Understanding Islamic Finance #
We did a video with Ustaz Haron of FAiWA, to give both sides of the argument:
On another note, one of the principle shariah requirements when it comes to investment contracts is that the profit should not be guaranteed for the interest of contracting parties due to gharar (excessive ambiguity).
However, when it comes to CPF arrangements, where it is required by law for a specific % of our salary to be taken along with specific % to be contributed from the employer, different shariah principles apply.
This is because one of the fundamental tenets in our shariah is that:
تصرف الامام منوط بالمصلحة.
It can be roughly translated:
The action of a (state) leader should be based on the public interest.
As well as:
اختلاف الأحكام التصرفات لاختلاف مصالحها
It can be roughly translated:
Different rulings apply to different public interests.
Thus, the original shariah principle on how we view the guaranteed interest/profit % from the CPF arrangements will differ according to the public interest from the lens of the (state) leader.
In other words, it will harm the public interest (retirement fund) if the state lets the CPF funds be invested in the open capital market with fluctuating profit/loss rates. This is because there will be a risk of the public losing their hard-earned wealth due to economic factors or targeted economic attacks by external parties.
Therefore, to protect the public interest, it is only prudent for the state to have the CPF fund be invested in special Singapore government securities (SGSS) – a closed fund- and have the interest/profit % guaranteed by the state profit % to protect the public interest.
Based on this background, MUIS fatwa views this arrangement as hibah (gift) from the state because the state guarantees the interest/profit % on their own shariah accord for the CPF account holders.
Also, you can check Bro Fazrihan’s research for alternative views on CPF:
https://www.academia.edu/75200042/Treatment_of_Financial_Returns_of_the_Central_Provident_Funds_in_Singapore_CPF_Interest_An_istiqra_
Allah knows best.
