The Shari’ah Foundation of Islamic Banking
DOI:
https://doi.org/10.59373/drs.v2i1.24Keywords:
Shari’ah, Maqasid-al-Shari'ah, Islamic Banking, Shari’ah foundationAbstract
Islam prescribes a complete code of conduct for human life including economic activities. The prescribed Islamic code of conduct generally refers to Shari’ah, on which Islamic banking was founded. The most important characteristic of Islamic banking is to maintain its products and operations according to the principles of Shari’ah, which is based on the Holy Qur’an, Hadith, Ijma, Qiyas, and Ijtihad. Islamic banking has rapidly been growing in the modern economic world as an alternative to conventional banking. It is expected that Islamic banking operations will not only comply with the Shari’ah but also contribute towards achieving the Maqasid-al-Shari’ah (objectives of Shari’ah), which is the ultimate welfare of the Muslim Ummah and the human being. The findings of several studies showed that Shari’ah compliance is the single most important factor for choosing Islamic banking. Unfortunately, many recent studies revealed that many Islamic banks are violating their obligation of Shari’ah compliance. Hence, the paper aims at understanding the Shari’ah foundation of Islamic banking to examine that the modes of Islamic banking are based on the principles of Shari’ah. It also incorporates the major components of Shari’ah and its concept of economic tools such as ownership, wealth, money, capital, trust, and accountability to have a comprehensive idea about the Shari’ah foundation of Islamic banking. The methodology used in this conceptual study is a critical analysis of the literature survey. The literature on the concept of Shari’ah basis of Islamic banking is read to understand the basic components of Shari’ah and its principles to govern economic practices to examine its application in the Islamic banking industry and identify the Shari’ah foundation of the modes and contracts used by the modern Islamic banking industry.
Downloads
References
AAOIFI, (2010). “Standard number 30”, Shari’ah Standards, Bahrain, Available at http://aaoifi.com.
Abd Jabbar, H.S.F. (2009). “Sharia-compliant financial instruments: principles and practice”, Company Lawyer, Vol. 30, No. 1.
Abozaid, A. & Asyraf, W.D. (2007). The Challenges of Realizing Maqasid al-Shariah in Islamic Banking and Finance, International Conference on Islamic Banking and Finance Research and Development, IIUM, Malaysia.
Abu-Sulayman, A.A. (1993). Towards an Islamic theory of international relations: New directions for methodology and thought, Islamization of Knowledge Series; No 1, International Institute of Islamic Thought, USA.
Aggarwal, R.K. & Yousef, T. (2000). “Islamic banks and investment financing”, Journal of Money, Credit and Banking, Vol. 32, No. 1, pp. 93-120.
Ahmad, A.U.F. (2002). Islamic Banking in Bangladesh, An unpublished thesis for Master of Laws, School of Law University of Western Sydney.
Ahmad, A.U.F. (2010). Theory and Practice of Modern Islamic Finance: The Case Analysis from Australia, Brown Walker Press.
Ahmad, K. (2000). “Islamic finance and banking: the challenge and prospects”, Review of Islamic Economics, Vol. 9, No. 1, pp. 57-82.
Ahmed, H. (2011). “Maqasid al-Shari'ah and Islamic financial products: a framework for assessment”, ISRA International Journal of Islamic Finance, Vol. 3, No. 1, pp. 149-160.
Ahmed H. & Aleshaikh, N.M. (2014). “Debate on Tawarruq: Historical Discourse and Current Rulings”, Arab Law Quarterly, Brill, Vol. 28, No. 1.
Anwar, M. (2003). “Islamicity of Banking and Modes of Islamic Banking”, Arab Law Quarterly, Brill, Vol. 18, No. 1.
Anwar, H. & Millar, R. (ed.) (2008). Islamic Finance: A Guide for International Business and Investment, GMB publishing, London.
Al-Bukhari, M. (1999). Sahih Al-Bukhari, Darussalaam Publishers, Riyad, KSA.
Al-Bayhaqi, (2013). Al-Sunan al-Kubra, Dar-ul-Hadith, UK. Vol. 6, p. 111.
Al-Hajjaj, M.I. (1999). Sahih Al-Muslim, Darussalaam Publishers, Riyad, KSA.
Al-Nasai, A.A.R. (n.d.). Al-Sunan al-Nasai, retrieved on 01 July, 2018 from https://sunnah.com/nasai/35b/1
Al-Nawawi, Y.I.S. (1991). Forty Hadith of Al-Nawawi, Al-Basheer Publications and Translations, USA.
Al-Qardawi, Y. (1993). Madkhal li-dirasatil-Shari’ah al-Islamiyyah, Mu’assasat al-Risalah, Beirut. (Quoted from Shatibi, Muwafaqat, Vol.1, p. 243).
Al-Qur’an.
Ali, M. (2000). Equity and morality in Islamic banking, In Siddiqi, A. (ed.). Anthology of Islamic banking, Institute of Islamic Banking & Insurance, London, pp. 62-68.
Ayub, M. (2007). Understanding Islamic Finance, John Wiley & Sons Ltd., UK.
Ayub, M. (2002). Islamic Banking & Finance: Theory and Practice, State Bank of Pakistan, Karachi, p. 12.
Chong, B.S. & Liu, M.H. (2009). “Islamic banking: Interest-free or interest-based”, Science Direct, Vol. 17, No. 1.
Khalil, E.H. (2006). An overview of the Sharia’a prohibition of riba, in Thomas, A.K. (ed). Interest in Islamic Economics: Understanding riba, Rutledge, London and New York.
El-Sharif, B.B.K. (1990). Law and Practice of Profit Sharing in Islamic Banking with Particular Reference to Mudarabah and Murabahah, PhD Theses of University of Exeter, University of Exeter Press, p. 33.
El-Gamal, M. (2006). Islamic Finance: Law, Economics and Practice, Cambridge University Press.
Gambling, T. & Karim, R.A.A. (1991). Business and Accounting Ethics in Islam. Mansell Publishing Co. Limited, London.
Haniffa, R., Hudaib, M. & Mirza, A. M. (2004). Accounting policy choice within the Shari’ah Islamiah framework, Depatment of Accounting & MIS, King Fahd University of Petroleum & Mineral, Saudi Arabia, pp. 1-27.
Haron, S. (2000). “The philosophy of Islamic banking”, In Siddiqi, A. (ed.). Anthology of Islamic banking, Institute of Islamic Banking & Insurance, London.
Haron, S. (1997). Islamic banking: Rules & regulations, Pelanduk Publications, Kuala Lumpur.
Ibn al-Athir, A. (n.d.). The End of Strange Words in Hadith, Vol. 2, Islamic Library, Cairo.
Ibn al-Hajjaj, M. (n.d.), Sahih al-Muslim, retrieved on 01 July, 2018 from https://sunnah.com/muslim/22/137
Ibn-Majah, A.A.M. (1999). Sunan Ibn-Majah, Darussalaam Publishers.
IIFA, (2009). The ruling of International Islamic Fiqh Academy, 19th session held in UAE. Available at http://www.isra.my/fatwas/topics/commercial-banking/financing/tawarruq/item/342-oicfiqh-academy-ruled-organised-tawarruq-impermissible-in-2009.html.
Iqbal, J. (2009). Islamic Finance Management, Global Vision Publishing House.
Iqbal, Z. & Mirakhor, A. (1999). “Progress and challenges of Islamic banking”, Thunderbird International Business Review, Vol. 41, No. 4-5, p. 381.
Ismayi, S.I. (2012). The Principles of Islamic Finance, Its Challenges and Policy Suggestions for Azerbaijan, An unpublished thesis for Master of Science, Institute of Graduate Studies and Research, Eastern Mediterranean University, North Cyprus.
Izzi Dien, M. (2004). Islamic Law: from Historical Foundations to Contemporary Practice, Edinburgh University Press, UK.
Jabbar, S.F.A. (2009). “Islamic finance: fundamental principles and key financial institutions”, Company Lawyer, Vol. 30, No. 1, p. 1.
Kamali, M.H. (1989). Principles of Islamic Jurisprudence, The Islamic Texts Society, UK.
Kamali, M. H. (2000). Islamic Commercial Law: An Analysis of Futures and Options, The Islamic Texts Society, UK, pp. 69-70.
Kamali, M.H. (2008). Shari'ah Law: An Introduction, One world Publications, Oxford, UK, p. 32.
Karsten, I. (1983). “Islam and financial intermediation”, Banker’s Journal Malaysia, Vol. 46, pp. 32-50.
Kettell, B. (2010). Islamic Finance in a Nutshell: a Guide for Non-Specialists, John Wiley & Sons Ltd.
Khan, M.A. (1994). An Introduction to Islamic Economics, International Institute of Islamic Thought and Institute of Policy Studies, Islamabad, Pakistan, p. 6.
Khan, F. & Porzio, M. (2010). Islamic Banking and Finance in the European Union: a Challenge Studies in Islamic Finance, Accounting and Governance, Edward Elgar.
Khir, K., Gupta, L. & Shanmugan, B. (2008). Islamic banking: A practical perspective, Pearson Malaysia Sdn. Bhd., Selangor.
Kuran, T. (2004). Islam and Mammon: The Economic Predicaments of Islamism, Princeton University Press, USA.
Lasasna, A. (2015). Bay' al-Inah, Bay’ al wafa and Tawarruq: Liquidity management- based transactions, Fiqh Muamalat course (FQ 6123/FQ 5123), International Centre for Islamic Finance.
Lee, Kun-Ho & Ullah, S. (2007). “Integration of Islamic and Conventional Finance”, International Review of Business Research Papers, Vol. 3, No. 5.
Lewis, M.K. & Algaoud, L. (2001). Islamic Banking, Edward Elgar Publishing, Cheltenham, UK.
Malik-ibn-Anas (1999). Al-Muwatta, Darussalaam Publishers.
Mannan, M.A. (1980). Islamic Economic: Theory and Practice, Idarah-i-Adabiyat-i-Delhi, New Delhi, India.
Mahajan, V.D. (1991). Legal Theory and Justice, Orient Longman Publication, New Delhi, India.
Meera, A.K.M. & Dzuljastri, A.R. (2005). “Islamic Home Financing Through Musharakah Mutanaqisah and al-Bai Bithaman Ajil Contracts: Comparative Analysis”, Journal of The International Association for Islamic Economics, Vol. 9, No. 2, p. 7.
Meera, A.K.M. & Larbani, M. (2009). “Ownership Effects of Fractional Reserve System”, Homanomics, Vol. 25 No. 4, pp. 101-116.
Muslehuddin, M. (1978). Insurance and Islamic Law, Islamic Publications, Ltd., Lahore, p. 12.
Nyazee, I.A.K. (2005). Theories of Islamic law, IIIT and Islamic Research Institute, Islamabad, p. 235.
Nyazee, I.A.K. (1998). Outlines of Islamic Jurisprudence, Advanced Legal Studies Institute, Islamabad, Pakistan.
Nawawi, R.H. (1999). Islamic law of commercial transaction, CERT Publications, Kuala Lumpur.
Omar, A.M. (2010). Dictionary of Holy Qur’an, (45:18), NOOR foundation-international, 2nd edition, p. 13.
Pramanik, A.H. (1993). Development and distribution in Islam. Pelanduk Publications, Kuala Lumpur.
Qureshi, A.I. (1991). Islam and The Theory of Interest, Shaikh Muhammad Ashraf, Kashmiribazar, Lahore, Pakistan, p. 11.
Ramadan, T. (2004). Western Muslims and the Future of Islam, Oxford University Press, New York, p. 31.
Rosly, S.A. (2005). Critical Issues on Islamic Banking and Financial Markets: Islamic Economics, Banking and Finance, Investments, Takaful and Financial Planning, Author House, Kuala Lumpur.
Samad, A. & Hassan, M.K. (1999). “The performance of Malaysian Islamic bank during 1984-1997: An exploratory study”, International Journal of Islamic Financial Services, Vol. 1, No. 3, pp. 1-14.
Schoon, N. (2009). Islamic Banking and Finance, Spiramus Press Ltd., London.
Suyuti, J.U.D. (n.d.). Al-Jami al-Saghir (under the word ghabn; Kanz al Ummal, Kitab al-. Buyu, al-Bab al-thani, al-fasl al-thani, on the authority of Sunan al-Bayhaqi) vol. 2., Australian Islamic Library.
Siddiqi, M.N. (2004). Riba, bank interest and the rationale of its prohibition. Islamic Research and Training Institute, Islamic Development Bank, Jeddah, KSA, p. 18.
Siddiqui, A. (2008). “Financial contracts: risk and performance of Islamic banking”, Managerial Finance, Vol. 10.
Sulayman, A.D. (n.d.). Sunan Abu Dawud, retrieved on 01 July, 2018 from https://sunnah.com/abudawud/23/58
Triyuwono, I. (2004). Trust (Amanah), the divine symbol: Interpretations in the context of Islamic banking and accounting practices, In Fourth Asia Pacific Interdisciplinary Research in Accounting Conference, Singapore.
Usmani, M.I.A. (2002a), Meezan Bank’s Guide to Islamic Banking, Darul Ishaat Urdu, Pakistan.
Usmani, M.T. (2002b). An Introduction to Islamic Finance, Arab & Islamic Laws Series, Kluwer Law International, 1st edition.
Visser, H. (2009). Islamic Finance; Principles and Practices, Edward Elgar, UK.
Venardos, A.M. (2005). Islamic Banking and Finance in South-East Asia: Its Development and Future, World Scientific Publishing Co. Ltd.
World Bank, (2017). Islamic Finance, March 31, retrieved on July 24, 2018 from http://www.worldbank.org/en/topic/financialsector/brief/islamic-finance.
Yahia, A.R. (2010). The Art of Islamic Finance and Banking: Tools and Techniques for Community-Based Banking, John Wiley & Sons, Inc., USA., p. 41.
Yousef, T.M. (2004). “The Murabaha syndrome in Islamic finance: laws, institutions and politics”, in Henry, C.M. & Wilson, R. (ed.), The Politics of Islamic Finance, Edinburgh University Press, Edinburgh, pp. 63-80.
Yusof, E. & Fahmy, E. (2008). Are Islamic banks in Malaysia really Islamic?, MPRA Paper No. 20901, available at: http://mpra.ub.uni-muenchen.de/20901/ .
Zuhayli, W. (n.d.) Al-Wajeez fi Usul al-Fiqh, Dar al-Fikr al-Mu’asir, Beirut, p. 92.
Downloads
Published
Issue
Section
License
Copyright (c) 2024 Md. Thowhidul Islam
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
Dirasah International Journal of Islamic Studies by Perkumpulan Dosen Tarbiyah Islam Indonesia is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
Based on a work at.
