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Unfair terms in Islamic banking contracts: realizing Maqasid al-Shariah towards banking consumer protection in Malaysia

The use of unfair contract terms in Islamic banking contracts remains a serious problem in Malaysia. Most Islamic banking contracts are in standard form contracts, also known as ‘adhesion contracts’ which are predrafted by the party with strong bargaining power in the contract and contain terms th...

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Main Authors: Abu Bakar, Noor Mahinar, Mohd. Yasin, Norhashimah
Format: Conference or Workshop Item
Language:English
Published: 2016
Subjects:
BP173.75 Islam and economics
HG1501 Banking
KBP173.25 Islamic law and other disciplines or subjects
Online Access:http://irep.iium.edu.my/54111/1/54111_UNFAIR%20TERMS%20IN%20ISLAMIC%20BANKING%20CONTRACTS.pdf
http://irep.iium.edu.my/54111/
http://umconference.um.edu.my/ICIC-2016=3722
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spelling my.iium.irep.541112017-01-31T08:58:26Z http://irep.iium.edu.my/54111/ Unfair terms in Islamic banking contracts: realizing Maqasid al-Shariah towards banking consumer protection in Malaysia Abu Bakar, Noor Mahinar Mohd. Yasin, Norhashimah BP173.75 Islam and economics HG1501 Banking KBP173.25 Islamic law and other disciplines or subjects The use of unfair contract terms in Islamic banking contracts remains a serious problem in Malaysia. Most Islamic banking contracts are in standard form contracts, also known as ‘adhesion contracts’ which are predrafted by the party with strong bargaining power in the contract and contain terms that are potentially unfair. These contracts are presented on a ‘take it or leave it’ basis and non-negotiable, leaving banking consumers no realistic opportunity to bargain for more favourable terms, subsequently resulting in an unfair transaction. Further, the unfair contract terms have greater implications on the realization of Maqasid al- Shariah, as it does not comply with the principles of protecting public interests (maslahah), honesty, trustworthy, financial transparency, prevent harm/hardship and al-‘adl wal-ihsan (justice with benevolence) in the circulation of wealth in banking transactions. This paper aims to analyze various legal documentations of Islamic banks in Malaysia in the light of Maqasid al-Shariah in order to propose a fair, transparent and consumer-friendly banking contracts. This paper suggests that the unfair contract terms in legal documentation of various Islamic banks and the inequality of bargaining power (ghubn) in banking industry, which resulted in the rights of banking consumers being infringed, have failed to realize the Maqasid al-Shariah. Thus, it justified the need to protect banking consumers from unfair contract terms as well as sending a strong message to the bankers to do fair trading and transparency in dealings, such that unfair terms will not be tolerated. This paper adopts a combination of theoretical and content analysis methodology. 2016-10-18 Conference or Workshop Item REM application/pdf en http://irep.iium.edu.my/54111/1/54111_UNFAIR%20TERMS%20IN%20ISLAMIC%20BANKING%20CONTRACTS.pdf Abu Bakar, Noor Mahinar and Mohd. Yasin, Norhashimah (2016) Unfair terms in Islamic banking contracts: realizing Maqasid al-Shariah towards banking consumer protection in Malaysia. In: The 1st International Conference on Islam and Contemporary Issues in the Islamic World: Challenges and Way Forward (ICIC 2016), 5th-6th Dec. 2016, Kuala Lumpur. http://umconference.um.edu.my/ICIC-2016=3722
institution Universiti Islam Antarabangsa Malaysia
building IIUM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider International Islamic University Malaysia
content_source IIUM Repository (IREP)
url_provider http://irep.iium.edu.my/
language English
topic BP173.75 Islam and economics
HG1501 Banking
KBP173.25 Islamic law and other disciplines or subjects
spellingShingle BP173.75 Islam and economics
HG1501 Banking
KBP173.25 Islamic law and other disciplines or subjects
Abu Bakar, Noor Mahinar
Mohd. Yasin, Norhashimah
Unfair terms in Islamic banking contracts: realizing Maqasid al-Shariah towards banking consumer protection in Malaysia
description The use of unfair contract terms in Islamic banking contracts remains a serious problem in Malaysia. Most Islamic banking contracts are in standard form contracts, also known as ‘adhesion contracts’ which are predrafted by the party with strong bargaining power in the contract and contain terms that are potentially unfair. These contracts are presented on a ‘take it or leave it’ basis and non-negotiable, leaving banking consumers no realistic opportunity to bargain for more favourable terms, subsequently resulting in an unfair transaction. Further, the unfair contract terms have greater implications on the realization of Maqasid al- Shariah, as it does not comply with the principles of protecting public interests (maslahah), honesty, trustworthy, financial transparency, prevent harm/hardship and al-‘adl wal-ihsan (justice with benevolence) in the circulation of wealth in banking transactions. This paper aims to analyze various legal documentations of Islamic banks in Malaysia in the light of Maqasid al-Shariah in order to propose a fair, transparent and consumer-friendly banking contracts. This paper suggests that the unfair contract terms in legal documentation of various Islamic banks and the inequality of bargaining power (ghubn) in banking industry, which resulted in the rights of banking consumers being infringed, have failed to realize the Maqasid al-Shariah. Thus, it justified the need to protect banking consumers from unfair contract terms as well as sending a strong message to the bankers to do fair trading and transparency in dealings, such that unfair terms will not be tolerated. This paper adopts a combination of theoretical and content analysis methodology.
format Conference or Workshop Item
author Abu Bakar, Noor Mahinar
Mohd. Yasin, Norhashimah
author_facet Abu Bakar, Noor Mahinar
Mohd. Yasin, Norhashimah
author_sort Abu Bakar, Noor Mahinar
title Unfair terms in Islamic banking contracts: realizing Maqasid al-Shariah towards banking consumer protection in Malaysia
title_short Unfair terms in Islamic banking contracts: realizing Maqasid al-Shariah towards banking consumer protection in Malaysia
title_full Unfair terms in Islamic banking contracts: realizing Maqasid al-Shariah towards banking consumer protection in Malaysia
title_fullStr Unfair terms in Islamic banking contracts: realizing Maqasid al-Shariah towards banking consumer protection in Malaysia
title_full_unstemmed Unfair terms in Islamic banking contracts: realizing Maqasid al-Shariah towards banking consumer protection in Malaysia
title_sort unfair terms in islamic banking contracts: realizing maqasid al-shariah towards banking consumer protection in malaysia
publishDate 2016
url http://irep.iium.edu.my/54111/1/54111_UNFAIR%20TERMS%20IN%20ISLAMIC%20BANKING%20CONTRACTS.pdf
http://irep.iium.edu.my/54111/
http://umconference.um.edu.my/ICIC-2016=3722
_version_ 1643614484311310336
score 13.211869

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