PTPTN riba in its operational before turning

PTPTN is a statutory body which
responsible to manage the financing of education for students in both public and
private higher education institutions in Malaysia. PTPTN was established under
the National Higher Education Fund Corporation Act 1997 (Act 566) which came
into force on July 1, 1997. Students can apply loan from PTPTN to finance their
education and pay back PTPTN once they complete study.

 

PTPTN practices riba in its operational before turning
to ujrah. Prior to 2009, PTPTN charged 3% interest on PTPTN borrowers. For
example, if borrowing worth RM 19,000 is required to repay RM 23,083.89 after
adding a 3% interest for the 10 years payment period. The additional 3% paid by
the borrower to PTPTN contains the element of Riba.

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However, the
Malaysian National Religious Council Fatwa Committee convened on 28 July 2008
resolved to agree on the service charge charged by PTPTN to the students on the
concept of Ujrah at reasonable rates and not burdensome students. The PTPTN can
charge compensation (ta’widh) to students who have earned a fixed and capable
job from financial aspect but intentionally do not want to repay PTPTN
financing. Thus, the Riba element has been removed from PTPTN.

 

(i)         
Gharar

Gharar in
conventional insurance occurs due to the uncertainty of compensation to be paid
by the insurer from the point of its existence and duration. In shari’ah, one
of the conditions in a sale and purchase contract is the delivery of prices and
goods within a period, and both parties need to be clear of the existence and
time of delivery.

 

The
conventional insurance contracts are containing Gharar element in four states:

a)    The doubt about
the duration of the contract;

b)    The existence
of contracts and compensation;

c)     Payment of
compensation; and

d)    The actual
amount of compensation or premium paid.

 

These Gharar
are attributed to the uncertainty of participants about when the insured event
will take place and how far the impact to the policyholder when the contract is
signed. This problem arises because the outcome of the insurance contract
itself is affected by the fate and the amount of money provided by individual
is different or known as aleatory.

 

In conventional insurance contracts, participants will
not know whether the disaster will happen nor do they know when the
compensation payment will be paid.

 

(ii)       
Maysir

Invest in stock price
index definitely involve element of maysir. Different from buying stock
activity, which the owner of funds buy shares and obtain stock certificates
worth the money he submitted. But, in stock price index transaction what
transacted is the stock price index and not the stock. The owner of the fund
handed over a certain amount of money to agent to be traded in the stock price
index. For instance, Hanseng Index, which is one of the largest stock exchanges
in Hong Kong. The agent will provide the information to the investor (owner of
the funds) regarding the development of the stock price index and provide
advice to buy or sell. Such transactions are forbidden because they contain
maysir (gambling) elements. Investors are risking their money to get the
benefit from these transactions without real buying and selling.

 

(iii)     
Immoral
practice to increase sales

To achieve or
increase sales targets, agents of takaful insurance often compete with each
other. To increase their sales, takaful agents and brokers need to get new
customers to avoid dismissal. They will use different types methods to increase
their sales and try to keep their performance in the firm. They may promise
any benefits that are not in the contract or guarantee capital and investment
profits and so on. These
immoral and unethical practices of takaful agents arise in order to increase
their sales. They may act out of control to maintain self-interest and
may cause agent misconduct has been identified. Insurance agents
have the opportunity for ethical misconduct because the service provided is
very abstract and difficult for customers to fully understand.

 

Another
scenario is agent tend to earn another commission from the existing
participant. Towards this purpose, agent need to sell new policy to existing
participants. Thus, there is a twisting occur which the participants will be
persuaded by the agent to replace the existing purchased plan to another plan
that need to contribute more. Takaful operation might address this issue as it
will affect the overall takaful industry image.