with people bombarding me with questions and disagreements involving life insurance, medical insurance, and Takaful. I have to point out here that there is a clear line between modern insurance with Islamic insurance in the form of Takaful, both are not one and the same although they have the same functions.

Lastly, even for a Syariah-compliant trust fund ie Public Mutual and gang, they are monitored by Islamic Banking and Finance Institute Malaysia who in turn only monitor portfolios, investment methods, counters of investments, calculations and everything else related to the handling of the funds. Nothing is being done to monitor the system itself for example how the agents are being paid commissions a-la Multi-Level Marketing which in essence is decreed Haram by Islamic standards. Therefore by entering one of these Syariah-compliant funds, we are only guaranteed clean profits in the sense of where, how and on what our money is being invested on. There is no guarantee that the system itself is 100% Syariah-compliant, a classic “The-end-doesn’t-justify-the-means” situation.

Bear in mind that I am not an expert in Islamic laws and what I’m trying to do is to look for the best way to invest my money in line with Syariah. It is not easy dealing with these inconvenient truths, moreover when I have had my ASB account for the past 10 years (though I never have more than RM1000 in there except some cash my mother tried to hide from my father XD). It is hard to learn and unlearn these things I trust and believed in for the better part of my life. Some harsher responses that I have received in my so called ‘conquest’ have been along this line: “If you don’t agree with it, then don’t bother to bother us with it”; which is fine, I guess, considering that I have done my part in trying to at least create an awareness among my peers. The way I see things, Halal is Halal and Haram is Haram no matter how we try to sugar-coat things. The end does not justify the means.

So, where do I go next? Judging from what I have discovered, I guess my best bet would be a Syariah-compliant trust fund. At the very least I know that the money will not be invested in Carlsberg. A friend also has pointed me to Al-Rajhi bank, which is the world's largest Islamic bank and a major investor in Saudi Arabia's business world. Unfortunately to date there are not many investment options offered yet as the bank is still very young in Malaysia but I do expect things to change for the better very soon. At the rate where Islamic awareness is generally on the rise in Malaysia, I sure hope more will be done towards achieving a purer Syariah-compliancy in the future of our economic system. Thanks to colleagues, friends and family who have shared their information and views.

Wallahu’alam.