Towards genuine Shariah products with lessons of the financial crisis

Abozaid, Abdulazeem (2014): Towards genuine Shariah products with lessons of the financial crisis. Published in: Islamic Banking and Financial Crisis, Edinburgh University Press Ltd (2014)

Abstract

The paper represents an unprecedented approach towards examining the compatibility of the current debatable Islamic banking and finance products with Shariah. This approach is rooted out from the lessons of the current financial crisis with all its causes and effects. Although the paper subjects only some of the existing financing products to this new methodology of Shariah scrutiny, it lays down the principles on the basis of which all financing products, whose legality has not been free from doubt, can be scrutinized. It is perceived that this new proposed methodology for judging Islamic banking products is indispensable especially nowadays as the current approach to Ijtihad, which is based on quoting and interpreting some juristic opinions from Fiqh schools as well as the individual assessment of Maslaha, has led to having conflicting stands on many Islamic banking products; something which definitely impedes growth and damages the image of Islamic banking. Thus, practical evidences and lessons of experience, when available, must be made the reference in this regard and be given the final say. The proposed approach is predicated on the well established Shariah principle of “Lawful is what is good and beneficial, and forbidden is what is bad and harmful”. Therefore, if upon analysis a particular debatable Islamic banking product is found to be resulting in the same harms of conventional products, and potentially contributing to creation of financial crises, then it must be undoubtedly ruled as unlawful. For treating the subject, the paper starts with highlighting the conventional transactions that are deemed to be responsible for the occurrence of the financial crisis, it then examines the debatable Islamic banking products to locate any similarities to the conventional ones that led to the crisis, and it briefly discusses the various justifications provided in their support. The paper then analyzes from both Shariah as well as economic perspective these products and determines their Shariah value considering their economic substance and potential implications. The paper concludes with formulating the benchmark that against which all current and future Islamic banking and finance products should be measured.

• Item Type: MPRA Paper
• Language: English
• Keywords: Islamic banking, Islamic finance, product development
• Subjects: G - Financial Economics > G0 - General; G - Financial Economics > G2 - Financial Institutions and Services > G23 - Non-bank Financial Institutions ; Financial Instruments ; Institutional Investors; K - Law and Economics > K1 - Basic Areas of Law

References

Abdulazeem Abozaid, Contemporary ‘Eina is it a sale or usury. Dar al-Multaqa, Aleppo, 2004.

Abozaid, Abdulazeem. Contemporary Islamic Financing Modes between Contracts Technicalities and Shari’ah Objectives Eighth Harvard University Forum on Islamic Finance, Harvard Law School – Austin Hall, USA, April 19-20, 2008.

Abozaid Abdulazeem, Fiqh Al-Riba, Al-Risalah, Beirut, 2004.

Abozaid Abdulazeem, The Devotional Dimension in Interest-oriented Shari’ah Rulings, p 52-53, Article in Arabic, Journal of Islam in Asia, Volume 3, No 1, July 2006.

Abozaid, Abdulazeem. Examining the New Applications of Sale of Debt in the Islamic Financial Institutions, Journal of Islam in Asia, Volume 5, No 2, December 2008.

Al-Bahuti. Kashaf Al-Qina’, Dar Al-Fikr, Beirut, 1402 A.H.

Al-Bugirami. Hashyat, Al-Maktabah Al-Islamiyyah: Diyar Bakr.

Al-Dasuqi. Hashiyah, Dar Ihia’a al-Kutub al-Arabiyyah.

Al-Hattab. Mawahib Al-Jalil, Dar al-Fikr, Beirut, 1987. Al-Jarhi Mabid Ali, “The Organized Tawarruq”, unpublished paper in Arabic.

Al-Shatibi.. Al-Muwafaqaat. Dar al-Fikr, Beirut.

Al-Sherbini. Mughni Al-Muhtaj, Dar al-Fikr, Beirut.

Ibn Abdeen. Hashiyat (Rad al-Mukhtar ala al-Dur al-Mukhtar), Dar Ihiya’ al-Turath al-Arabi, Beirut, 1987. Ibn al-SubkiAl-Ibhaj. Dar al-Kutub al-Ilmiyyah Beirut, Lebanon. 2004.

Resolutions of the Securities Commission Syriah Advisory Council, Malaysia.

Sano, Mustafa, "The Sale of Debt as Implemented by Islamic Financial Institutions in Malaysia”, Research Center, International Islamic University Malaysia.

Zarka Anas, “Tawarruq Train”, unpublished paper in Arabic.