MCCA continues to FAIL

Every time I receive MCCA’s newsletter with my shareholder statement, I expect changes to the board of directors. Sure enough, this time, there was an announcement of a new board election. They officially have more leadership churn than post-war Iraq.

There was also an announcement of a new financial service, Tamleek. Tamleek is an allegedly shariah compliant home finance scheme based on the principle of ijara muntahiya bit-tamlik.

Tamleek has been developed in consultation with re-known [sic] international Islamic finance scholar Dr Mohd Daud Bakr and endorsed by reputable Shariah advisor in Australia, Dr Ibrahim Abu Muhammad.

With all respect to those scholars, many of us are just not convinced of their authority in Islamic finance. To paraphrase Marshall Bruce Mathers III, won’t the real shariah heavyweights please stand up?

It continues.

MCCA has formed important partnerships with a private funder who facilitates unlimited funding. The funders are non-banking institutions.

MCCA acts as the financial intermediary who brings the investor/financier and the member together. The funding facility has been duly considered by a body of Islamic scholars and they have agreed that this new finance facility adheres to the requirements of Shariah.

MCCA is trying to attract customers who are concerned about funds from a banking source. This is a Good Thing.

But in doing so, they’ve enlisted a private entity whose source of funds is entirely unknown. Not to worry, though: an anonymous body of anonymous Islamic scholars approves. Anonymously.

Apart from the lack of transparency, this is not reassuring on any level. Can this private funder be trusted? If they pull out, could it put the future of Tamleek or MCCA at risk?

But this is the best part: Tamleek offers up to 10 years fixed interest profit rates. The profit rate is based on “operating and management costs, cost of funds, dividends to members, [and] community fund allocations”.

My knowledge of Islamic finance is as limited as the next guy’s, but this seems, to use a technical term, pretty dodgy. Of particular concern is the ambiguity in the total contract cost and the variable nature of the profit rate. Terminology aside, how is Tamleek any different from mortgates with variable interest rates? There seems to be no difference in practice.

This is not a condemnation of MCCA’s Tamleek. Ultimately, a recognised authority in Islamic finance must review the Tamleek contracts before any judgement is made.

This is a call to MCCA to lift their game. Stop introducing controversial finance schemes shrouded in secrecy and ambiguity. Stop shuffling your board every time your newsletter is due. And stop pretending you are doing a great service to the Muslim community.

Go back to the drawing board. Give the community what they want. Solid, shariah compliant home financing. Murabaha schemes for motor vehicles. Halal managed funds that are not outperformed by ANZ savings accounts. Takaful alternatives to health, vehicle, and home insurance. And microfinance for Muslim small business.

Act now, before another Islamic finance institute steals your thunder and renders your FAIL a truly epic one.


#1 Uludag on 11.08.08 at 2:06 am

People thought they were entering into a halal contract with MCCA only to find out that they had really signed up for a riba contract with GE Capital!

#2 Andrew Reynolds on 11.12.08 at 2:09 pm

I do not claim to be a sharia scholar (or, for that matter, a Muslim), but I understand that Ayub’s “Understanding Islamic Finance” is (reasonably) definitive. The restrictions in there (pp292-6) on this sort of contract look onerous and speak of the need for intensive surveillance for this, as it appears it can fall very easily into non-Sharia compliant territory.
The source of the funding is another possible problem. While (as I understand it) the source of the funding for the contract does not affect compliance with Sharia of the contract itself, I think it may be difficult to claim that GE Capital is an appropriate source for an IF organisation. If it is from GE Capital, I can understand their reluctance to loudly advertise the fact. I would have thought that funding would have been available from the Gulf.

#3 Uludag on 11.14.08 at 10:33 pm

The bait and switch tactics are a worry. People signed a contract with MCCA but somehow they ended up owing money directly to GE Capital. They have even received letters talking about interest rate rises on GE Capital paper.

At the end of the day MCCA were/are just mortgage originators or brokers. I don’t see what is particularly Islamic about the contract that people end up in.

#4 Aussie on 11.17.08 at 11:18 am

Uladag that is correct, they are pretty much just selling mortgages for GE (their funders).

Not to mention their “lease” rates are at least 75 basis points above the interest rates of the 4 big Australian banks. And when the RBA drops the interest rates and the major banks take a few days to react, it takes MCCA about a month, though in retrospect when the RBA was raising rates and your big lenders would raise a month later, MCCA would send their letters out that same week raising their “lease”.

The Commonwealth Bank would charge me less “lease” than MCCA, so why should I choose MCCA simply because they claim a “halal alternative”? Why should I as a consumer be paying that extra 75 basis points on a 300,000 loan? Work out the figures yourself, I would be ripping myself off in the long term.

#5 Annoyed on 11.20.08 at 10:11 pm

Isn’t the fact that MCCA has no control over the “profit rates” a worry?

#6 Chaaban Omran on 11.26.08 at 7:48 pm

I read the article by “Mohammad’ dated 8th November 2008 and wish to extend my views in this matter.

Firstly it would be good if this gentleman:
1. Contacted MCCA to clarify a number of points
2. Took the time to understand the complexities of the existing legal framework
3. Took the time to understand how MCCA has invested on behalf its members, thousands of dollars to ensure that we can produce a Shariah Compliant product and not breach our common and civil laws
4. Has not offered any alternatives or suggestions

Its easy to demand something and to criticise in writing but it takes intelligence and effort to perform due diligence and to understand the constraints of offering Islamic Finance in Australia.

MCCA has taken the necessary steps to adhere to the law of the land and to adhere to the Sharia in a Dual Compliance framework – this is the beginning towards the full solution of the islamic Framework. The institution in Australia that can achieve this is MCCA – which operates on behalf of its 7,500 owners.

We have the expertise and know-how to educate the regulators on what needs to change. This will take time.

In the meantime, MCCA invites anyone to come in and see for themselves the steps and measures taken towards the path of Shariah Compliance. Ofcourse there is always room for reform and improvement. Strategic projects are in place to find overseas Islamic Banking partners and to apply for an AFSL license with ASIC. The road to Wealth Management is also in progress.

In its 18 year history, MCCA has achieved a lot. “MCCA continues to fail”?… I don’t think so.

I am confident that one day the full community will get behind us in support of our quest towards Islamic Finance and Banking in Australia.

Chaaban Omran
Managing Director

#7 Ibrahim Rashid on 11.26.08 at 10:30 pm

MCCA can offer whatever they think is a good product and it is up to the public to decide for themselves. I don’t think they “owe” us anything really.

#8 Amir on 11.27.08 at 12:51 am

Chaaban makes some fair points.

People have, from time to time, been critical of MCCA and their various offerings. Yet nobody and no organisation has been able to come up with something that is substantially different.

Even the sheikhs and other experts who have criticised the MCCA products have been unable to articulate an alternative that meets the expectations of the community AND the legal/regulatory requirements of the state.

#9 Mohammed on 11.27.08 at 2:32 am

Brother Chaaban,

Thank you for your reply. It’s refreshing to see open communication from an official source, defensive though it may be.

I understand your points, and I accept that what MCCA is doing is incredibly difficult. They deserve credit for their efforts and achievements to date, and their path to dual compliance is yet a long one. I will take all of this into account from now on.

Unfortunately, that doesn’t change much about the present. I don’t claim to speak on behalf of 7,500 people, but every shareholder I know has echoed my frustration with MCCA’s services. Most of us are just not impressed, and our patience and support are giving way to cynicism and defection.

I hope for the community’s sake that I am delusional, and that things will turn out just fine in due time.

Finally, I did offer suggestions in my post to the best of my ability. I am neither a financial expert nor a shariah one, just like your average shareholder. If I take the time to research these issues, others will not. It is up to MCCA to lay things out openly and transparently so we can all get on the same page.

And thanks for the invitation for scrutiny. I plan to take it on board, and I hope others do too.

#10 Chaaban Omran on 12.20.08 at 10:50 pm

Dear Br Mohammed
Assalam walaikum and Eid Mubarak for Eid Al-Adha that just past!

My article wasn’t meant to be defensive and for this I do apologise. Our current generation needs to be as professional as possible to leave behind a good image for those whom we lead. The reality is that we don’t always get it right but this opens opportunities for us to learn from and move forward.

The new MCCA vision has now been developed and our community should be excited about the new path. New blood and ideas brings about new hope inshallah and the new team is making good progress. The new MCCA is reforming, bringing Imams along the journey, developing new products and continuing to invest in good lawyers and partners – this is part of the new growth strategy.

In the meantime I invite you or anyone who is able to articulate their concerns and ideas for a better MCCA for future generations. Afterall, what alternatives is there for our children except banks (la ya3oothoo billah). The path to halal means it is often difficult and challenging and the path to haram filled with ease and temptations.

In the short-term we are now relaunching our internal product – “Murabahah” which is back after huge demand – naturally there will be waiting list. An official announcement will be made in the new year inshallah.

I invite anyone wanting to be a part of this exciting future to become a member and to meet with me to share the boards vision of a new MCCA for all Australians and not just Australian Muslims.

JazzakAllah Kheir for your continued support as a shareholder and feel strongly that one day you will be proud to have been associated with such a vital institution.

We Ask Allah swt to give success to His Deen, the Ummah and Humanity. Ameen.
Chaaban Omran
Managing Director
Est 1989.
[email protected]

#11 Mohammed on 01.07.09 at 4:30 pm

wa alaykum assalam brother Chaaban,

JazakAllah khayr for your eloquent and inspirational reply. May Allah give MCCA tawfiq to reach its objectives.


#12 antish on 01.09.09 at 9:14 pm

Aussie, I assume that you are Muslim, so surely you wouldn’t make your decision between a shaia-compliant “leaser” and the Commonwealth Bank based of which offers better value!

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