Fiqh for islamic banking


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Fiqh for islamic banking

  1. 1. FIQH FOR ISLAMIC BANKING AND FINANCE (MIFB 6043) ASSIGNMENT 1The Application of Islamic Legal Maxims to Islamic Banking and Finance Prepared by Mohamed Ibrahim Ismail Matric Number: A1111477M04 Session: 2011/2012 Semester: First Semester Date: 10 September 2011 Submitted to: Tuan Haji Dziyauddin bin Haji Ahmed
  2. 2. ContentsIntroduction…………………………………………………………………………………………………………….…1-2Definition of Legal Maxims…………………………………………………………………………………………..2Differences between Al-qawa’id al-fiqh and usul ……………………………………………………...2-3Islamic Legal Maxims and Development of Islamic Finance…………………………………….…3-4Leading Islamic Legal Maxims and their evidences from the Quran and Sunnah…….…5-8Application of Islamic Legal Maxims to Islamic banking, Finance and business…………….9Matters are determined according to their intentions…………………………………………..………….…9-11Hardship begets facility…………………........………………………………………………………………..………..11-12Certainty cannot be overruled by doubt……………………………………………………….…………………..12-13The origin of all rules is permissibility…………………………………………………………..…………..……….…13Harm should not be inflicted nor reciprocated…………………………………………..…………………...13-15Freedom from liability is a fundamental freedom……………………………………………………………….15Custom is a source of judicial decision…………………………………………..……………..………………….15-16Damage and benefit go together………………………..………………………………………………….16-17Conclusion………………………………………………………………………………………………………………17-18References……………………………………………………………………………………………………………….....19Appendix………………………………………………………………………………………………………………….20-21 i
  3. 3. 1 INTRODUCTIONThe study of figh for Islamic economics is very important as the field of Islamic finance andbanking gains momentum and expands throughout the globe. As Islamic banks and otherIslamic financial institutions embarked upon new products, the role of Muslim Shariah scholarsin the area of Islamic jurisprudence (fiqh) became paramount as there could be no products tobe introduced if they were not approved by a knowledgeable Muslim Shariah scholar.Conventional banking system dominated the world for the last century, even though it existedbefore 1900; its effect was strongest after the imperialists took control most of the countries inthe world. Along its other ideologies, it introduced the interest-based banking system to theMuslim nations which is against the Shariah principles.This riba-based banking system threatened the existence of Muslim nations, their business andeconomic activities and forced them to depend on the western banking which was meant todevour the wealth of the poor, enslave the weak people, and exploit the underprivileged.To prevent such exploitations to continue and prevail among the Muslims, some Muslimscholars such as Anwar Qureyshi, Muwdudi and others recognized the need for commercialbanking based on profit and loss sharing.These scholars based their analysis on the branch of Islamic fiqh known as fiqh al-muamalat,which is a branch that studies rules and guidelines on the relationship between man and manon social and economic matters, man and other creatures of Allah and a man and hissurrounding1However since Muslims desperately need to distance themselves from a riba-based bankingsystem and establish their own banking system which is based on Islamic Shariah, there came apressing need to fully comprehend, analyze and understand shariah principles and Islamic fiqhto achieve this goal.1 Dziyauddin bin Ahmed, (2007) Handbook on Fiqh Muamalat: Compilation of Class Notes on FiqhMuamalat, IIUM, Kuala Lumpur
  4. 4. 2Among the useful tools which are used by Muslim scholars of Islamic fiqh to come up with newrulings –including the innovation of shariah-based products, are Islamic legal maxims known asAl-qawa’id al-fiqhiyyah ( ). These Islamic legal maxims are very important to theeconomic and business activities to the Muslim people since even when they are conductingtheir business activities they should behave according to the shariah and with a good intentionto please Allah, insha Allah, it would be considered to be ibadah (worshiping Allah SWT)This paper would attempt to highlight the development of Islamic legal maxims, their evidencesfrom the Qur’an and Sunnah and their application to economic and business matters especiallyto Islamic banking and finance.Definition of Islamic legal maxims (Al-qawa’id al-Fiqhiyyah)According to Wahbah Zuhaili, These are principles which summarize a number of fiqh ruleswhich are related to each other into maxims2. An example of such a maxim is: “Certainty cannotbe overruled by doubt”.Differences between usul fiqh and qawa’id al-fiqhUsul fiqh ( )Usul al-fiqh is a methodology of legal reasoning which derives legal rulings from primarysources of Shariah which is the Qur’an and Sunnah. The sources are read in an honest andunbiased manner to infer the intentions of Allah SWT. Usul al-fiqh talks about rules ofinterpretation, meaning and implication of commands and prohibitions and so forth32 Al-Zuhaili, W. (1996), Fiqh-al-Islami wa adillatuh, Damascus, Dar-al-fikr3 See also Kamali.M(n.d), Principles of Islamic jurisprudence, Islamic Text society, Cambridge
  5. 5. 3Al-qawa’id al-fiqh )These are defined as principles which summarize a number of fiqh rules which are related toeach other into maxims. An example of such maxims is: “Matters are determined according totheir intention.”It is quite important to understand that these Principles are derived from consolidated reading onvarious rules of fiqh regarding various themes. They are short, epithetical expressions of Shariah goalsand objectives.Islamic Legal Maxims and Development of Islamic FinanceThe text, either from the Quran or Sunnah, can be divided into two main categories1. Text which explain certain issues in detail2. Text which gives general guidelines and basic principlesThese different types of orientation have certain purpose to serve. The first from the firstcategory usually addresses fixed issues and matters which are transcendental such as thesystem of belief and other issued which cannot be changed regardless of the time and place.For example in the area of crime and penalties ( ), the Qur’an legislated fivespecific offenses, murder, theft, highway robbery, adultery and slanderous accusations. TheQur’an also gave detailed rulings about marriage, inheritance and family matters. This isbecause the objective of such rulings is permanency and cannot be changed whatsoever.4On the other hand, Islamic Shariah gave general guidelines in many areas which could changedue to time, place and circumstances. The basic objective of the law in this case is to provide aroom for flexibility which can lead to variations in interpretations. Thus various interpretationsand flexibility makes application possible which would not have been possible had there been4 Securities Commission Malaysia(2009) Islamic Commercial Law(fiqh al-Muamalat), LexisNexis, KualaLumpur
  6. 6. 4any rigidity in the text. Allah SWT says: )“Allah intends for you ease and He does not want to make things difficult for you”5 Al-baqara:185Thus commercial law and finance fall within this second category where there is enough roomfor flexibility as long as it is in line with Shariah principles and complies with the basic objectiveof Shariah that is based on justice and fairness.The development of the Islamic banking and finance industry has raised many contemporaryissues regarding Islamic commercial contracts and more in general the Islamic commercial law.These issues are needed to be in accordance with Islamic rulings. Most of the time, directrulings from the texts could not be found as the nature of the texts itself has left the issues fordifferent considerations. Hence, as a solution, application of legal maxims would help todevelop the parameters of Islamic banking and finance and its general principles. 65 Taqi-u-Din, M. and Muhsin, M.(1982)The Noble Qur’an English Translation of the meaningsand commentary, King Fahd Complex, Madinah6 Securities Commission Malaysia(2009) Islamic Commercial Law(fiqh al-Muamalat), LexisNexis, KualaLumpur p.71
  7. 7. 5 Leading Islamic Legal Maxims and their Evidences ( ) from the Quran and Sunnah1. Matters are determined according to their intentions ) The evidence for this legal maxim is from an authentic Hadith. The Prophetsaid: 7 ). (“Deeds are judged by intentions and every personis judged according to his intention”)8 quoted by Bukhari Hadith No: 6689 and Muslim HadithNo: 19072. Hardship begets facility ( )The evidence for this legal maxim is from the Quranic verses in which Allah SWT says:“And (Allah SWT) has not laid upon you in religion any hardship” 9 Al-Hajj: 78“Allah intends for you ease and He does not want to make things difficult for you” Al-baqara:185 10And in a Hadith the prophet said:3. Certainty cannot be overruled by doubt ( )This maxim originated from a hadith where the prophet was reported to havesaid: 11 “78 See 79 Taqi-u-Din, M. and Muhsin, M. op. cit., p.4541011
  8. 8. 6“If one of you feels something in his stomach (fart etc) and then cannot differentiate ifsomething came out or not? He should not go out of the mosque unless he hears a sound orfinds a smell.”124. The origin of all rules is permissibility ( )This legal maxim originated from this Quranic verse. Allah SWT says:“He it is Who created for you all that is on earth”13 Al-baqara: 295. Harm should not be inflicted nor reciprocated )The origin of the legal maxim is found both in the Qur’an and hadith. Allah SWT says:“And do not kill yourselves (nor kill one another). Surely Allah is Most Merciful to you”14 An-nisa: 29In following hadith the prophet said: 15 ”“Harm should not be inflicted nor reciprocated.”1612 See 1113 Taqi-u-Din, M. and Muhsin, M. op. cit., p.714 Taqi-u-Din, M. and Muhsin, M. op. cit., p.1121516 See 11
  9. 9. 76. Freedom from liability is a fundamental principle ( )This origin of this maxim is founded on the Quranic verse declaring the original permissibility ofall things.Say ( O Muhammad ): “I find not in that which has been revealed to meanything forbidden to be eaten by one who wishes to eat it, unless it be Maitah ( a deadanimal) or blood poured forth (by slaughtering or the like), or the flesh of swine(pork); forthat surely is impure or impious(unlawful) meat (of an animal) which is slaughtered as asacrifice for others than Allah (or has been slaughtered for idols or on which Allah’s Name hasnot been mentioned while slaughtering ). But whosoever is forced by necessity withoutwillful disobedience, nor transgressing due limits; (for him) certainly, your Lord is Oft- 17Forgiving, Most Merciful.” Al-an’am: 145In this Quranic verse, it could be understood that everything is presumed to be permissibleunless prescribed otherwise. Similarly, a person is deemed to be free from any liability unlessthere is evidence to show otherwise as the origin of man is free from any liability.7. Custom is a source of judicial decision. )The origin of this maxim is found in the Qur’an and Sunnah17 Taqi-u-Din, M. and Muhsin, M. op. cit., p.195
  10. 10. 8“And live with them (your wives) honorably”18 An-nisa: 19And the evidence from the hadith whereby Hinda the wife of Abu Sufyan complained to theprophet about the stinginess of her husband he then said to her: 19 ”“Take for yourself and your children to suffice your needs according to what is customary”207. Damage and benefit go together21 ( )This maxim is based upon the hadith of the prophet saying: 22 ““Revenue goes with liability”23Even though this hadith was quoted by Ibn Majah, Nisai, Abu Daud and others and declared itto be an authentic hadith ( ), others such as Imam Al-Bukhari told that it is weak ( )and as we always seek refuge from Allah to falsely label upon the prophet whathe did not say( ), yet the hadith is used as abasis of legal maxim applied in financial transactions and business matters.18 Taqi-u-Din, M. and Muhsin, M. op. cit., p.1101920 See 1921 Majalla art. 86. see also Hasanuzzaman, S.(2007) the economic relevance of shariah maxims(al-qawa’id al-fiqhiyah), Scientific publishing, Jeddah2223 See 22
  11. 11. 9Application of Islamic leading maxims to Islamic banking, Finance, business and economic mattersIslamic legal maxims are the systematic exposition of the spirit of the legal text (nass) intendedto guide man towards different situations in human society throughout the ages. They providebroad contours within which policy making can be persuaded and its validity judged. The legalmaxims on the other hand are amendable to trade-offs and substitutions.241. Matters are determined according to their intentions )That Quran reiterates that Muslims should demonstrate consistency in faith and practice and inwords and deeds.“O you who believe! Enter perfectly in Islam (by obeying all the rules and regulations of theIslamic religion)”25 Al-baqara: 208“Verily, Those who say: “Our Lord is Allah (Alone) and then they stand firm26” Fusilat: 30 27The rule embodied in this maxim has been applied by early jurists mostly on acts of ritualsbut it is just as equally applicable to other spheres of activity. The liability of a person who finds24 Hasanuzzaman, S.(2007) the economic relevance of shariah maxims(al-qawa’id al-fiqhiyah), Scientificpublishing, Jeddah25 Taqi-u-Din, M. and Muhsin, M. op. cit., p.4426 In Arabic Istaqamu( ), stand firm; means they followed(really) the religion of IslamicMonotheism, believed in the Oneness of Allah, worshiped none but Him(Alone), and performed all thatwas ordained by Allah(good deeds), and abstained from all that was forbidden by Allah(sins and evildeeds)
  12. 12. 10somebody’s goods lying in the way and picks it up will be contingent upon the intention withwhich he has picked it up. If he intends to hand it over to the owner and made it known toothers he will be treated as trustee and will not be required to indemnify the owner in case theproperty is destroyed while in his possession. But if he has kept it as an owner he would betreated as usurper, ghasib ( ) and will be required to indemnify the owner in case theproperty is destroyed.28Let us consider an example of our time. The establishment of Islamic financial institutions andIslamic banks could be piety-driven aiming at improving the socioeconomic status of theMuslims across the world and ensuring their well-being while avoiding riba-based bankingsystem and unlawful gains whichever sort it is. On the other hand some” Islamic banks” may beestablished to exploit the needy, introduce artifice ( ) to practice distorted forms of riba andmaximize their profit in the name of Islamic banks. The difference between the two categoriesis the intention behind each category of them. The intention of the first category is to pleaseAllah, acquire wealth and dispose it according to the Shariah while the intention of the latter isto amass wealth, enslave others and satisfy its selfish urges without morality and ethics.The following sub-maxim further highlights intentions and acts in financial transactions,business and economic matters.“Contracts are to be understood in relation to their intention and substance, not by the wordsand phrases used’ ( )For example, kafalah implies coextensive liability while transfer of debt implies discharge of theprincipal debtor. If a contract of transfer of debt is made with the condition to hold theprincipal debtor liable in case the transferee fails to discharge the debt, contract even thoughtermed as a contract of transfer of debt will be treated as a contract of kafalah. Similar will be27 Ibn Nujaym, pp. 10-12; Suyuti p. 8, sqq See also Hasanuzzaman, S.(2007) the economic relevance ofshariah maxims(al-qawa’id al-fiqhiyah), Scientific publishing, Jeddah p.628 Majalla, Arts. 769-770. See also Hasanuzzaman, S. (2007) the economic relevance of shariahmaxims(al-qawa’id al-fiqhiyah), Scientific publishing, Jeddah p.7
  13. 13. 11the treatment of a contract of kafalah in case the principal debtor is discharged after thecontract of kafalah is signed.Also it will not be permissible for Islamic banks to practice Musharakah and Mudarabah in sucha way as to ensure fixed rate of return for the banks while the liability of bearing loss or anuncertain amount of remaining profit is transferred to the working partner.2. Hardship begets facility ( )This legal maxim means difficulty is to be accompanied by easiness. Another similar maximreads: “necessity renders prohibited things permissible” ( )This legal maxim is found to be of important relevance in modern Islamic finance. An example isthe permission to deal with conventional banks for the Muslim minority living in non-Muslimcountries. In this case, they might be allowed to temporarily use conventional banking due tothe compelling need whereby no Islamic financial facilities are available for products likeresidential financing. Another example is the compulsory insurance protection whereby notakaful product is available to protect the risk. If Muslims are not allowed to take the insurance,they might be subjected to certain hardships. In order to avoid the hardship, they might beallowed to take insurance to cover that particular risk temporarily29.However, it must be emphasized that, although facility is granted in situations of hardship, it isnot absolute. Such a grant must be limited to certain extent in order to preserve the originalrule. Thus, the permissibility granted due to hardship is limited by anther maxim, that is:“necessity is estimated by the extent thereof.” ).Therefore, if permissibility isgranted in case of hardship, it must be granted up to the extent required for meeting thathardship. If a person is allowed to deal with conventional banking products due to necessity,the permission ceased with the availability of Islamic banking products. This is supported by this29 ISRA (2011) ISLAMIC FINANCIAL SYSTEM principles and operations, ISRA, Kuala Lumpur
  14. 14. 12following sub-rule (sub-maxim) “what is lawful for a reason becomes invalid when such reasondisappears”30 ( )3. Certainty cannot be overruled by doubt ( )The basic rule that resolves the conflict between doubt and certainty is contained in the maximthat reads: “Certainty cannot be overruled by doubt.” This maxim rejects the effect of doubtthat disturbs the original position. This rule is of great significance in the event of controversyon rights and obligations of contending parts in the absence of a proof on either side. Thebenefit of doubt arising out of a controversial position can never go to a person on whom theonus of proof lies; thus the position of an indebted person even after his death will not beaffected by doubt as to a probable discharge of debt. Likewise a claim as to the discharge of adebt will not be rejected on the basis of presumption to the contrary.The rule if read with the following sub-rule (sub-maxim), provides a broader canvas of itsapplication. a. “As to incorporeal matters that do not prove themselves, the basic principle (presumption) is that they do not exist”( )For instance, a partner has no right to assume a minimum rate of profit earned by his businesspartner and claim his share in that profit as different from the amount stated to have beenactually earned by the partner. The sub-maxim provides that in case the working partnerdeclares a certain amount of profit no more will be presumed unless the contrary is proved tobe a fact.The above sub-maxim is further strengthened by another sub-maxim that says: “No reliance(should be made) on mere imagination” ( )30 Majalla, Art 34. See also Hasanuzzaman, S.(2007) the economic relevance of shariah maxims(al-qawa’id al-fiqhiyah), Scientific publishing, Jeddah p.7
  15. 15. 13Given the above sub-maxims, in case of loss in business a partner cannot allege willful neglectand require the latter to indemnify him for the loss unless he proves the contrary. Failing thisproof the partner will not be personally made liable to the loss or to indemnify the otherpartner. Any doubt affecting his position of freedom from liability will be untenable. Noarbitrary judgment of the contender would be acceptable.4. The origin of all rules is permissibility ( )This principle is of crucial importance particularly in Islamic commercial law. It opens the wayfor inventions and wide room for innovations for different financial tools and instruments forfinancial transactions without necessarily finding the authority for their permissibility.Nevertheless, it must be ensured that the innovations do not transgress any of the agreedprinciples of the Quran and Sunnah.5. Harm should not be inflicted nor reciprocated )Essentially, this maxim states that, while engaging in the economic and business activities, afirm is prohibited from inflicting injury or causing grief to others. This guiding maxim when readwith its sub-maxim, “wrong is to be undone” ( ) provides a guideline to regulate theentire financial system in such a way that prohibits harm imposition and discourages retaliation.If for example a customer has caused damage to the ATM of a bank, it is not permissible for theaffected bank (or its representatives) to retaliate by damaging the car, the house or any otherproperty belonging to the customer. If a customer has been denied to use his credit card or hadhis accounts frozen by a discretionary order from the management of a bank, the customer isnot permitted to retaliate by causing damage to the equipment of the Bank. This is becausesuch action is deemed to aggravate the damages without any benefits in return, hence it isharmful. The alternative is paying compensation to the same value of the damaged property ordenied service so as to avoid further harm to the property of the owner or a service he isentitled to.
  16. 16. 14This maxim allows individuals to act unilaterally to protect themselves or others from harm. Forexample, in case the buyer of perishable goods absents himself without taking possession ofthe purchased goods the seller, in order to protect himself and the from loss, has a right tounilaterally revoke the contract of sale and sell the goods to some other party lest commodityshould perish.There may be situations in which a trade is not unlawful but involves both benefit and harm;such situations are governed by the following sub-maxims.Harm is eliminated to the extent that is possible ( ). A practical manifestationof this maxim is the validation of the option of defect ( ) in Islamic law, which isdesigned to protect the buyer against harm. Therefore, when a customer buys a car and thendiscovers that it is substantially defective, he has the option to revoke the contract. For there isa legal presumption under the Shariah, that the buyer concluded the contract on condition thatthe object of sale was not defective.31The following sub-maxim presents the practical guidelines of harm elimination.Harm is not eliminated by another harm ( ).For instance, if a buyer gets a faulty article he is given the option to return the goods. But if thepurchased article has developed similar fault while in possession of the purchaser he will losehis option to return the goods because, in order to protect himself from harm, he will also beharming the seller. This would amount to repelling harm by causing a similar harm.A greater harm is eliminated by means of a lesser harm ( ). This rulesays that in cases where the choice is between two harmful alternatives the one fraught withless harm may be chosen. For a example a customer loses his credit card in a slot in an ATMmachine, his card may be allowed to go waste rather than to dismantle the machine which hasgreater value than the credit card. But in case a very valuable case of jewellery is lost in a lessexpensive machine, the recovery, damaging the machine will be acceptable.31 Abu Umar Faruq Ahmed et al. (n.d)Shariah Maxims and their application on modern financialtransactions, Australia.
  17. 17. 156. Freedom from liability is a fundamental principle ( )Thus in case of loss in a business, a partner cannot allege willful neglect and require the latterto indemnify him for the loss, unless he proves the contrary. Failing this proof the partner willnot be personally made liable to the loss or to indemnify the other partner. Any doubt affectinghis position of freedom from liability will be untenable. No arbitrary judgment of the contenderwould be acceptable.This maxim states that a person is innocent until proven guilty and any claim made against himshould be rejected unless a proof is found and the person will remain in his original state. If forexample, a bank claims that a given customer owes him a debt amounting to RM 500,000 thebank must actually prove that the mentioned customer owes him this amount. If it does notbring any proof, the customer will be free from liability. The proof should be enough for thematter to attain a degree of certainty.327. Custom is a source of judicial decision. )This legal maxim rules that customary practices of society in terms of their words and action areacknowledged and recognized by shariah in the absence of textual injunctions, provided theyhave fulfilled the following requirements: a. The custom must not violate a divine text of the Qur’an and Sunnah or any other Shariah principle. b. The custom must be consistently applied and prevailing in the society ) c. The custom must have been in effect at the time the activity or transaction is carried out32 Securities Commission Malaysia (2009) Islamic Commercial Law (fiqh al-Muamalat), LexisNexis, KualaLumpur p.7 -73
  18. 18. 16 d. The two contracting parties must not have agreed to a condition contrary to the customary practice. If they have agreed to the contrary, then the customary practice is not recognized.33With reference to contemporary Islamic financial transactions, a good example which isdeemed to be a valid customary practice by scholars is the acceptance of the definition used inspot trading for cross border transactions. Even though the common understanding for spottrading from the Islamic financial transaction’s perspective is on the same day and within thecontractual session ( ), the delay of two business days has now been recognized asspot transaction due to the prevalent market practice to facilitate the transfer of fund from onecountry to another.348. Damage and benefit go together ( )This legal maxim implies that if the merchandise not yet possessed by the buyer is lost, it is theseller but not the buyer who would have to bear the loss because the former enjoys possession.Or, in case the price of purchased goods still in possession of the seller increases, the increasewill benefit the one who is deemed to be liable to suffer from an adverse fluctuation in price ofthe goods.The depositary who is liable to return the deposit is entitled to take away the profit of thedeposit if the same has been invested, even though the permission (express or implicit) hasbeen given by the depositor. But if the depositor lays down the condition of transferring profits33 ISRA (2011) ISLAMIC FINANCIAL SYSTEM principles and operations, ISRA, Kuala Lumpur p.17134 ISRA (2011) ISLAMIC FINANCIAL SYSTEM principles and operations, ISRA, Kuala Lumpur p.172
  19. 19. 17to him he will have to bear the loss, when incurred, on these investments. The depositor isliable to bear the expenditure of safe-keeping because it is he who benefits from this safety.35These rules are to be made applicable to all situations where an owner earns benefit from theproperty which he has transferred or intends to transfer fully or partially to others under acontract of sale, hire, lease, tenancy, agency, etc; or joins with another person with a view toearning through partnership (Shirka or Mudaraba) or sharecropping (Muzaraa)36ConclusionAt the outset, an introduction to Islamic banking and finance as well as the legal maxims wasdeveloped. The paper highlighted the development of Islamic banking and legal maxims in thelight of contemporary issues. The paper emphasized the importance of legal maxims and theircrucial role in today’s banking and finance activities. It further indicated the necessity forknowledge shariah scholars who mastered in the area of Islamic fiqh and contemporary issuesfor them to spearhead the ongoing efforts in the Islamic finance industry to device newproducts without violating shariah principles.As the paper underlined the importance of Islamic legal maxims, it shed light on theapplications of such maxims in the financial and banking practices as well as other relatedbusiness and economic matters. Great importance was given to maxims most commonly usedin the area such as those concerning solving controversies, profit and loss sharing, preventing ofunnecessary damage inflicted by either of the contracting parties, customary practices infinancial transaction and other important issues.35 Hasanuzzaman, S.(2007) the economic relevance of shariah maxims(al-qawa’id al-fiqhiyah), Scientificpublishing, Jeddah p.4336 Hasanuzzaman, S.(2007) the economic relevance of shariah maxims(al-qawa’id al-fiqhiyah), Scientificpublishing, Jeddah p.43
  20. 20. 18To achieve truly halal products and valid financial transactions according to the Shariah, thelegal maxims, should be given greater consideration and a throughout analysis should be madeto base banking and financial transactions upon legal maxims which are derived from theQur’an and Sunnah. And to void any misinterpretation of the maxims they should be appliedand analyzed in an honest and unbiased manner by qualified and knowledgeable Muslimshariah scholars in the area of fiqh.REFERENCESAbu Umar Faruq Ahmed et al (n.d) Shariah Maxims and their application on modern financialtransactions, Australia
  21. 21. 19AI-Suyuti, JaIaIuddin ‘Abd aI-Rahman(1959) Al-Ashbah wannazair, CairoAl-Bukhari, Muhammad ibn Ismail :( n.d) Sahih Bukhari, Muhammad Said and Sons, KarachiAl-Zuhaili, W. (1996), Fiqh-al-Islami wa adillatuh, Damascus, Dar-al-fikrDziyauddin bin Ahmed, (2007) Handbook on Fiqh Muamalat: Compilation of Class Notes on FiqhMuamalat, IIUM, Kuala LumpurHasanuzzaman, S.(2007) the economic relevance of shariah maxims(al-qawa’id al-fiqhiyah),Scientific publishing, JeddahIbn Maja, Muhammad b. Yazid:(n.d) Sunan, Muhammad Said and Sons, KarachiIbn Nujaym, Zayn al-‘Abidin: (1270 H.)Al-Ashbah Wan-nazair, CalcuttaISRA (2011) ISLAMIC FINANCIAL SYSTEM principles and operations, ISRA, Kuala LumpurKamali.M (n.d), Principles of Islamic jurisprudence, Islamic Text society, CambridgeMajalla al-Ahkam al-Adliyya,(n.d) Reprint, KarachiNasai, Ahmad ibn Shuayb: (n.d)Sunan, LahoreSecurities Commission Malaysia (2009) Islamic Commercial Law (fiqh al-Muamalat), LexisNexis,Kuala LumpurTaqi-u-Din, M. and Muhsin, M.(1982)The Noble Qur’an English Translation of the meanings andcommentary, King Fahd Complex, MadinahAppendixLegal Maxims used in the paper
  22. 22. 20