THE OBJECTIVE OF THE SHARÔÑAH IN ISLAMIC FINANCE: IDENTIFYING THE ENDS (MAQÓØID) AND THE MEANS (WASÓ’IL) ASSOC. PROF. DR. MOHAMAD AKRAM LALDIN DR. HAFAS FURQANI RESEARCH PAPER (No: 32/2012)
Nov 03, 2014
THE OBJECTIVE OF THE SHARÔÑAH IN ISLAMIC FINANCE: IDENTIFYING THE ENDS (MAQÓØID) AND THE MEANS (WASÓ’IL)
ASSOC. PROF. DR. MOHAMAD AKRAM LALDINDR. HAFAS FURQANI
RESEARCH PAPER (No: 32/2012)
THE OBJECTIVE OF THE SHARÔÑAH IN ISLAMIC
FINANCE: IDENTIFYING THE ENDS (MAQÓØID)
AND THE MEANS (WASÓ’IL)
Assoc. Prof. Dr. Mohamad Akram Laldin*, Dr. Hafas Furqani**
ABSTRACT
Islamic finance attempts to rearrange modern financial practices in line with SharÊÑah
principles and requirements. The industry has grown considerably over the last three
decades and has a global reach. As it rapidly develops in Muslim countries, it is also
penetrating the Western world. We contend that this trend is being driven not only by
operational compliance with the requirements of Islamic law but also because of the
objectives and values it promotes. Islamic banking and finance (IBF) was intended to
bring an Islamic vision of the economy to the financial sphere in an effort to realize
human wellbeing (maÎlaÍah) and a just and fair order of society. Financial practices
are to be arranged to meet those objectives. Recently, interest has been growing in the
industry regarding the objectives (maqÉÎid) of the SharÊÑah. This interest has been
driven by the perception that satisfying the minimum legal requirements of SharÊÑah
compliance may not be sufficient. The paper attempts to elaborate the concept
of maqÉÎid al-SharÊÑah and its application in the financial sphere. This is done by
investigating the ends (maqÉÎid) that ought to be realized and the means (wasÉ’il)
employed to realize those goals.
Keyword : maqÉÎid al-SharÊÑah, maÎlaÍah, Islamic finance, wealth, bank
* Assoc. Prof. Dr. Mohamad Akram Laldin is the Executive Director of ISRA. He can be contacted at [email protected].
** Dr. Hafas Furqani is a Researcher, ISRA. He can be contacted at [email protected].
ISRA RESEARCH PAPER (NO. 32/2012)Mohamad Akram Laldin, Hafas Furqani
2
1. INTRODUCTION
The development of Islamic finance is widely considered as phenomenal. Islamic
finance is not only used by Muslims but also by non-Muslims. While it continues to
develop rapidly in Muslim countries, it is also now penetrating the Western world.
Islamic finance is seen as a movement to translate religious teachings in the financial
sphere and economic life in general. Considerable attention has been given by scholars
and practitioners to both the theoretical and practical levels.
IBF’s emergence as a practical financial system is viewed as timely in the midst of a world
financial crisis and uncertain solutions to solve the crisis. Although the phenomenon
might be seen by some as part of the global Islamic resurgence to reconstruct Islam’s
legacy in modern times, the interest in its practice is actually triggered by the philosophy
and system of value it offers. It is expected that Islamic banking and finance can offer
a coherent perspective for understanding real economic problems as well as a genuine
alternative to the very foundations of how economics and finance should be managed
for human prosperity.
This spirit is very much reflected in the concept of maqÉÎid al-SharÊÑah (objectives of
the SharÊÑah), which comprise the basic philosophical foundations that give guidelines
and justifications for IBF’s raison d’être in contemporary times. In Islam, finance is
viewed as part of the SharÊÑah. Adherence to maqÉÎid al-SharÊÑah as the grand objective
of Islam is necessary for developing genuine and indisputable ‘Islamic’ finance. We see
recognition of this reflected in increased interest in using the maqÉÎid as a guide for
developing Islamic finance. During the first three decades (1970s-1990s) of attempts
to Islamize modern financial products, scholars and practitioners who structured
Islamic financial contracts mostly focused on technical considerations for fulfilling
Islamic legal requirements. However, there is growing acknowledgement that meeting
legal requirements through comprehensive and systematic technical procedures is not
sufficient. Attention should also be paid to the objectives of the SharÊÑah. The ‘SharÊÑah
compliant’ title carries the expectation of a financial system and practices that are truly
based on all the tenets of the SharÊÑah, namely the ÑaqÊdah, Islamic legal principles (al-
aÍkÉm al-sharÑiyyah) and ethics (akhlÉq), and that serve the noble goals prescribed by
Islam (maqÉÎid al-SharÊÑah).
In that light, this paper attempts to discuss the issue by exploring the objectives of the
SharÊÑah, which signify the philosophy and goals that Islam propagates in the effort to
THE OBJECTIVE OF THE SHARÔÑAH IN ISLAMIC FINANCE: IDENTIFYING THE ENDS (MAQÓØID) AND THE MEANS (WASÓ’IL)
3
establish an Islamic financial system. The maqÉÎid discussion will give us insight on
the raison d’être of Islamic finance and provide guidelines for the direction the industry
should be developed and what objectives are to be achieved. The discussion covers an
investigation of the meaning of maqÉÎid al-SharÊÑah, its dimensions and scope, how it
has been conceptualized, and the means (wasÉ’il) to apply in order to realize maqÉÎid
al-SharÊÑah in Islamic banking and finance.
2. MAQÓØID AL-SHARÔÑAH: MEANING AND SCOPE
MaqÉÎid al-SharÊÑah is translated as the objectives of the SharÊÑah. In the financial
sphere, maqÉÎid al-SharÊÑah is considered the grand framework that provides guidelines
and directions for ensuring the realization of maÎlaÍah (benefit) and the prevention of
mafsadah (harm) in all financial contracts. However, these objectives remain theoretical
until they are applied and brought into the realm of reality.
Before we discuss the concept of maqÉÎid al-SharÊÑah, it is important to understand
the meaning and scope of the SharÊÑah. This is because the SharÊÑah is the crux of the
discussion, and the maqÉÎid are only the goals derived from it. Al-QaraÌÉwÊ (2007:
16-22) points out that there are differing conceptualizations of SharÊÑah. One view
identifies it with Islamic laws (aÍkÉm) regulating ÑibÉdah (the Man-God relationship)
and muÑÉmalÉt (interactions between people). SharÊÑah in this perspective is limited to
the domain of law that regulates practical aspects of human life: personal, societal, state
or international relationships. When SharÊÑah is reduced to Islamic law, it is then often
equated with fiqh. In this dimension, maqÉÎid al-SharÊÑah are put in the framework of
the objectives of “Islamic law” or the objectives of Islam in legislation.
A second view of SharÊÑah is wider, considering it a system of life that encompasses all
aspects of the belief system (ÑaqÊdah), the system of ethics and morals (akhlÉq), and the
rules (aÍkÉm) governing the Man-God relationship (ÑibÉdah) and human relationships
(muÑÉmalÉt). SharÊÑah in this perspective covers the entire spectrum of Islamic life,
including belief, morality, virtues and principles of guidance on economic, political,
cultural and civilizational matters that concern not only the Muslim community but
all of humanity (Berghout, 2006: 55; cf. Abdul Rauf, 2002: 3). By this consideration,
SharÊÑah could be understood as synonymous with religion (al-dÊn), encompassing all
of human life: the uÎËl (roots) and furËÑ (branches).
ISRA RESEARCH PAPER (NO. 32/2012)Mohamad Akram Laldin, Hafas Furqani
4
This understanding comes from the original linguistic meaning of sharÊÑah as a “source
of water” or “path to a watering place”. SharÊÑah is therefore an all-embracing concept
and framework that exists to support human existence and provide the necessary
principles, values and means to establish human wellbeing (maÎÉliÍ al-ÑibÉd) in this
worldly life and the hereafter (Qur’an, 2:30; 3:191; 6:165; 38:27; 44:38-39; 42:13, 21;
45:18; 67: 1-2).
This paper embarks from the second definition of SharÊÑah. What is meant by maqÉÎid
al-SharÊÑah is all the goals and objectives of Islam as a system of life that constitutes
standards and criteria, values and guidance based on divine revelation (waÍÊ) to be
applied in practical life to solve human problems and guide the direction of human life.
More narrowly framed, maqÉÎid al-SharÊÑah are the underlying purposes upon which
the SharÊÑah is established.
The SharÊÑah as a system of life has been revealed primarily to protect human wellbeing
(maÎlaÍah; pl. maÎÉliÍ). All the SharÊÑah’s teachings, injunctions and prohibitions
are related to the grand wisdom (Íikmah) of blessing mankind and securing human
interests. All the SharÊÑah rules that contain obligations and duties bring benefit and
prosperity and all its prohibitions prevent them from harm and hardship (Laldin, 2010:
65).
To quote Ibn ÑÓshËr (2001: 273):
من مقاصدها على الدالة اإلسالمية الشريعة موارد استقرينا حنن إذا التشريع، استبان لنا من كليات دالئلها ومن جزئياهتا املستقراة أن املقصد العام من التشريع فيها هو حفظ نظام األمة واستدامة صالحه بصالح عقله، صالح صالحه ويشمل اإلنسان. نوع وهو عليه، املهيمن وصالح عمله، وصالح ما بني يديه من موجودات العامل الذي يعيش
فيه.From a comprehensive thematic analysis of textual sources of the
SharÊÑah pertaining to its objectives in tashrÊÑ, as well as from the
general rules and specific proofs, it is clear to us that the all-purpose
goal of the SharÊÑah (maqÎad ÑÉmm) is to preserve the social order
(ÍifÐ niÐÉm al-ummah) and ensure its healthy progress by promoting
THE OBJECTIVE OF THE SHARÔÑAH IN ISLAMIC FINANCE: IDENTIFYING THE ENDS (MAQÓØID) AND THE MEANS (WASÓ’IL)
5
the wellbeing and righteousness (salÉÍ) of that which prevails in
it, namely the human species. The wellbeing and virtue of human
beings consist of the soundness of their intellect (Ñaql), their deeds
(Ñamal) as well as the goodness of the things of the world where they
live that are put at their disposal.
MaqÉÎid al-SharÊÑah are therefore, in the literature, often equated with maÎlaÍah. Al-
QaraÌÉwÊ (2007: 116) states, “Wherever there is SharÊÑah, there is maÎlaÍah.” It is
impossible that the SharÊÑah, which has been created by God, would have been revealed
to harm human beings or the creation (Qur’an, 2: 143; 67: 14) or to make human life
difficult (Qur’an, 2:185, 220; 4:28, 5:6). Instead, it has been revealed to cause humans
and the whole creation to flourish in this life and the hereafter.
... ير يد الله بكم اليسر وال يريد بكم العسر“Allah intends every facility for you; He does not want to put you to
difficulties.” (2:185).
The Qur’an describes the role of Allah’s Messenger (peace be upon him) thus:
يأمرهم بالمعروف وينننهاهم عن المنكر ويل لم الطيبات ويرم عليهم البائث ويضع عننهم إصرهم واألغالل الت كانت عليهم فالذين آمنوا
به وعزروه ونصروه وا�نبنعوا النور الذي أنزل معه أولئك هم المفلحون“[H]e commands them to what is decent and forbids them what is
evil; he allows them as lawful what is good and pure and prohibits
them from what is bad and impure; He releases them from heavy
burdens and from the yokes that are upon them” (7:157).
The discussion of maqÉÎid al-SharÊÑah in Islamic finance should be seen in the broader
perspective. It should not be confined to Islamic objectives in laws related to financial
activities. In fact, it encompasses the purpose of Islam in financial activities. While
we agree that observing the philosophical underpinning of legal rulings is important,
a maqÉÎidic discussion would extend the subject matter to why and for what purposes
the contracts and financial activities are permitted or prohibited. The discussion of
ISRA RESEARCH PAPER (NO. 32/2012)Mohamad Akram Laldin, Hafas Furqani
6
SharÊÑah in Islamic finance does not halt at what contracts are permitted or prohibited,
what elements should be observed or what mechanisms should be followed to make
the contracts legally valid, as per the dominant current discourse in SharÊÑah-compliant
finance. Instead, the maqÉÎid discussion will open up the horizon of raison d’être: why
we need to develop Islamic finance in the first place, what goals are to be realized, and
in what direction the industry should proceed.
3. MAQÓØID AL-SHARÔÑAH : SOURCES AND DIMENSIONS
The ultimate source of maqÉÎid al-SharÊÑah is the Qur’an and Sunnah. The two are
the prime textual sources of Islam. The maqÉÎid are often found in texts (nuÎËÎ)
that explicitly or implicitly declare the purpose of the SharÊÑah in human life. In this
endeavour, intellectual reasoning (Ñaql) is significant. The interaction of Ñaql and nuÎËÎ
is not only legitimate but encouraged; the combination is necessary for elaborating the
comprehensive objectives (maqÉÎid ÑÉmmah), which are relevant to every aspect of
life, and those that relate to particular domains (maqÉÎid khÉÎÎah).1 They are derived
through direct interaction with the nuÎËÎ, which necessarily involves a certain measure
of independent reasoning and intellectual exertion (ijtihÉd) as those texts (particularly
in muÑÉmalÉt) tend to be expressed in general terms, leaving the technical procedures
and details of application to the wisdom of human beings. The Qur’anic statements on
economics, in particular, lay down ethical guidelines and principles as the foundations
for an Islamic value system in economics, instead of supplying operational mechanisms
for how the system would work. IjtihÉd, therefore, is required to elaborate detailed
rules and ensure that the SharÊÑah is applied in an appropriate way so that the objectives
it promotes are realized.
Al-ShÉÏibÊ (1997: II/6) proposes comprehensive istiqrÉ’ (inductive reading of the texts)
as an approach to identify the maqÉÎid al-SharÊÑah. This is done by collective thematic
reading of a variety of textual proclamations in the Qur’an and the authentic Prophetic
traditions to derive conclusions about the purposes of the SharÊÑah. Ibn ÑÓshËr (2006:
14-5), a well-known contemporary scholar who has elaborated al-ShÉÏibÊ’s work in
the modern context, elucidates that it is possible to derive the maqÉÎid by thematic
inferences (istiqrÉ’) of the Ñillah (ratio legis) behind the commands and prohibitions.
This is done by: (1) exhaustively surveying the SharÊÑah commands for which the text
1 Kamali (1999) observes that close interaction can be seen between SharÊÑah and fiqh. While SharÊÑah is the primary source and indicates the heavenly guide, it is fiqh (literally: understanding) that discovers the SharÊÑah’s underlying essence in the effort to find answers to contemporary issues.
THE OBJECTIVE OF THE SHARÔÑAH IN ISLAMIC FINANCE: IDENTIFYING THE ENDS (MAQÓØID) AND THE MEANS (WASÓ’IL)
7
provides verbal indication of the effective cause (Ñillah) and inferring the specific
objective that unites similar effective causes, or (2) surveying the textual proofs (nuÎËÎ)
in which the ratio legis (Ñillah) of the command or prohibition is not verbally indicated
but must, instead, be identified by contemplation and mental effort. When a number
of commands or prohibitions have a similar or common ratio legis (Ñillah), it can be
concluded that it is an intended objective of the SharÊÑah.2
This requires an integrative approach that looks beyond the particular concerns of
individual texts to pursue a comprehensive perspective of the general philosophy and
objectives of the SharÊÑah behind all injunctions or prohibitions. The texts are not
approached in a separated or scattered way (Qur’an, 2:85). Instead, they are read all
together in conjunction with their rationale and purposes so that a balance between process
and purpose, form and substance, literal interpretation and substantive understanding
in formulating the law can be achieved.3 Through a comprehensive reading of the texts
that captures the essential spirit that underlies the SharÊÑah’s objectives, we are able to
develop a grand framework of the SharÊÑah for real life application.
Embarking from the grand objective that the SharÊÑah is revealed in order to create
a balanced order in human life whereby justice (ÑadÉlah) is achieved and human
wellbeing (maÎlaÍah) is preserved, the derivative objectives can then be deduced
(Qur’an, 57:25). Comprehension of the grand objective of the SharÊÑah and the
principles that serve it provides a theoretical framework within which particular texts
are properly understood so that detailed legal rulings can be derived accordingly. Thus,
understanding of the maqÉÎid is an essential prerequisite for undertaking the process
of ijtihÉd and determining the operational framework and direction (al-QaraÌÉwÊ,
2007: 137). In ijtihÉd, all aspects, including Ñillah, maÎlaÍah, Íikmah and maqÉÎid al-
SharÊÑah, should be taken into consideration so that a good result is achieved that links
the universal with the particular, uÎËl (roots) with furËÑ (branches), and practical law
with its objectives.
Such a process would lead us to a balanced approach in deriving laws from the nuÎËÎ
and produce a moderate, balanced and just output (Qur’an, 55:8-9). This approach is
2 The best example is the classification of maÎlaÍah into three categories of ÌarËriyyÉt (essentials), ÍÉjiyyÉt (complementaries) and taÍsÊniyyÉt (embellishments). As we shall discuss later on, this classification is not detailed or explicitly mentioned in the texts of the Qur’Én and Sunnah. However, the scholars have deduced it based on their reading and understanding of the general objectives of the SharÊÑah mentioned in a wide variety of texts.
3 Kamali (2002: 17-19) discusses examples of possible errors that arise from deriving the law from a literal reading of the text without pondering over its objective and meaning.
ISRA RESEARCH PAPER (NO. 32/2012)Mohamad Akram Laldin, Hafas Furqani
8
the middle course between two extremes. On the one hand is an ultra-literal approach,
which ignores the maqÉÎid in favour of rigid textual understanding. On the other extreme
is an ultra-liberal approach, which throws around terms like maqÉÎid and maÎlaÍah in
the absence of any clearly defined methodology, and ends up disregarding, overriding
or twisting the meaning of the SharÊÑah texts.4
The rigorous technical rules of uÎËl al-fiqh for interpreting texts and deducing laws have
undergone centuries of discussion, debate and refinement. When the science of maqÉÎid
is used in tandem with this time-tested methodology, it opens up the avenues of ijtihÉd
in the effort to realize the spirit of the SharÊÑah in practical legal rulings (Kamali, 2002:
22). This approach would not only observe the “correct mechanisms” in the technical-
procedural sense but, most importantly, be able to capture the essential spirit and noble
goals with regard to particular actions. Hence, errors arising from a rigid literal reading
of the text could be avoided. It will open up the horizons by understanding texts in
relation to the context of practical realities and view the SharÊÑah as a unity in which the
detailed rules are to be read within a general framework and detailed actions are to be
set in line with larger goals. MaqÉÎid-based ijtihÉd would link the SharÊÑah principles
and objectives to all situations in a two-way process that ensures “correspondence”
between human circumstances in all places and times and the grand framework of
the SharÊÑah (El-Mesawi, 2006: 92). In the literature, the effort is identified as jalb al-
maÎlaÍah (confirming benefits); taghyÊr aw dafÑ al-mafsadah (changing or repelling
the harmful); sadd al-dharÊÑah (blocking apparently lawful means that lead to harmful
results); and rafÑ al-Íaraj (removing hardship).
This should be done continuously until we arrive at what Ibn al-Qayyim (IÑlÉm al-
MuwaqqiÑÊn, 3/14-15) says:
All of [the SharÊÑah] is justice, all of it is benefits, and all of it is
wisdom. Any issue [in which the ruling] departs from justice to
injustice, from mercy to its opposite, from benefit to harm or
corruption, and from wisdom to arbitrariness is not, in fact, part
of the SharÊÑah, even if it has been attributed to it by a process of
interpretation.5
4 Contradiction between texts and maÎlaÍah derived from the reading of the texts is possible in practice and can be seen in the literature. Al-QaraÌÉwÊ (2007: 141), nevertheless, limits this to the case of ÐannÊ (probable) texts or ÐannÊ maÎlaÍah. QaÏÑÊ (definitive) texts will not contradict qaÏÑÊ maÎlaÍah, and vice versa. Therefore, ta’wÊl (interpretation) of ÐannÊ texts is important in order to find the qaÏÑÊ maÎlaÍah.
5 The full quotation in IÑlÉm al-MuwaqqiÑÊn (3/11) is as follows:
فإن الشريعة مبنناها وأساسها على الكم ومصالح العباد ف المعاش والمعاد، وهي عدل كلها، ورحة كلها، ومصالح كلها، وحكمة
THE OBJECTIVE OF THE SHARÔÑAH IN ISLAMIC FINANCE: IDENTIFYING THE ENDS (MAQÓØID) AND THE MEANS (WASÓ’IL)
9
All the SharÊÑah rules that contain obligations and duties bring benefit and prosperity
and all its prohibitions prevent them from harm and hardship (Laldin, 2010: 65).
MaqÉÎid al-SharÊÑah are basically related to human interest by providing for a good
order of life and wellbeing (maÎlaÍah). Therefore, the discussion of maqÉÎid embraces
all dimensions of human life in the individual and community spheres, the micro and
macro dimensions, as well as religious (dÊn) and worldly (dunyÉ) matters.6 The SharÊÑah
would ensure the benefits to the individual and to the community, and all its rulings
are designed to protect those benefits and facilitate improvement and perfection of the
conditions of human life on earth (Kamali, 2008: 1).
This is reflected in the maqÉÎid discourse, in which scholars have attempted to clas-
sify them into various classifications to capture the essential Islamic spirit and di-
rection in human life. Al-GhazÉlÊ is widely acknowledged as the first to attempt to
systematize thinking about the maqÉÎid of the SharÊÑah. In al-MustaÎfÉ (1993: I/74),
he classifies the maqÉÎid based on a hierarchy of priority into essentials (ÌarËriyyÉt),
complementaries (ÍÉjiyyÉt) and embellishments (taÍsÊniyyÉt).7
The essentials refer to five fundamental matters: faith (dÊn), life (nafs), intellect (Ñaql),
lineage (nasl), and property (mÉl). Their protection is essential to normal order in
society as well as to the survival and wellbeing of individuals, in their religious and
worldly affairs; and their destruction will lead to chaos and collapse of normal order
in individuals’ lives and/or the society. As the essential maÎÉliÍ constitute an all-
encompassing theme of the SharÊÑah and all of its laws are in one way or another related
to the protection of these benefits, the SharÊÑah takes affirmative and also punitive
measures to promote and protect these values (Kamali, 2008: 4).8
ها، وعن المصلحة إل المفسدة، وعن الكمة إل البنعث؛ كلها؛ فكل مسألة خرجت عن العدل إل الور، وعن الرحة إل ضدالة فنليست من الشريعة وإن أدخلت فيها بالتأويل؛ فالشريعة عدل الله بنني عباده، ورحته بنني خلقه، وظله ف أرضه، وحكمته الد عليه وعلى صدق رسوله - صلى الله عليه وسلم - أت داللة وأصد�نها، وهي نوره الذي به أبصر المبصرون، وهداه الذي به اهتدىالمهتدون، وشفاؤه التام الذي به دواء كل عليل، وطريقه المستقيم الذي من استنقام عليه فنقد استنقام
6 If fiqh is related to knowledge of Islamic rulings mainly related to the practical aspects of individual conduct, maqÉÎid will bring societal dimensions into the formulation of law.
7 Al-GhazÉlÊ clarifies what he means by maqÉÎid and maÎÉliÍ as follows:
أما المصلحة فهي عبارة ف األصل عن جلب مننفعة أو دفع مضرة، ولسنا ننعن به ذلك، فإن جلب المننفعة ودفع المضرة مقاصد اللق وصالح اللق ف تصيل مقاصدهم، لكنا ننعن بالمصلحة المحافظة على مقصود الشرع، ومقصود الشرع من اللق خسة: وهو أن يفظ عليهم ديننهم وننفسهم وعقلهم ونسلهم ومالم، فكل ما ينتضمن حفظ هذه األصول المسة فنهو مصلحة، وكل ما.ينفوت هذه األصول فنهو مفسدة ودفنعها مصلحة
Al-ShÉÏibÊ (1997) and Ibn ÑÓshËr (2006) acknowledge the classification and elaborate further on details. A recent elaboration in the contemporary context has been done by Umer Chapra (2008).
8 While this classification is widely recognized in the literature and applied in fiqh, it has also received
ISRA RESEARCH PAPER (NO. 32/2012)Mohamad Akram Laldin, Hafas Furqani
10
The complementary benefits (al-ÍÉjiyyÉt) supplement the five essential maÎÉliÍ
facilitating people’s affairs in a better way and removing severity and hardship, although
their loss does not pose a threat to the very survival of normal order. The taÍsÊniyyÉt
(embellishments) are the maÎÉliÍ whose realisation leads to life’s improvement (taÍsÊn),
beautification (tazyÊn), and perfection (kamÉliyyÉt), and the attainment of that which
is desirable without any violation of good moral standards (makÉrim al-akhlÉq) or an
excessive or extravagant lifestyle (maÍÉsin al-ÑÉdÉt) (al-ShÉÏibÊ, al-MuwÉfaqÉt, II/22).
The maqÉÎid are further classified, based on their scope, into the following:
1. The Divine purposes in the SharÊÑah (maqÉÎid al-ShÉrÊÑ) and human goals
and purposes (maqÉÎid al-mukallaf).
2. The primary objectives (al-maqÉÎid al-aÎliyyah), which are the primary
goals intended in the SharÊÑah and the basic purposes by which human
conduct is evaluated, and subsidiary goals (al-maqÉÎid al-tÉbiÑah).
3. The comprehensive purposes (al-maqÉÎid al-ÑÉmmah), which characterize
Islam as a system of life and guide the enactment of regulations in their
totality, and the particular goals (al-maqÉÎid al-khÉÎÎah), which are theme-
specific and relate to specific areas of life.
4. The definitive goals (al-maqÉÎid al-qatÑiyyah), which are supported by
clear evidence in the texts (nuÎËÎ), and speculative purposes (al-maqÉÎid
al-Ðanniyyah), which are not supported by clear evidence and are, hence,
subject to disagreement.
The classification shows the wide-range dimensions and varieties of maqÉÎid al-
SharÊÑah. Realizing maÎlaÍah and avoiding mafsadah is essentially a timeless agenda
that requires constant effort. This is because maÎlaÍah is characterized by iÍÉÏah
(comprehensiveness, covering all dimensions of human well-being), tawassuÑ (its
scope expands with human progress) and ziyÉdah (improvement from one level to the
highest level of well-being). The effort to achieve maqÉÎid al-SharÊÑah improves the
self and society. Movement from maÎlaÍah ÌarËriyyÉh to ÍÉjiyyÉh and taÍsiniyyÉh;
criticism from scholars who say the classification is arbitrary in limiting the scope of human wellbeing to five categories, excluding other important dimensions and unnecessarily narrowing the maqÉÎid. Attia (2007: 18-19) points out that many classical scholars added a sixth category, ÑirÌ (dignity or honor), to the ÌarËriyyÉt. Dignity is clearly considered important in the SharÊÑah and, indeed, in all societies. Among those who have explicitly expanded the list of ÌarËriyyÉt, or expressed the need to do so, are Ibn Taymiyyah, Ibn FarÍËn and contemporary scholars such as Ibn ÑÓshËr, al-QaraÌÉwÊ, MuÍammad al-GhazÉlÊ, and al-RaysËnÊ. Among the additional maqÉÎid that have been proposed are equality, justice, and freedom. (Attia, 2007: 77 passim).
THE OBJECTIVE OF THE SHARÔÑAH IN ISLAMIC FINANCE: IDENTIFYING THE ENDS (MAQÓØID) AND THE MEANS (WASÓ’IL)
11
from maÎlaÍah ÑÉmmah to maÎlaÍah khÉÎÎah; and from maÎlaÍah dunyÉwiyyah to
maÎlaÍah ukhrÉwiyyah, reflects an increase in an individual’s or society’s level of well-
being. The more that benefits are acquired and the more that harm is eliminated in all
dimensions of human life, the better the conditions will be. Consequently, as realizing
maÎlaÍah means realizing falÉÍ, an individual’s behavior should always be oriented
to realize maÎlaÍah. Therefore, realizing maÎlaÍah is a positive force for individuals
as well as society. For an individual, it is a continuous effort to reach a perfect state
of being (insÉn kÉmil). For society, it is a constructive force that guides it and helps to
remove its imbalances in order to become a good society (khayr ummah).
Figure 1.1
Dimension and Characteristics of MaÎlaÍah
111111 1
2
3
D
E A
B
C
2
2
2
2
3
3
3 3
Notes:
1. MaÎlaÍah dimensions:
(A). DÊn (Religion); (B). 'Aql (Intellect); (C). Nafs (Life); (D). Nasl (Lineage);
(E). MÉl (Property).
2. MaÎlaÍah hierarchy:
(1) ÖarËriyyÉt (the essentials needs); (2). ×ÉjiyyÉt (the comforts needs); and
(3). TaÍsiniyyÉt (the embellishments needs).
3. MaÎlaÍah characteristics:
(1) Tawassu’ (Expansion); 2). ZiyÉdah (Improvement); 3) IÍÉÏah
(comprehensiveness); and 4). Boundaries: Goals, Visions, Moralities, Values.
ISRA RESEARCH PAPER (NO. 32/2012)Mohamad Akram Laldin, Hafas Furqani
12
On the other hand, the classification also reflects a hierarchical order in practical
application. The order is structured based on the level of authority, reference to the
nuÎËÎ, and scope of application. The order can then be classified as follows. The highest
comprise maqÉÎid al-ShÉrÊÑ, al-maqÉÎid al-aÎliyyah, al-maqÉÎid al-qatÑiyyah, and al-
maqÉÎid al-ÑÉmmah. The lowest comprise maqÉÎid al-mukallaf, al-maqÉÎid al-tÉbiÑah,
al-maqÉÎid al-Ðanniyyah and al-maqÉÎid al-khÉÎÎah. This means, in identifying the
maqÉÎid, that the lower level should logically follow the higher level and the higher
level should embrace all dimensions of the lower levels. This also means, in the case of
differences and contradictions, that priority is to be given to the higher level over the
lower level.
4. SHARÔÑAH OBJECTIVES IN FINANCIAL ACTIVITIES:
IDENTIFYING THE GOALS (MAQÓØID)
As the SharÊÑah is designed on the basis of and for the purpose of human maÎlaÍah,
maqÉÎid al-SharÊÑah9 constitute the various dimensions of human needs, and their
fulfilment will create balanced satisfaction in human life at the level of both the
individual and the society and help realize human wellbeing. Therefore, maqÉÎid
would encompass the micro and macro dimensions of individual and collective life.
With reference to Islamic finance in particular, maqÉÎid al-SharÊÑah refer to the overall
goals and meaning that the SharÊÑah aims to achieve from its principles and rulings
related to financial activities and transactions (Laldin, 2008: 77).
The maqÉÎid discussion in the literature on Islamic finance is usually framed in terms
of the protection of wealth (ÍifÐ al-mÉl) as mentioned by al-GhazÉlÊ in his classification
of maÎlaÍah (Al-Khelaifi: 2004; Laldin: 2010; Dusuki and Bouheraoua: 2011; Ahmed:
2011). This approach is justified as the subject matter of finance is basically how to
allocate resources from the surplus sector (capital providers) to the deficit sector (capital
users) so that wealth is smoothly circulated and human welfare is realized. As finance
deals with wealth allocation and appropriation (from mobilization until utilization), the
maqÉÎid that come under the rubric of ÍifÐ al-mÉl should, therefore, be understood and
discussed by looking at the nature, function and role of wealth in relation to the primary
objective of realizing human wellbeing, individually and collectively, by acquiring
benefit (maÎlaÍah) and preventing harm (mafsadah) (Qur’an, 5:6).10
9 To quote Ibn al-Qayyim (1991, 3/11) “الشريعة مبنية على مصالح العباد”.10 The principle of realizing maÎlaÍah (benefit) and repelling harm (mafsadah) is viewed as the general
objective of SharÊÑah in realizing human wellbeing. SharÊÑah is designed in order to accomplish this mission.
THE OBJECTIVE OF THE SHARÔÑAH IN ISLAMIC FINANCE: IDENTIFYING THE ENDS (MAQÓØID) AND THE MEANS (WASÓ’IL)
13
Reflecting upon various texts of the Qur’an and the Sunnah on financial activities, it can
be stated that the SharÊÑah has observed specific objectives in the enactment of financial
laws and principles. These objectives serve the financial needs of human beings. They
include the circulation of wealth in the society, enjoining fair and transparent financial
practices and promoting socioeconomic justice.
4.1. Wealth Circulation
Wealth circulation comprises all processes related to its creation, consumption and
distribution. This objective is derived from the Qur’an, which provides, as a rationale
for instructions to distribute one source of wealth among a number of different groups,
“…so that wealth is not circulated among the rich in the society only” (Qur’an, 59: 7).
Islam intends to ensure that resources are circulated in the economy to activate human
potential in the pursuit of wellbeing and intergenerational continuity.
This perspective embarks from the concept that wealth is considered as God’s bounty
(faÌl AllÉh) entrusted (amÉnah) to its recipient. As God’s bounty, wealth itself reflects
the blessings of God on man (Qur’an, 62: 10) and it is, therefore, naturally good (khayr)
(Qur’an, 2: 215, 272-3; 11:84; 22:11; 31:32; 50:25; 68:12; 70:12). Working to acquire
wealth is, therefore, not only legitimated but highly praised (Qur’an, 16:97; 4:32).
Wealth is also God’s trust (amÉnah) to be directed to the higher objective as implied
in the mission of khalÊfah (Qur’an, 23:51-52; 115). While private ownership and
consumption are recognized (Qur’an, 3:14-15), they have not been created to merely
satisfy man’s wants (Qur’an, 30:34) and, hence, deny and neglect the right (Íaqq) of
society (Qur’an, 89:17-20). Instead, wealth is to be used in the best way to fulfil the
need of individuals and society for a better life (Qur’an, 16:97) without any corruption
or misuse (ifsÉd, 11: 86), wastage (isrÉf, 6: 141; 25: 67) and squandering (tabdhÊr, 17:
26). Likewise, shortsighted, self-interested behaviour in acquiring and utilizing wealth
by spoiling the environment, or at the expense of society and future generations, is
strongly condemned (Qur’an, 28:77). Wealth should be created and augmented through
the right means (Qur’an, 4:29) and spent for the right ends (Qur’an, 3:92).
Commercial and financial activities are viewed positively as mechanisms to circulate
wealth among all the sections of society so that it is not concentrated in the hands
of a few and instead goes into all sectors of the economy that would benefit human
wellbeing. Islam encourages wealth to be employed in productive activities. The funds
ISRA RESEARCH PAPER (NO. 32/2012)Mohamad Akram Laldin, Hafas Furqani
14
should not be wasted, left idle (Qur’an, 9:34) or managed unprofessionally (Qur’an,
4:5). In fact, any funds that are not employed will be “penalized” through zakÉh, which
will gradually reduce the volume of wealth and put it back into circulation. ZakÉh is a
mechanism that necessarily keeps wealth in continuous circulation.
The Islamic economic system as a general framework would ensure fair and equitable
mobilization and distribution of resources. Islamic finance, in particular, is developed
in line with Islam’s objective of wealth circulation by observing Islamic rules on
transactions, which have been legislated to protect wealth (ÍifÐ al-mÉl). Islamic
financial institutions, including Islamic banks, takÉful companies, mutual funds, etc,
play a role in circulating resources in society and increasing human wellbeing.
4.2. Fair and Transparent Financial Practices
Permissibility (ibÉÍah) is the overarching principle governing commercial and
financial transactions. This ibÉÍah principle is aimed to facilitate the realization of
maÎlaÍah and the removal of hardship in financial transactions. Freedom of contract is
therefore not only recognized as part of the system but is also guaranteed and treated as
a necessary element of a valid contract. Nevertheless, this freedom is to be used within
an atmosphere of fairness, equity, justice and high morality. Any contract stipulated and
agreed by both parties should be respected and enforced (Qur’an, 5:1).
Transparency means that all financial transactions must be conducted in such a manner
that all the parties are clear about all important facts concerning the transactions. This
information symmetry prevents the main cause of disputes and damage to any party
in all dimensions of the contract. The Qur’an has stressed that all agreements and
contracts should be as transparent and clear as possible (Qur’an, 2:282, 17:35, 11:84,
26:181-182, 55:9, 83:1-3).
Fairness means equity between the transacting parties, honesty and truthfulness, as well
as efficiency in transactions. Fraud, deception, manipulation of any kind are therefore
condemned. Islam insists that the contract is only legitimate if there is mutual consent
of the parties. A transaction that takes place under pressure or accompanied by fraud or
misrepresentation by any party is not valid. Likewise, Islam disapproves all commercial
practices that involve explicit or implicit harm and injustice to one of the contracting
parties or to the public at large or which restricts freedom of trade, or stands in violation
of the Qur’anic injunctions and the approved business conduct (Balala, 2011: 6).
THE OBJECTIVE OF THE SHARÔÑAH IN ISLAMIC FINANCE: IDENTIFYING THE ENDS (MAQÓØID) AND THE MEANS (WASÓ’IL)
15
The purpose is to protect the contracting parties from mutual injustice and resulting
disputes (Qur’an, 2: 282). In addition, this objective also seeks to rid Islamic finance
from misuse and squander, and to prevent disputes, arguments and grudges among the
community regarding financial matters as well as to prevent one party’s gain at another’s
expense. Kamali (2008: 22), in this regard, firmly notes that justice and fairness are the
hallmark values in commercial contracts. If it proves to be an instrument of injustice,
such a contract must be set aside, and justice, which is the goal and maqÎËd of the
Lawgiver, must be given priority over considerations of conformity to an untenable
contract.
4.3. Justice in the Macro and Micro Dimensions
The maqÎad of wealth circulation is a macro goal of the SharÊÑah while the maqÉÎid
of fair and transparent financial practices are related to micro goals of the SharÊÑah in
transactional instruments and mechanisms. The maqÎad of justice embraces both micro
and macro dimensions. This maqÎad is related to the desire of having a just order of
society as well as just dealings among individuals in financial transactions. Justice in
Islam embraces the individual and social dimensions.
حسان وإيتاء ذي القرب وينننهى عن الفحشاء إن الله يأمر بالعدل واإلوالمنكر والبنغي يعظكم لعلكم �ذكرون
“Allah commands justice, doing of good, and generosity towards relatives,
and He forbids what is shameful, blameworthy and oppressive. He teaches
you so that you may take heed” (Qur’an, 16:90).
This objective is characterized in the Qur’an with the concepts of right, fairness, putting
things in their right place, equality, harmony, balance and moderation. It is a right
(Íaqq) to have equal opportunity, to be free from exploitation and to receive true value
in exchange for one’s labour. This objective underlies the substantive and regulative
rules of the SharÊÑah, the formation of the community and the behaviour of individuals
(Iqbal and Mirakhor, 2007).
At the macro level, the goal is to realize social justice. The Islamic financial system
attempts to realize economic justice through wealth circulation, efficiency in resource
utilization, fulfilling society’s basic needs, elimination of poverty and improving
human wellbeing. The main purpose of resource circulation (distribution) is to achieve
justice, maximum efficiency and improvement of human wellbeing in general.
ISRA RESEARCH PAPER (NO. 32/2012)Mohamad Akram Laldin, Hafas Furqani
16
This is really a challenge as earthly human life has a natural tendency to end up with
unequal distribution, i.e., inequality is natural; humanity is made up of the rich and the
poor, the bright and the dull, the strong and the sick, the haves and the have-nots. The
very structure of society is built up on the basis of human inequality as a “test”, a moral
struggle by individuals on the basis of mutual dependency despite the differences in
Divine gifts (Qur’an, 2:255; 4:37; 8:74; 16:74). Human beings are expected to cooperate
among themselves to properly perform the task and mission of khilÉfah (Qur’an, 11:61)
in line with their role as ÑÊbÉd AllÉh (the slaves/worshippers of Allah). Inequality
requires the rich to help the poor and the needy (Qur’an, 9:71; 24:22) rather than taking
the opportunity to exploit others (Qur’an, 107:1–7). While competition among society
is appreciated, cooperation that results from the spirit of brotherhood among society
is more appreciated (Qur’an, 2:277; 6:165; 16: 71; 17:30). Such social commitment is
praised in the Qur’an as a mark of the individual’s spiritual ascent. God’s love is in this
spirit of sacrifice for others to create a just society (Qur’an, 4:80–81; 16:55).11
The Islamic system of economics is structured to coordinate and harmonize the various
economic interests of individuals and groups within the society to achieve the ideals
mentioned above. Islam sustains this social dimension by establishing important
economic institutions such as zakÉh, irth (standardized distribution of inheritance),
waqf (charitable endowment), Îadaqah (charity), infÉq (spending for good purposes)
and others.12 This is done on the basis of obligations as well as voluntary actions that
emerge from an individual’s consciousness of human brotherhood to contribute to
society’s development. This mix of individual freedom and social justice describe the
egalitarian principles of Islam that ensure the system is both efficient and equitable
(Sharif, 2005: 102). This framework guarantees a free market with a fair process and just
mechanism that ensures fair circulation of resources in society and maintains a stable
yet dynamic economic life. The State also plays a role in an Islamic economic system
to ensure that individual freedom is respected while social objectives are achieved.
Justice also embraces individual dealings. Economic transactions demand equal rights
and opportunities and cannot become effective without the mutual consent (tarÉÌÊ)
11 In this perspective, sacrifice for society is in human self-interest (Qur’an, 12:88; 34:38; 4:114) in that it purifies the soul and makes it beautiful so that love of God may be produced in it (Qur’an, 9:103) and hence God will bless the person (Qur’an, 9:71) with wellbeing in the eternal life of the hereafter (Qur’an, 30:38).
12 In addition to that, several economic actions that lead to social enmity/exploitation or reduce social wellbeing are prohibited. RibÉ, for example, is prohibited as this action only aims at increasing one’s personal welfare through unjustified means. ZakÉh, on the other hand, is obliged and encouraged, as it improves the welfare of the whole society.
THE OBJECTIVE OF THE SHARÔÑAH IN ISLAMIC FINANCE: IDENTIFYING THE ENDS (MAQÓØID) AND THE MEANS (WASÓ’IL)
17
of the contracting parties. Likewise, unfair dealings or unjustified actions that lead
to economic injustice or exploitation, such as bribery (rishwah), fraud or deception
(ghish), cheating (tadlÊs), uncertainty and lack of clarity (gharar) or unjustified
increase in wealth (ribÉ) are condemned. RibÉ is highly correlated with injustice. The
prohibition is not limited to interest on loans. Instead, it is a comprehensive concept
that encompasses all factors of production and distribution, such as capital, land and
labour whereby one party attempts to gain benefit at the expense of the other party
without giving a reasonable counter value (ÑiwaÌ) (AbuSulayman, 1998: 99). RibÉ is
forbidden on the ground that it fosters the unjust acquisition of wealth at the expense of
social justice, the equitable distribution of wealth and the wellbeing of the community
(Choudhury, 2012). The abolition of ribÉ also implies that Islam promotes cooperative
and participatory financing for the mobilization and circulation of resources in society
as a means of realizing general productivity and wellbeing.
5. MAQÓØID AL-SHARÔÑAH IN ISLAMIC FINANCIAL ACTIVITIES:
INSTITUTING THE MEANS (WASÓ’IL)
As the objective of the SharÊÑah is none other than human wellbeing, the SharÊÑah
provides the necessary ways and means (wasÉ’il) to establish and preserve it in the
actual human context. Our previous discussion of the nature of maqÉÎid established
that they aim at establishing maÎlaÍah and preventing or removing mafsadah. WasÉ’il
(means) can be classified, in accord with the nature of maqÉÎid, into those that help
achieve maÎlaÍah (in this case, facilitating the circulation of wealth, promoting fair
and transparent financial dealings and realizing social justice) and those that prevent
mafsadah (i.e., factors that would prevent wealth from smoothly circulating, lead to
unfair financial dealings or undermine social justice).
MaqÉÎid and wasÉ’il, however, differ in certain aspects of their nature. While principles
and objectives (maqÉÎid) are permanent and unchanging, the means (wasÉ’il) are
relatively temporary, dynamic, conditional and amenable to change. WasÉ’il are not
restricted or limited, and hence creativity and elaboration are required so that the
maqÉÎid can be effectively achieved. The following discussion will investigate some
of these directives and mechanisms.
ISRA RESEARCH PAPER (NO. 32/2012)Mohamad Akram Laldin, Hafas Furqani
18
5.1. Facilitating Financial Contracts
To institute smooth circulation of wealth in society, the SharÊÑah facilitates various
types of transactions and strongly encourages Muslims to participate and undertake
necessary types of financial activities (Laldin, 2008). In commercial activities, the
underlying principle is that of permissibility (ibÉÍah). The transactions validated in the
Qur’an and Sunnah are not exhaustive, and new transactions can be introduced as long
as they do not contradict the principles of the SharÊÑah. Therefore, freedom of contracts
is guaranteed as long as it does not annul fairness and good measure as propagated by
maqÉÎid al-SharÊÑah (Kamali 2000: 69-70).
In general, Islamic nominate contracts related to economic transactions are classified
into three main categories: exchange (muÑÉwaÌÉt), partnership (ishtirÉk), and gratuitous
(tabarruÑÉt). Exchange contracts include simple spot sales (bayÑ), sales creating debt
like bayÑ mu’ajjal, salam, istiÎnÉÑ, ijÉrah, and work done for a reward (juÑÉlah).
Partnership contracts are ones in which one party assigns work/capital/obligation
to one or more other parties. These contracts include agency (wakÉlah), partnership
(sharikah) contracts in the forms of muÌÉrabah and mushÉrakah, debt assignment
(ÍawÉlah), and pledge or mortgage (rahn). In gratuitous contracts, ownership or rights
of use are transferred without consideration (payment) or compensation. Gratuitous
contracts include loans (ÑÉriyah and qarÌ), deposits (wadÊÑah), gifts (hibah), and
guarantees (ÌamÉn or kafÉlah).
Every contract is designed to serve a particular purpose. Therefore, the contract should
be respected and fulfilled, not only in order to protect the interests of the parties
involving in it, but also to serve the very purpose of the contract that caused the parties
to enter into it and willingly bind themselves to it (Qur’an, 5:1).
If a contract were irregular due to some of its conditions (shurËÏ), it would have to be
fixed. If it is defective in its pillars (arkÉn), it would be considered void (bÉÏil), and
is irreparable. Dissolution (inÍilÉl) of a contract after it has become valid (ÎaÍÊÍ) and
enforceable (nÉfidh), but before or during its execution, is possible through: (1) mutual
agreement (iqÉlah), or (2) revocation and termination due to special reasons (faskh),
such as impossibility (istiÍÉlah) of contractual performance, or automatic dissolution
by death, destruction of the subject matter, expiry of the period, achievement of purpose,
etc (Islam, 1998: 339). This is because the SharÊÑah firmly stands for cooperation and
fair treatment among the contractual parties. Therefore, it does not allow a loophole to
exist so that unfair or unjust treatment could happen.
THE OBJECTIVE OF THE SHARÔÑAH IN ISLAMIC FINANCE: IDENTIFYING THE ENDS (MAQÓØID) AND THE MEANS (WASÓ’IL)
19
This spirit marks the Islamic approach in commercial (financial) dealings as not
only formal but also substantial. While certain formalities and substantive elements
are essential for a transaction to become legally binding on the parties, this should
be done through mutual agreement that brings about mutual consent and satisfaction
(riÌÉ) (Qur’an, 2:282). Therefore, along with approval of various contractual facilities
and the emphasis on fulfilment of contractual obligations, Islamic law also provides
various ways to remove contractual obligation in situations of unavoidable difficulties
and necessities (Islam, 1998: 368).
5.2. Establishing Values and Standards
Transparent and fair dealings are considered among the main objectives of the SharÊÑah
in financial transactions and activities. The SharÊÑah, in this regard, aims at creating an
equal and fair transactional atmosphere and at protecting the parties against exploitation
or imbalance between their reciprocal rights and obligations. Such imbalances tend to
result from a lack of fair and objective criteria by which their rights and obligations can
be determined with an acceptable degree of exactitude and certainty (Omar, 1998: 44).
The application of the SharÊÑah in the financial sphere should therefore not result in
injury, harm or difficulties to either individuals or the public at large as the SharÊÑah
intends to create a positive atmosphere in commercial transactions whereby exchanges
are done on the basis of brotherhood, cooperation and mutual benefit to both parties.
Therefore, the SharÊÑah institutes some values, measures and standards to be upheld in
the transactions and indicates certain negative elements to be avoided, as they would
nullify the objective. Those values and standards would relate to both the macro-
maqÉÎid dimension of having wealth circulate smoothly in society and the micro-
maqÉÎid aspect of having fair and transparent financial dealings.
Economic exchange in Islam is inseparable from Islamic values, which must be
translated into practical rulings that prevent fasÉd (corrupt acts) such as unfair dealing,
abusiveness, stinginess, greed, unbridled individualism and exploitation of others.13At
the same time, truth and honesty, responsibility, trust, generosity, justice, friendship
and cooperation14 are highly encouraged and must be preserved in financial dealings.
These values would not only protect customers, stakeholders and the public, they
would also promote smooth allocation of resources and fair dealings in transaction. 13 Qur’an, 2:195; 7:31; 11:85; 28:77; 107:1-3.14 Qur’an, 5:119; 39:33; 16:90; 4:58; 52:21;4:58; 40:32; 56:77; 44:17, 26; 2: 278-9; 49:13; 49: 10, 13.
ISRA RESEARCH PAPER (NO. 32/2012)Mohamad Akram Laldin, Hafas Furqani
20
According to Abtani (2007), “Islamic law cannot be separated from its moral,
ethical and religious principles; otherwise, its rules will be useless. In other words,
the Islamic system cannot be secular. This is because all Islamic rules, including
economic and political, are connected with the faith, beliefs and worship of Islam.”
Beyond the realm of values, the Islamic economic system has instituted various ways
to spend for the sake of Allah such as zakÉh, infÉq, Îadaqah, hibah and qarÌ. These
would cultivate the spirit of brotherhood and mutual cooperation in society, assist the
circulation of wealth, activate the economy and increase productivity. Conversely,
destructive tendencies have been prohibited, for example, isrÉf (unnecessary spending),
itrÉf (self-indulgence), tabdhÊr (spending on unlawful activities), and bukhl (stinginess).
IÍtikÉr (hoarding) is also prohibited as it prevents wealth from circulation by halting
supplies. Likewise, illegal means of wealth acquisition or causing harm to others in
wealth creation are also prohibited (Qur’an, 5:33, 38).
From the micro-perspective of transactions, in the effort to achieve justice, Islam puts
in place measures to “level the playing field” among the parties to a contract. That
includes the removal of factors that would distort equality or allow one party to gain
at the expense of the others. Among the main negative elements are ribÉ and gharar.
RibÉ is banned because it allows unjustified increase in wealth in transactions, whether
in loans (qurËÌ) or sales (buyËÑ) (Qur’an, 2: 275-277). An essential feature of ribÉ
is that it transfers risk onto one party and shields the other from it and guarantees
it a fixed return. In a loan, ribÉ transfers risk to the debtor, by requiring him to pay
back the money lent with increment. Certain sales, especially those involving delayed
payment, can be structured to transfer all risk to the buyer without the seller assuming
risk (ghurm) or liability (ÌamÉn) or effort (kasb). RibÉ could also arise due to unequal
exchange in a sale.
Gharar is also prohibited and considered a major negative element that would prevent
a fair financial transaction. Gharar is defined as a characteristic that renders the
consequences and future outcome of a transaction unknown or uncertain (majhËl). It is
a transaction done on the basis of pure speculation in a state of ignorance (jahÉlah) due
to uncertainty about the existence of the contract’s subject matter or failure to properly
identify it, e.g., its genus, type or quantity, or uncertainty about the ability to deliver
it, time of delivery, time of payment, etc. Transactions containing gharar usually lead
THE OBJECTIVE OF THE SHARÔÑAH IN ISLAMIC FINANCE: IDENTIFYING THE ENDS (MAQÓØID) AND THE MEANS (WASÓ’IL)
21
to dissatisfaction on the part of the parties involved and cause harm and/or conflicts
between them due to the attendant ambiguity.
In the maqÉÎidic approach, law and ethics, values and practices, form and substance
should integrate and not contradict one another. SharÊÑah prohibitions and parameters
should not, therefore, be understood in a merely legalistic or formalistic manner.
Instead, attention should be focused on the core and substance of values and principles.
In banking and finance activities, for example, the SharÊÑah injunctions should be
integrated in the operational activities with genuine concern for fair and transparent
practices that contribute to the development of society and human wellbeing (Dusuki
and Abozaid, 2007: 161).
5.3. Instituting Social Responsibility
In the spirit of social justice, Islam balances individuals’ rights and their duties and
responsibilities towards others. The concept of farÌ kifÉyah (social obligation) puts a
responsibility on those who are capable or better off to assist those who are not capable
or worse off. As it is an obligation (farÌ), social responsibility is therefore not an option.
This framework of mutual cooperation and assistance should become the social context
of an Islamic economy, whereby society will grow without disparity, indifference or
exploitation (Fazlurrahman, 1969: 1).
As wealth is an amÉnah, the Qur’an indicates that a person may consume according
to his need. The rest of income or wealth (al-Ñafwu) should be spent in charity, or
the cause of Allah (fÊ sabÊlillÉh), or reinvested in a business where it may produce
more wealth and contribute to employment and income for others. ZakÉh and Îadaqah
are formal institutions of social responsibility instituted by Islam that ought to bring
society close to the ideal of distributive justice (Al-Faruqi, 1983: 221).
While it is preferred that this responsibility be undertaken from moral consciousness
that it is right to take care of and assist fellow human beings, an Islamic economy is
also realistic in acknowledging the responsibility of the state. It is a factual reality that
man, left to himself and to market forces, would most likely not reach the desired goals
and objectives spelled out above due to weaknesses in individuals (Qur’an, 96:6). Some
other mechanisms are therefore needed. This calls for state involvement by setting up
regulations, laws and policies, as well as institutions of civil society to help, along
ISRA RESEARCH PAPER (NO. 32/2012)Mohamad Akram Laldin, Hafas Furqani
22
with government, to provide a social safety net for the disadvantaged. The constraints
imposed, and incentives offered, by the norms, values and culture adopted in a society
are also important.
The emergence of Islamic banking and finance should be viewed in this context. IBF is
a part of Islamic economics that has the potential to contribute richly to the achievement
of the major socioeconomic goals of Islam such as socioeconomic justice and equitable
distribution of income and wealth (Chapra, 1985: 34). The establishment of IBF is not
an attempt to merely fulfil Muslim society’s desire to have a “legal” (ÍalÉl) form of
financial services in a strict legalistic (formalistic) sense by cleansing economic and
financial practices from interest (ribÉ), gambling (maysir), uncertainty (gharar) and
other prohibited (ÍarÉm) elements commonly found in conventional financial services.
Corporate social responsibility on the part of IBF is more expected in society since the
institutions carry the “Islamic” name, which implies that the institutions would promote
Islamic ideals and objectives in human life (Dusuki and Abdullah: 2007; Sairaly, 2011).
Islamic banks and financial institutions should take maqÉÎid into account in setting their
corporate objectives and policies and also use them to verify compliance to true Islamic
principles; IBF’s progress will be monitored by how well it realizes the maqÉÎid in
producing a good economy marked by the spirit of brotherhood (ukhuwwah) and
cooperation (taÑÉwun), social equality and social justice (ÑadÉlah), just and fair
allocation of resources, elimination of poverty, protection of the environment and
achievement of general wellbeing (maÎlaÍah).
6. CONCLUSION
MaqÉÎid is a comprehensive concept that explicates the very ideals/objectives of
the SharÊÑah related to human life. As the SharÊÑah is an all-embracing concept that
is concerned with human life and human wellbeing, maqÉÎid should not be reduced
to objectives in the legal dimension. The maqÉÎid discussion in the financial sphere
should always refer to the general objective of the SharÊÑah, which provides a grand
framework and direction for how financial transactions should be arranged in an Islamic
economic system. Our perspective should not be limited to fulfilling the minimum
legal requirements and calling that SharÊÑah compliant.
In the framework of maqÉÎid, Islamic finance and banking activities lead to the
actualization of SharÊÑah objectives by realizing maÎlaÍah (benefit) and preventing
THE OBJECTIVE OF THE SHARÔÑAH IN ISLAMIC FINANCE: IDENTIFYING THE ENDS (MAQÓØID) AND THE MEANS (WASÓ’IL)
23
or repelling mafsadah (harm). In this endeavour, the discussion would embrace the
micro and macro dimensions of individuals and of society in general. The maqÉÎid
(objectives) would include smooth circulation of wealth, fair and transparent financial
practices, and justice and equity at both the micro and macro levels. In order to realize
those objectives, the means instituted by the SharÊÑah include facilitating financial
contracts, establishing values and standards as well as inculcating a sense of social
responsibility. The future trend in the development of Islamic banking and finance is
expected to adopt maqÉÎid al-SharÊÑah as the indispensable framework for structuring
Islamic financial contracts and as the directional guideline for further development of
the industry. Fulfilling minimum SharÊÑah legal compliance in product structuring is
viewed as insufficient. Instead, movement towards realizing maqÉÎid al-SharÊÑah is
highly valued as the means to give Islamic banking and finance a meaningful presence.
This would have an impact of economic substance in the form of just and fair allocation
of resources, real economic sector development, and fair and transparent financial
dealings with all the ethical hallmarks of brotherhood, cooperation and risk sharing.
ISRA RESEARCH PAPER (NO. 32/2012)Mohamad Akram Laldin, Hafas Furqani
24
REFERENCES
Abdul Rauf, Feisal. (2002). Islam: A Sacred Law. Kuala Lumpur: Yayasan Dakwah
Islamiah Malaysia.
Abtani, Faisal. (March, 2007). The Prevention of Financial Crime within an Islamic
Legal Framework. Economic Affairs, 27-33.
AbuSulayman, AbdulHamid. (1998). The Theory of the Economics of Islam (I), IIUM
Journal of Economics and Management, 6 (1), 79-122.
Ahmed, Habib. (2011). MaqÉÎid al-SharÊÑah and Islamic Financial Products: A
Framework for Assessment. ISRA International Journal of Islamic Finance, 3
(1), 149-160.
Al-GhazÉlÊ, MuÍammad ibn MuÍammad AbË ×Émid. (1993). Al-MustaÎfÉ min ÑIlm
al-UÎËl, ed. MuÍammad ÑAbd al-SalÉm ÑAbd al-ShÉfÊ. Beirut: DÉr al-Kutub
al-ÑIlmiyyah.
Al-Faruqi, IsmÉÑÊl Raji. (1983). Tawhid: The Principle of the Economic Order. Kuwait:
International Islamic Federation of Student Organization.
Al-Khelaifi, Riyad Mansur. (2004). Al-MaqÉÎid al-SharÑiyyah wa ÓthÉruhÉ fÊ Fiqh
al-MuÑÉmalÉt al-MÉliyyah. Majallat JÉmiÑat al-Malik ÑAbd al-ÑAzÊz: al-IqtiÎÉd
al-IslÉmÊ, 17 (1), 3-49.
Al-ShÉÏibÊ, IbrÉhÊm ibn MËsÉ. (1997). Al-MuwÉfaqÉt fÊ UÎËl al-SharÊÑah (ed. AbË
ÑUbaydah MashhËr Ibn ×asan ÑAlÊ SalmÉn). DÉr Ibn ÑAffÉn.
Al-QaraÌÉwÊ, YËsuf. (2007). DirÉsah fÊ Fiqh MaqÉÎid al-SharÊÑah: Bayn al-MaqÉÎid
al-Kulliyyah wa al-NuÎËÎ al-Juz’iyyah. Cairo: DÉr al-ShurËq.
Al-QarÉfÊ, ShihÉb al-Din. (2001). Al-FurËq. Cairo: DÉr al-SalÉm.
Attia, Gamal Eldin. (2007). Towards Realization of the Higher Intents of Islamic Law.
London: IIIT.
Balala, Maha-Hanaan. (2011). Islamic Finance and Law: Theory and Practice in a
Globalized World. London: IB Tauris.
THE OBJECTIVE OF THE SHARÔÑAH IN ISLAMIC FINANCE: IDENTIFYING THE ENDS (MAQÓØID) AND THE MEANS (WASÓ’IL)
25
Berghout, AbdelAziz Berghout. (2006). MaqÉÎid al-SharÊÑah as an Approach for
Intellectual Reform and Civilizational Renewal. In Proceedings of the
International Conference on Islamic Jurisprudence and the Challenges of
the 21st Century: MaqÉÎid al-SharÊÑah and its Realization in Contemporary
Societies, Vol. 3, (51-66), Kuala Lumpur: IIUM.
Chapra, M. Umer. (1985). Towards a Just Monetary System. Leicester: The Islamic
Foundation.
Chapra, M. Umer. (2008). The Islamic Vision of Development in the Light of MaqÉÎid
al-SharÊÑah. IIIT Occasional Papers Series 15. Washington: IIIT.
Choudhury, Masudul Alam. (2012). Usury in Encyclopaedia of the Qur’an. http://
referenceworks.brillonline.com/entries/encyclopaedia-of-the-quran/usury-
SIM_00438. Retrieved 14 February 2012.
Dusuki, Asyraf Wajdi and Abdullah, Nurdianawati Irwani. (2007). MaqÉÎid al-
SharÊÑah, MaÎlaÍah and Corporate Social Responsibility. AJISS, 24 (1), 25-45.
Dusuki, Asyraf Wajdi and Abozaid, Abdulazeem. (2007). A Critical Appraisal on the
Challenges of Realizing MaqÉÎid al-SharÊÑah in Islamic Banking and Finance.
IIUM Journal of Economics and Management, 15 (2), 143-165.
Dusuki, Asyraf Wajdi and Bouheraoua, Said. (2011). The Framework of MaqÉÎid
al-SharÊÑah (the Objectives of the SharÊÑah) and Its Implications for Islamic
Finance. ISRA Research Paper No. 22. Kuala Lumpur: ISRA.
Fazlurrahman. (1969). Economic Principles of Islam. Islamic Studies, 18 (1), 1-8.
El-Mesawi, Muhamed Tahir. (2006). MaqÉÎid al-SharÊÑah as an UÎËlÊ Doctrine or
Independent Discipline: A study of Ibn ‘Ashur’s Project. In Proceeding of
the International Conference on Islamic Jurisprudence and the Challenges of
the 21st Century: MaqÉÎid al-SharÊÑah and its Realization in Contemporary
Societies, vol. 3, (51-66), Kuala Lumpur: IIUM.
Ibn al-Qayyim, MuÍammad ibn AbË Bakr. (1991). IÑlÉm al-MuwaqqiÑÊn Ñan Rabb
al-ÑÓlamÊn, ed. Muhammad ÑAbd al-SalÉm IbrÉhÊm. Beirut: DÉr al-Kutub al-
ÑIlmiyyah.
ISRA RESEARCH PAPER (NO. 32/2012)Mohamad Akram Laldin, Hafas Furqani
26
Ibn ÑÓshËr, MuÍammad al-ÙÉhir. (2006). Treatise on MaqÉÎid al-SharÊÑah, translated
by Dr. MuÍammad El-ÙÉhir El-Mesawi. Herndon, Va.: International Institute
of Islamic Thought.
Iqbal, Zamir and Mirakhor, Abbas. (2007). An Introduction to Islamic Finance.
Singapore: John Wiley & Sons (Asia) Pte Ltd.
Islam, Muhammad Wahidul. (1998). Dissolution of Contract in Islamic law. Arab Law
Quarterly, 13 (4), 336-368.
Kamali, Mohammad Hashim. (1999). Law and Society: The Interplay of Revelation
and Reason in SharÊÑah. In John L. Esposito (ed.), The Oxford History of Islam.
New York: Oxford University Press, 107-108.
Kamali, Mohammad Hashim. (2000). Issues in the Legal Theory of Usul and Prospects
for Reform. Kuala Lumpur: IIUM.
Kamali, Mohammad Hashim. (2008). MaqÉÎid al-SharÊÑah Made Simple. Washington:
IIIT.
Laldin, Mohamad Akram. (2008). Fundamentals and Practices in Islamic Finance.
Kuala Lumpur: ISRA.
Laldin, Mohamad Akram. (2010). Understanding the Concept of MaÎlaÍah and Its
Parameters When Used in Financial Transactions. ISRA International Journal
of Islamic Finance, 2 (1), 61-84.
Omar, Mohamed Abdel-Khalek. (1998). Reasoning in Islamic Law: Part Three. Arab
Law Quarterly, 13 (1), 23-60.
Sairaly, Salma. (2011). Best Practices in Socially Responsible Finance: Lessons for
the Islamic Financial Industry from Leading Socially Responsible Financial
Institutions in the UK. Kyoto Series of Islamic Area Studies 6. Kyoto: Center
for Islamic Area Studies at Kyoto University (KIAS).
Sharif, Mohammed. (2005). The Feasibility of an Islamic Economic System in a Modern
World. In M. Basheer Ahmad, Syed A. Ahsani and Dilnawaz A. Siddiqui (ed.s),
Muslim Contributions to World Civilization (pp. 91-108). Herndon, USA: IIIT.
Notes
Notes
International Shari’ah Reseach Academy for Islamic FinanceISRA @ INCEIF (718736-K)Lorong Universiti A59100 Kuala Lumpur
Tel : + 603 7651 4200Fax : + 603 7651 4242Email : [email protected]
www.isra.my