Hisbah as a Consumer Protection Institution in Malaysia: A Special Reference to Islamic Consumer Credit Industry

• Published date: 26 August 2019
• Pages: 69-87
• DOI: https://doi.org/10.1108/978-1-78973-545-120191011
• Date: 26 August 2019
• Author: Rusni Hassan,Ibtisam @Ilyana Ilias

Chapter 5

Hisbah as a Consumer Protection

Institution in Malaysia: A Special

Reference to Islamic Consumer

Credit Industry

Rusni Hassan and Ibtisam @ Ilyana Ilias

Abstract

Hisbah is one of the distinguished institutions that had emerged since the early

days of the Islamic empire. Based on its cardinal duty to enjoin good and

prohibit evil, over time, its functions gradually expanded, and its responsi-

bilities increasingly grew. In light of the contemporary trend in establishing

institutional framework for consumer protection, entrusting an agency with

multifarious tasks may not be the best and effective way in handling consumer

protection issues. Thus, this chapter attempts to explore the new paradigm

of hisbah as a consumer protection institution in Malaysia with a special ref-

erence to the Islamic consumer credit industry. While utilising the doctrinal

legal research methodology, relevant sources of law have been examined and

analysed. This research nds that the classical hisbah institution provides a

good reference point in establishing regulatory agency and dispute manage-

ment body. Nevertheless, some modications are required to remain relevant

especially in terms of specialisation of role and function. Likewise, it is viewed

that adjustment of the hisbah institution is also necessary regarding the char-

acteristic of the muhtasib (ombudsman).

Keywords: Hisbah; ombudsman; consumer protection; consumer credit;

dispute management

Introduction

Hisbah is one of the distinguished institutions that emerged since the early days

of the Islamic empire. Based on its cardinal duty to enjoin good and prohibit evil,

Emerging Issues in Islamic Finance Law and Practice in Malaysia, 69–87

Copyright © 2019 by Emerald Publishing Limited

All rights of reproduction in any form reserved

doi:10.1108/978-1-78973-545-120191011

70 Rusni Hassan and Ibtisam @ Ilyana Ilias

over time, its functions gradually expanded, and the responsibilities increasingly

grew. In the light of contemporary trend in establishing institutional framework

for consumer protection, entrusting an agency with multifarious tasks may not

be the best and effective way in handling consumer protection issues. Thus, this

chapter attempts to explore the new paradigm of hisbah as a consumer protec-

tion institution in Malaysia with special reference to the Islamic consumer credit

industry.

Undeniably, consumer credit plays a vital role in the vast nancial system,

both to facilitate the economic growth and full the needs of consumers from all

levels of society. It is an old industry which is continuously growing in response to

the high demand of consumers from various social classes (Finlay, 2009). Exam-

ples of common consumer credit are house nancing, vehicle nancing, personal

nancing and credit sale. In Malaysia, the outstanding characteristic of this

industry is when substantial demands for consumer credit are not only satised

by conventional credit facilities but also by numerous Islamic consumer credit

products offered by either Islamic banks or non-banks institutions. For instance,

in 2017, it has been acknowledged that the positive development of Islamic con-

sumer credit is driven by household sector particularly Islamic home nancing

which continued to exhibit strong growth of 17.5% followed by other household

nancing (5.9%) and vehicle nancing (2.5%) (Bank Negara Malaysia, 2017).

The relentless intensication in living costs coerces nancial consumers, espe-

cially from the lower and middle classes, to incur debt to satisfy their basic needs

such as house, vehicle, education and even common daily needs such as food and

clothes. Some of them will have to resort to moneylenders or even pawnbrokers

for readily available cash. The available statistics strongly proved heavy reliance

on consumer credit among Malaysians for top-three purposes since 2012, namely,

purchasing a house, vehicle acquisition and personal use.

Financial consumers who are in dire need of cash thus have poor bargaining

power and are exposed to countless unfair measures of credit providers. Although

admittedly, Sharīʿah promotes values constituting strong foundation for con-

sumer protection such as ensuring fairness, avoiding exploitation and prohibit-

ing injustice, these inherent features alone cannot guarantee adequate protection

(Mahmood, 2012). This is attributed to several factors, inter alia, greed, commer-

cial and competitive pressures and lack of sophistication on the part of consum-

ers (Mahmood, 2012). Manifestly, the role of a dedicated regulator to monitor

and supervise the industry against the unethical practices of credit providers is

unavoidable. Currently, the approach is piecemeal in nature whereby different

authorities govern different consumer credit industry. Premised on the preceding

discussion, viability of classical hisbah institution as a reference in establishing

consumer protection agency in Islamic consumer credit industry in Malaysia will

be the central focus of this chapter.

Sharīʿah and Consumer Credit

Consumer credit is one of the branches of economic activities which traces its

roots in Sharīʿah under the broad category of qh al-muamalah (the jurisprudence