HOUSEHOLDS’ OVER-INDEBTEDNESS: AN EXPLANATION FROM A SHARI‘AH PERSPECTIVE

Authors

Keywords:

creditors, debtors, households, over-indebtedness, Sharī‘ah

Abstract

Excessive indebtedness at the individual level can create vulnerability to exploitation (Zulm), leading to a modern form of slavery known as debt bondage. Household over-indebtedness has become an increasingly widespread phenomenon in Malaysia, compounded by the negative economic impact of the COVID-19 pandemic. In response, this study explores the different aspects of indebtedness from a Sharī‘ah perspective. The research draws on a qualitative methodology, including an intensive literature review, analysis of Quranic verses and the sayings of the Prophet. (pbuh), as well as interviews with reputable scholars. The study provides a detailed understanding of Sharī‘ah's position on debt in various circumstances, the relationship between debtors and creditors, preventive solutions, and solutions for those over-indebted. The study highlights rules that regulate the relationship between debtors and creditors and suggests solutions to assist households in financial difficulties. The study concludes that incurring debt should be for Sharī‘ah-compliant purposes and with a genuine intention to pay back, regardless of the hierarchy of needs. This study makes a valuable contribution to the literature on preventing debt bondage and offers insights that can help households avoid over-indebtedness.

Downloads

Download data is not yet available.

References

AAOIFI, Shari’ah Standards (Kingdom of Bahrain: Manama, 2015).

Abdulazeem Abozaid, “Trade of Debts Resulting from Financial Intermediation: Analysis from Shariah Perspective,” Justicia Islamica, vol. 19/2 (2022): 247, https://doi.org/10.21154/justicia.v19i2.3970

Abderrazak Belabes, “Limitations of the SDGs in the Light of a Zakat Approach in Terms of Resilience,” AZKA International Journal of Zakat & Social Finance, vol. 3/1 (2022): 53–84, https://doi.org/10.51377/azjaf.vol3no1.94

Abdelaziz E L Hammaoui and Abdelmajid Hmaittane, “Retard de Paiement En Droit Musulman : Étude Comparative Avec Le Droit Malaisien et Le Droit Européen,” International Review of Entrepreneurial Finance, vol. 2/1 (2019): 96–123.

Aḥmad bin ‘Ali al-Nasā’i, Saḥīḥ Sunan al-Nasā’ī, vol. 3 (Riyad: Maktabah al-Ma‘arif, 1998).

Ahmed Belouafi, “Towards a Just Monetary System,” Journal of King Abdulaziz University, vol. 2/1 (2022): 109-115, https://doi.org/10.20944/preprints202211.0483.v1

Aidit bin Haji Ghazali, “Consumer Credit from the Islamic Viewpoint,” Journal of Consumer Policy, vol. 17 (1994): 443–457.

Asyraf Wajdi Dusuki and Said Bouheraoua, “The Framework of Maqasid al-Shariʿah and Its Implication For Islamic Finance,” Islam and Civilisational Renewal, (2005): 316-336

Djubaedi Yunus and JM Muslimin, “Debt in the Perspective of Islamic Law,” Jurnal Syarikah: Jurnal Ekonomi Islam, vol. 6/1 (2020): 22, https://doi.org/10.30997/jsei.v6i1.2187.

Dunja Skalamera-Alilovic and Mira Dimitric, “(IR) Responsible Lending and Personal Indebtedness: Consumer Credit Marketing,” International Scientific Conference on Economic and Social Development, (2017): 14.

Fadillah Mansor, Ahmad Naim Abdullah and Zairani Zainol, “Exploring the Concept of Financial Planning from the Perspective of Maqāṣid al-Sharīʿah,” TAFHIM: IKIM Journal of Islam and the Contemporary World, vol. 15/2 (2022): 1–35, https://doi.org/10.56389/tafhim.vol15no2.2.

Hafas Furqani, Riaz Ansary, Said Adekunle Mikail, Tawfik Azrak and Mohamad Akram Laldin, “Debt from Shariah and Economic Perspectives: Concepts, Issues and Implications,” ISRA Research Paper, vol. 81 (2015): 48.

Joanne Horton, Richard Macve and Geert Struyven, ‘Qualitative Research: Experiences in Using Semi-Structured Interviews,’ In The Real Life Guide to Accounting Research, ed. Christopher Humphrey and Bill Lee (Elsevier, 2004), https://doi.org/10.1016/b978-008043972-3/50017-7.

Kingstone Mutsonziwa and Ashenafi Fanta, “Over-Indebtedness and Its Welfare Effect on Households Evidence from the Southern African Countries,” African Journal of Economic and Management Studies, vol. 10/2 (2019): 185–197, https://doi.org/10.1108/AJEMS-04-2018-0105.

Mohamad Akram Laldin and Furqani Hafas, “The Foundation of Islamic Finance and the Maqasid al-Shari’ah Requirement,” Journal of Islamic Finance, vol. 2/1 (2013): 31–37

Mohammad Firdaus and Mohammad Hatta, “Examining the Dominance of Islamic Debt-Based Products in the Economy,” International Journal of Arts and Commerce, vol. 3/6 (2014): 51–68.

Mohammad Omar Farooq, “Islamic Finance and Debt Culture: Treading the Conventional Path?,” International Journal of Social Economics, vol. 42/12 (2015): 30, https://doi.org/http://dx.doi.org/10.1108/03068299710193624.

Muḥammad bin ‘Īsa al-Tirmidhī, Saḥīḥ Sunan al-Tirmidhī, vol. 2 (Riyad: Maktabah al-Ma‘ārif, 2000).

Muḥammad bin Ismā‘īl al-Bukhārī, Saḥīḥ al-Bukhārī (Dimashq: Dār Ibn Kathīr, 2002).

Muḥammad Ibn Yazīd Ibn Mājah, Al-Sunan al-Kubra, vol. 2 (Cairo: Dār Ta’sīl, 2014).

Muhammad Iqbal Fasa, Itsla Yunisva Aviva, Yayan Firmansah, and Suharto, “Controversy on Riba Prohibition: Maqashid Shariah Perspective,” International Journal of Islamic Economics, (2016): 1–23

Mustafa Khattab, The Clear Quran: A Thematic English Translation (Cairo, Egypt: Dar al-Salaam, 2015).

Rusni Hassan, Ahmad Azam Othman and Syuhaeda Aeni Binti Mat Ali, “Procedural Laws Governing Event of Default in Islamic Financing in Malaysia: Issues and Challenges,” Emerging Issues in Islamic Finance Law and Practice in Malaysia, (2019): 193–207, https://doi.org/10.1108/978-1-78973-545-120191017.

Sapora Sipon, Khatijah Othman, Zulkifli Abd Ghani and Husni Mohd Radzi, “The Impact of Religiosity on Financial Debt and Debt Stress,” Procedia - Social and Behavioral Sciences, vol. 140/2003 (2014): 300–306, https://doi.org/10.1016/j.sbspro.2014.04.424.

Toh Siaw Mien and Rusmawati Said, “A Cross-Sectional Household Analysis of Household Consumption Patterns: An Indirect Approach to Identify the Possible Factors of Personal Bankruptcy,” Jurnal Ekonomi Malaysia, vol. 52/3 (2018): 231–246, https://doi.org/10.17576/JEM-2018-5203-18

Tullio Jappelli, Marco Pagano and Marco Di Maggio, “Households’ Indebtedness and Financial Fragility,” Jacques Polak Annual Research Conference, (2008): 43, https://doi.org/10.12831/73631.

Virginia Braun and Victoria Clarke, “Using Thematic Analysis in Psychology,” Qualitative Research in Psychology, vol. 3/2 (2006): 77–101, https://doi.org/10.1191/1478088706qp063oa.

Wahbah al-Zuhaily, Financial Transactions in Islamic Jurisprudence, vol. 1 (Damascus: Dar al-Fikr, 2001).

Yusuf Qardawi, Fiqh al-Zakah II: A Comparative Study of Zakah, Regulations and Philosophy in the Light of Qur’an and Sunnah (Jeddah, Saudi Arabia: Scientific Publishing Centre King Abdulaziz University, 2009).

Zairani Zainol, Aini Nur Hajjar Khairol Nizam and Rosemaliza Ab Rashid, “Exploring the Concept of Debt from the Perspective of the Objectives of the Shariah,” International Journal of Economics and Financial Issues, vol. 6/7 Special Issue (2016): 304-312.

Interviews

Ahcene Lahsasna (Head of Shariah Committee, Standard Chartered Saadiq), in interview with the author, 14 October 2021.

Ahmad Husni bin Abd Rahman (Head of Shariah and International Relation Unit, Pusat Pungutan Zakat MAIWP) in interview with the author, 02 December 2021.

Engku Rabiah Adawiah bt Engku Ali (Member of the shariah advisory council, BNM), in interview with the author, 10 September 2021.

Mahadi Ahmad ISRA (Senior Researcher, ISRA), in interview with the author, 02 August 2021.

Mohammad Mahbubi Ali (Chairman of Shariah Committee, AFFIN bank Islamic), in interview with the author, 22 August 2021.

Muhammad Hisyam Hassan (Head of Shariah Governance and Management, Maybank Islamic) in interview with the author, 28 Septmber 2021.

Rusni Hassan (Chairman of Shariah Committee, Hong Leong Islamic Bank), in interview with the author, 14 November 2021.

Published

2023-08-30

How to Cite

Ghaouri, M. H., Kassim, S., Zakariyah, H. ., & Abdullah Othman, A. H. . (2023). HOUSEHOLDS’ OVER-INDEBTEDNESS: AN EXPLANATION FROM A SHARI‘AH PERSPECTIVE. Jurnal Syariah, 31(2), 160–194. Retrieved from https://jpmm.um.edu.my/index.php/JS/article/view/41962