Al-Hisbah as a Foundation of Shariah Auditing.

Saiful Azhar Rosly, Ph.D saiful@inceif.org

International Center For Education in Islamic Finance (INCEIF)

www. inceif.org

The application of Hisbah in the Islamic financial markets should be

based on how it (i.e. Hisbah) was institutionized in the early days of
Islam. It should not be misconstrued to run on an economic and
commercial orientation alone. The concept of Hisbah lies in the
Quranic injunction “enjoining the good and forbidding the evil” amr bil
ma’ruf wannahi ‘anil munkar” All persons with an Islamic authority
actually acted on the same principle as above. As described by Ibn
Taimiyah these include: Greater military authority (wilayat al-harb al-
kubra) like: the Prime Minister (niyabat al-saltana) Lesser authority
such as: 1. police (shurta), 2. the magistracy (wilayat al-hukm) or 3. the
financial authority (al-dawawin al-maliya) 4. the hisba authority In
this sense the Hisba authority complements the other authorities and
not overriding them. The overall objective of the Hisbah is to facilitate
society to perform the ‘Ibadat (i.e. worshipping Allah swt). This “Ibadat
can be categorized into 3 categories as given below with the respective
Hisbah functions:

1. those relating to the rights of God such as religious/ritualistic

activities – punctuality of prayers, organization of Jumaah/Friday
congregations and maintenance of mosque.

2. those relating to the rights of people such as community affairs and

behaviour in the market like accuracy of weights and measures and
honesty in dealings those related to both such as municipal
administration such as keeping the roads and streets clean and
preventing the building of a factory or dwelling place that may damage
community interest.

The practice of Islamic financial transactions today may need some

degree of monitoring as it must reflect true label, which is one aspect of
Shariah auditing. The Hisbah system can be examined closely and some
principles can be extracted from it (i.e. Hisbah) to make way for a
transparent system of check and balance in the Islamic financial
landscape. The public should be given an avenue to relate their
experiances and also critique of current practices. Some may include
Islamic banking practices such as:

1. charging al-bai bithaman ajil customers with higher profit rates than
interest-rates.

2. selling assets without effecting transfer of title

3. Buying assets from customers with a condition that the latter must
buy it back

4. imputing penalty charges similar with conventional instruments

5. Conducting leasing (ijarah) without liability of ownership