This document discusses the application of Islamic legal maxims to Islamic banking and finance. It begins with an introduction on the importance of Islamic jurisprudence in developing new Islamic finance products and an overview of key legal maxims. The document then examines several leading Islamic legal maxims in more depth, providing evidence from the Quran and Hadith for each. Finally, it explores how several maxims can be applied to Islamic banking, business, and economic matters, using examples to illustrate their relevance.
ISLAMIC ACCOUNTING PRACTICES - THE IMPORTANCE OF ISLAMIC CAPITAL MARKET IN MA...Nur Adillah Arifah Nazri
Capital markets are an important component of the financial system for raising funds for long-term investment. They provide opportunities for diversification of risk through cross-sectional risk sharing. The long-term investments are facilitated through a series of short-term contracts in the form of tradable securities enabling the investors an opportunity to exit or enter through trade. Thus they provide an element of liquidity to the otherwise illiquid assets. The secondary market also provides pricing and valuation of assets on a continued basis thus eliminating arbitrage and inefficiencies
Maqasid as-Shariah is very important subject in understanding the whole picture of Islamic law. Without the knowledge about maqasid as-Shariah, people will not be able to see the beautiful of Islam as it has been described in the Quran as the rahmah or mercy to the universe. Maqasid as-Shariah shows that every single law or regulations in the Islamic teaching are meant for the benefit of the whole universe since Islam was revealed to the universe. Shari'ah aims at the welfare of the people in this life and in the life hereafter, and for this purpose it has advised people to adopt such means and measures that may give advantage benefit/well-being to them and may ward off evil/injury/loss, from them.
Maqasid al-Shari'ah comprises those benefits/welfare/advantages behind the revelation of Islamic Laws.
It aims at the attainment of good, welfare, benefits, and warding off evil, injury, loss, etc. for the creatures. (All this in Arabic terminology can be stated as Masalih al-'Ibad.)
Many jurists have tried to explain the aims and objectives of Shari'ah upon which it is established.
Among the outstanding figures are the Malikite Abu Ishaq al-Shatibi, the Shafite al-'Izz ibn 'Abd aI-Salam, and the Hanbalite Ibn Qayyim al-Jawiziyyah.
Many jurists have tried to explain the aims and objectives of Shari'ah upon which it is established.
Among the outstanding figures are the Malikite Abu Ishaq al-Shatibi, the Shafite al-'Izz ibn 'Abd aI-Salam, and the Hanbalite Ibn Qayyim al-Jawiziyyah.
One of very important objective is:
Rahmah (Mercy or Compassion), that seek to eliminate prejudice, alleviate hardship and establish justice. The laws of the Qur’an and Sunnah also seek to promote co-operation and support within the family and the society at large.’Adl or Qist (Justice), is indeed a manifestation of God’s Mercy, but may also be seen as a principal objective of the Shari’ah.
One of very important objective is Rahmah (Mercy or Compassion), that seek to eliminate prejudice, alleviate hardship and establish justice. The laws of the Qur’an and Sunnah also seek to promote co-operation and support within the family and the society at large.’Adl or Qist (Justice), is indeed a manifestation of God’s Mercy, but may also be seen as a principal objective of the Shari’ah. An adequate knowledge of the maqasid
thus equips the student of Shari’ah with insight and provides him with a theoretical framework in which the attempt to acquire detailed knowledge of its various doctrines can be more meaningful and interesting.
MENGELOLA LINI PRODUK DAN MEREK
Produk dan Bauran Produk
Lima Level Produk
Manfaat inti
Produk dasar
Produk yang diharapkan
Produk yang ditingkatkan
Produk potensial
Hierarki Produk
Rumpun kebutuhan (need family)
Rumpun produk (product family)
Kelas produk (product class)
Lini produk (product line)
Jenis produk (product type)
Merek (brand)
Unit produk (item)
Klasifikasi Produk: Barang tidak tahan lama, Barang tahan lama, Jasa
Klasifikasi Produk:
Barang Industri
1. Bahan Baku
2. Barang modal
3. Perlengkapan &
Jasa Bisnis
Bauran Produk
Product mix adalah kumpulan dari semua produk dan unit produk yang ditawarkan penjual tertentu kepada pembeli
Lebar bauran, berapa banyak macam lini produk perusahaan
Panjang bauran, jumlah unit produk dalam bauran produknya
Kedalaman bauran produk, berapa banyak varian yang ditawarkan tiap produk dalam lini tersebut
Konsistensi bauran produk, mengacu pada seberapa erat hubungan berbagai lini produk dalam hal penggunaan akhir, persyaratan produksi, saluran distribusi dll.
Enam Level Pengertian Merek
Atribut, mengingatkan pada atribut-atribut tertentu
Manfaat, atribut yang diterjemahkan menjadi manfaat fungsional dan emosional
Nilai, menyatakan sesuatu nilai produsen
Budaya, mewakili budaya tertentu
Kepribadian, mencerminkan pribadi tertentu
Pemakai, menunjukkan jenis konsumen yang membeli atau menggunakan produk tersebut
Pelabelan, bisa berupa tempelan sederhana pada produk atau gambar yang dirancang dengan rumit yang merupakan satu kesatuan dengan kemasan
Fungsinya :
Mengidentifikasi produk atau merek
Menentukan kelas produk
Menjelaskan produk
Mempromosikan produk
ISLAMIC ACCOUNTING PRACTICES - THE IMPORTANCE OF ISLAMIC CAPITAL MARKET IN MA...Nur Adillah Arifah Nazri
Capital markets are an important component of the financial system for raising funds for long-term investment. They provide opportunities for diversification of risk through cross-sectional risk sharing. The long-term investments are facilitated through a series of short-term contracts in the form of tradable securities enabling the investors an opportunity to exit or enter through trade. Thus they provide an element of liquidity to the otherwise illiquid assets. The secondary market also provides pricing and valuation of assets on a continued basis thus eliminating arbitrage and inefficiencies
Maqasid as-Shariah is very important subject in understanding the whole picture of Islamic law. Without the knowledge about maqasid as-Shariah, people will not be able to see the beautiful of Islam as it has been described in the Quran as the rahmah or mercy to the universe. Maqasid as-Shariah shows that every single law or regulations in the Islamic teaching are meant for the benefit of the whole universe since Islam was revealed to the universe. Shari'ah aims at the welfare of the people in this life and in the life hereafter, and for this purpose it has advised people to adopt such means and measures that may give advantage benefit/well-being to them and may ward off evil/injury/loss, from them.
Maqasid al-Shari'ah comprises those benefits/welfare/advantages behind the revelation of Islamic Laws.
It aims at the attainment of good, welfare, benefits, and warding off evil, injury, loss, etc. for the creatures. (All this in Arabic terminology can be stated as Masalih al-'Ibad.)
Many jurists have tried to explain the aims and objectives of Shari'ah upon which it is established.
Among the outstanding figures are the Malikite Abu Ishaq al-Shatibi, the Shafite al-'Izz ibn 'Abd aI-Salam, and the Hanbalite Ibn Qayyim al-Jawiziyyah.
Many jurists have tried to explain the aims and objectives of Shari'ah upon which it is established.
Among the outstanding figures are the Malikite Abu Ishaq al-Shatibi, the Shafite al-'Izz ibn 'Abd aI-Salam, and the Hanbalite Ibn Qayyim al-Jawiziyyah.
One of very important objective is:
Rahmah (Mercy or Compassion), that seek to eliminate prejudice, alleviate hardship and establish justice. The laws of the Qur’an and Sunnah also seek to promote co-operation and support within the family and the society at large.’Adl or Qist (Justice), is indeed a manifestation of God’s Mercy, but may also be seen as a principal objective of the Shari’ah.
One of very important objective is Rahmah (Mercy or Compassion), that seek to eliminate prejudice, alleviate hardship and establish justice. The laws of the Qur’an and Sunnah also seek to promote co-operation and support within the family and the society at large.’Adl or Qist (Justice), is indeed a manifestation of God’s Mercy, but may also be seen as a principal objective of the Shari’ah. An adequate knowledge of the maqasid
thus equips the student of Shari’ah with insight and provides him with a theoretical framework in which the attempt to acquire detailed knowledge of its various doctrines can be more meaningful and interesting.
MENGELOLA LINI PRODUK DAN MEREK
Produk dan Bauran Produk
Lima Level Produk
Manfaat inti
Produk dasar
Produk yang diharapkan
Produk yang ditingkatkan
Produk potensial
Hierarki Produk
Rumpun kebutuhan (need family)
Rumpun produk (product family)
Kelas produk (product class)
Lini produk (product line)
Jenis produk (product type)
Merek (brand)
Unit produk (item)
Klasifikasi Produk: Barang tidak tahan lama, Barang tahan lama, Jasa
Klasifikasi Produk:
Barang Industri
1. Bahan Baku
2. Barang modal
3. Perlengkapan &
Jasa Bisnis
Bauran Produk
Product mix adalah kumpulan dari semua produk dan unit produk yang ditawarkan penjual tertentu kepada pembeli
Lebar bauran, berapa banyak macam lini produk perusahaan
Panjang bauran, jumlah unit produk dalam bauran produknya
Kedalaman bauran produk, berapa banyak varian yang ditawarkan tiap produk dalam lini tersebut
Konsistensi bauran produk, mengacu pada seberapa erat hubungan berbagai lini produk dalam hal penggunaan akhir, persyaratan produksi, saluran distribusi dll.
Enam Level Pengertian Merek
Atribut, mengingatkan pada atribut-atribut tertentu
Manfaat, atribut yang diterjemahkan menjadi manfaat fungsional dan emosional
Nilai, menyatakan sesuatu nilai produsen
Budaya, mewakili budaya tertentu
Kepribadian, mencerminkan pribadi tertentu
Pemakai, menunjukkan jenis konsumen yang membeli atau menggunakan produk tersebut
Pelabelan, bisa berupa tempelan sederhana pada produk atau gambar yang dirancang dengan rumit yang merupakan satu kesatuan dengan kemasan
Fungsinya :
Mengidentifikasi produk atau merek
Menentukan kelas produk
Menjelaskan produk
Mempromosikan produk
pasar modal yang ada selama ini diakui mengandung berbagai hal yang menyimpang dari prinsip-prinsip Syariah.seperti riba, maisir dan gharar (tak jelas wujudnya)
Islamic finance current, future trends and challengesHosam alden
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Fiqh for islamic banking
1. FIQH FOR ISLAMIC BANKING AND FINANCE
(MIFB 6043)
ASSIGNMENT 1
The 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. Contents
Introduction…………………………………………………………………………………………………………….…1-2
Definition of Legal Maxims…………………………………………………………………………………………..2
Differences between Al-qawa’id al-fiqh and usul ……………………………………………………...2-3
Islamic Legal Maxims and Development of Islamic Finance…………………………………….…3-4
Leading Islamic Legal Maxims and their evidences from the Quran and Sunnah…….…5-8
Application of Islamic Legal Maxims to Islamic banking, Finance and business…………….9
Matters are determined according to their intentions…………………………………………..………….…9-11
Hardship begets facility…………………........………………………………………………………………..………..11-12
Certainty cannot be overruled by doubt……………………………………………………….…………………..12-13
The origin of all rules is permissibility…………………………………………………………..…………..……….…13
Harm should not be inflicted nor reciprocated…………………………………………..…………………...13-15
Freedom from liability is a fundamental freedom……………………………………………………………….15
Custom is a source of judicial decision…………………………………………..……………..………………….15-16
Damage and benefit go together………………………..………………………………………………….16-17
Conclusion………………………………………………………………………………………………………………17-18
References……………………………………………………………………………………………………………….....19
Appendix………………………………………………………………………………………………………………….20-21
i
3. 1
INTRODUCTION
The study of figh for Islamic economics is very important as the field of Islamic finance and
banking gains momentum and expands throughout the globe. As Islamic banks and other
Islamic financial institutions embarked upon new products, the role of Muslim Shariah scholars
in the area of Islamic jurisprudence (fiqh) became paramount as there could be no products to
be 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 existed
before 1900; its effect was strongest after the imperialists took control most of the countries in
the world. Along its other ideologies, it introduced the interest-based banking system to the
Muslim nations which is against the Shariah principles.
This riba-based banking system threatened the existence of Muslim nations, their business and
economic activities and forced them to depend on the western banking which was meant to
devour 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 Muslim
scholars such as Anwar Qureyshi, Muwdudi and others recognized the need for commercial
banking 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 man
on social and economic matters, man and other creatures of Allah and a man and his
surrounding1
However since Muslims desperately need to distance themselves from a riba-based banking
system and establish their own banking system which is based on Islamic Shariah, there came a
pressing need to fully comprehend, analyze and understand shariah principles and Islamic fiqh
to achieve this goal.
1
Dziyauddin bin Ahmed, (2007) Handbook on Fiqh Muamalat: Compilation of Class Notes on Fiqh
Muamalat, IIUM, Kuala Lumpur
4. 2
Among the useful tools which are used by Muslim scholars of Islamic fiqh to come up with new
rulings –including the innovation of shariah-based products, are Islamic legal maxims known as
Al-qawa’id al-fiqhiyyah ( ). These Islamic legal maxims are very important to the
economic and business activities to the Muslim people since even when they are conducting
their business activities they should behave according to the shariah and with a good intention
to 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 evidences
from the Qur’an and Sunnah and their application to economic and business matters especially
to 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 rules
which are related to each other into maxims2. An example of such a maxim is: “Certainty cannot
be overruled by doubt”.
Differences between usul fiqh and qawa’id al-fiqh
Usul fiqh ( )
Usul al-fiqh is a methodology of legal reasoning which derives legal rulings from primary
sources of Shariah which is the Qur’an and Sunnah. The sources are read in an honest and
unbiased manner to infer the intentions of Allah SWT. Usul al-fiqh talks about rules of
interpretation, meaning and implication of commands and prohibitions and so forth3
2
Al-Zuhaili, W. (1996), Fiqh-al-Islami wa adillatuh, Damascus, Dar-al-fikr
3
See also Kamali.M(n.d), Principles of Islamic jurisprudence, Islamic Text society, Cambridge
5. 3
Al-qawa’id al-fiqh )
These are defined as principles which summarize a number of fiqh rules which are related to
each other into maxims. An example of such maxims is: “Matters are determined according to
their intention.”
It is quite important to understand that these Principles are derived from consolidated reading on
various rules of fiqh regarding various themes. They are short, epithetical expressions of Shariah goals
and objectives.
Islamic Legal Maxims and Development of Islamic Finance
The text, either from the Quran or Sunnah, can be divided into two main categories
1. Text which explain certain issues in detail
2. Text which gives general guidelines and basic principles
These different types of orientation have certain purpose to serve. The first from the first
category usually addresses fixed issues and matters which are transcendental such as the
system 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 five
specific offenses, murder, theft, highway robbery, adultery and slanderous accusations. The
Qur’an also gave detailed rulings about marriage, inheritance and family matters. This is
because the objective of such rulings is permanency and cannot be changed whatsoever.4
On the other hand, Islamic Shariah gave general guidelines in many areas which could change
due to time, place and circumstances. The basic objective of the law in this case is to provide a
room for flexibility which can lead to variations in interpretations. Thus various interpretations
and flexibility makes application possible which would not have been possible had there been
4
Securities Commission Malaysia(2009) Islamic Commercial Law(fiqh al-Muamalat), LexisNexis, Kuala
Lumpur
6. 4
any 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:
185
Thus commercial law and finance fall within this second category where there is enough room
for flexibility as long as it is in line with Shariah principles and complies with the basic objective
of Shariah that is based on justice and fairness.
The development of the Islamic banking and finance industry has raised many contemporary
issues 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, direct
rulings from the texts could not be found as the nature of the texts itself has left the issues for
different considerations. Hence, as a solution, application of legal maxims would help to
develop the parameters of Islamic banking and finance and its general principles. 6
5
Taqi-u-Din, M. and Muhsin, M.(1982)The Noble Qur’an English Translation of the meanings
and commentary, King Fahd Complex, Madinah
6
Securities Commission Malaysia(2009) Islamic Commercial Law(fiqh al-Muamalat), LexisNexis, Kuala
Lumpur p.71
7. 5
Leading Islamic Legal Maxims and their Evidences ( ) from the
Quran and Sunnah
1. Matters are determined according to their intentions )
The evidence for this legal maxim is from an authentic Hadith. The Prophet
said: 7 ). (“Deeds are judged by intentions and every person
is judged according to his intention”)8 quoted by Bukhari Hadith No: 6689 and Muslim Hadith
No: 1907
2. 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
10
And 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 have
said:
11
“
7
8
See 7
9
Taqi-u-Din, M. and Muhsin, M. op. cit., p.454
10
11
8. 6
“If one of you feels something in his stomach (fart etc) and then cannot differentiate if
something came out or not? He should not go out of the mosque unless he hears a sound or
finds a smell.”12
4. 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: 29
5. 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: 29
In following hadith the prophet said:
15
”
“Harm should not be inflicted nor reciprocated.”16
12
See 11
13
Taqi-u-Din, M. and Muhsin, M. op. cit., p.7
14
Taqi-u-Din, M. and Muhsin, M. op. cit., p.112
15
16
See 11
9. 7
6. Freedom from liability is a fundamental principle ( )
This origin of this maxim is founded on the Quranic verse declaring the original permissibility of
all things.
Say ( O Muhammad ): “I find not in that which has been revealed to me
anything forbidden to be eaten by one who wishes to eat it, unless it be Maitah ( a dead
animal) or blood poured forth (by slaughtering or the like), or the flesh of swine(pork); for
that surely is impure or impious(unlawful) meat (of an animal) which is slaughtered as a
sacrifice for others than Allah (or has been slaughtered for idols or on which Allah’s Name has
not been mentioned while slaughtering ). But whosoever is forced by necessity without
willful disobedience, nor transgressing due limits; (for him) certainly, your Lord is Oft-
17
Forgiving, Most Merciful.” Al-an’am: 145
In this Quranic verse, it could be understood that everything is presumed to be permissible
unless prescribed otherwise. Similarly, a person is deemed to be free from any liability unless
there 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 Sunnah
17
Taqi-u-Din, M. and Muhsin, M. op. cit., p.195
10. 8
“And live with them (your wives) honorably”18 An-nisa: 19
And the evidence from the hadith whereby Hinda the wife of Abu Sufyan complained to the
prophet 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”20
7. Damage and benefit go together21 ( )
This maxim is based upon the hadith of the prophet saying: 22 “
“Revenue goes with liability”23
Even though this hadith was quoted by Ibn Majah, Nisai, Abu Daud and others and declared it
to 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 what
he did not say( ), yet the hadith is used as a
basis of legal maxim applied in financial transactions and business matters.
18
Taqi-u-Din, M. and Muhsin, M. op. cit., p.110
19
20
See 19
21
Majalla art. 86. see also Hasanuzzaman, S.(2007) the economic relevance of shariah maxims(al-
qawa’id al-fiqhiyah), Scientific publishing, Jeddah
22
23
See 22
11. 9
Application of Islamic leading maxims to Islamic banking, Finance, business and
economic matters
Islamic legal maxims are the systematic exposition of the spirit of the legal text (nass) intended
to guide man towards different situations in human society throughout the ages. They provide
broad contours within which policy making can be persuaded and its validity judged. The legal
maxims on the other hand are amendable to trade-offs and substitutions.24
1. Matters are determined according to their intentions )
That Quran reiterates that Muslims should demonstrate consistency in faith and practice and in
words and deeds.
“O you who believe! Enter perfectly in Islam (by obeying all the rules and regulations of the
Islamic religion)”25 Al-baqara: 208
“Verily, Those who say: “Our Lord is Allah (Alone) and then they stand firm26” Fusilat: 30
27
The rule embodied in this maxim has been applied by early jurists mostly on acts of rituals
but it is just as equally applicable to other spheres of activity. The liability of a person who finds
24
Hasanuzzaman, S.(2007) the economic relevance of shariah maxims(al-qawa’id al-fiqhiyah), Scientific
publishing, Jeddah
25
Taqi-u-Din, M. and Muhsin, M. op. cit., p.44
26
In Arabic Istaqamu( ), stand firm; means they followed(really) the religion of Islamic
Monotheism, believed in the Oneness of Allah, worshiped none but Him(Alone), and performed all that
was ordained by Allah(good deeds), and abstained from all that was forbidden by Allah(sins and evil
deeds)
12. 10
somebody’s goods lying in the way and picks it up will be contingent upon the intention with
which he has picked it up. If he intends to hand it over to the owner and made it known to
others he will be treated as trustee and will not be required to indemnify the owner in case the
property is destroyed while in his possession. But if he has kept it as an owner he would be
treated as usurper, ghasib ( ) and will be required to indemnify the owner in case the
property is destroyed.28
Let us consider an example of our time. The establishment of Islamic financial institutions and
Islamic banks could be piety-driven aiming at improving the socioeconomic status of the
Muslims across the world and ensuring their well-being while avoiding riba-based banking
system and unlawful gains whichever sort it is. On the other hand some” Islamic banks” may be
established to exploit the needy, introduce artifice ( ) to practice distorted forms of riba and
maximize their profit in the name of Islamic banks. The difference between the two categories
is the intention behind each category of them. The intention of the first category is to please
Allah, acquire wealth and dispose it according to the Shariah while the intention of the latter is
to 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 words
and phrases used’ ( )
For example, kafalah implies coextensive liability while transfer of debt implies discharge of the
principal debtor. If a contract of transfer of debt is made with the condition to hold the
principal debtor liable in case the transferee fails to discharge the debt, contract even though
termed as a contract of transfer of debt will be treated as a contract of kafalah. Similar will be
27
Ibn Nujaym, pp. 10-12; Suyuti p. 8, sqq See also Hasanuzzaman, S.(2007) the economic relevance of
shariah maxims(al-qawa’id al-fiqhiyah), Scientific publishing, Jeddah p.6
28
Majalla, Arts. 769-770. See also Hasanuzzaman, S. (2007) the economic relevance of shariah
maxims(al-qawa’id al-fiqhiyah), Scientific publishing, Jeddah p.7
13. 11
the treatment of a contract of kafalah in case the principal debtor is discharged after the
contract of kafalah is signed.
Also it will not be permissible for Islamic banks to practice Musharakah and Mudarabah in such
a way as to ensure fixed rate of return for the banks while the liability of bearing loss or an
uncertain 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 maxim
reads: “necessity renders prohibited things permissible” ( )
This legal maxim is found to be of important relevance in modern Islamic finance. An example is
the permission to deal with conventional banks for the Muslim minority living in non-Muslim
countries. In this case, they might be allowed to temporarily use conventional banking due to
the compelling need whereby no Islamic financial facilities are available for products like
residential financing. Another example is the compulsory insurance protection whereby no
takaful 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 be
allowed to take insurance to cover that particular risk temporarily29.
However, it must be emphasized that, although facility is granted in situations of hardship, it is
not absolute. Such a grant must be limited to certain extent in order to preserve the original
rule. Thus, the permissibility granted due to hardship is limited by anther maxim, that is:
“necessity is estimated by the extent thereof.” ).Therefore, if permissibility is
granted in case of hardship, it must be granted up to the extent required for meeting that
hardship. 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 this
29
ISRA (2011) ISLAMIC FINANCIAL SYSTEM principles and operations, ISRA, Kuala Lumpur
14. 12
following sub-rule (sub-maxim) “what is lawful for a reason becomes invalid when such reason
disappears”30 ( )
3. Certainty cannot be overruled by doubt ( )
The basic rule that resolves the conflict between doubt and certainty is contained in the maxim
that reads: “Certainty cannot be overruled by doubt.” This maxim rejects the effect of doubt
that disturbs the original position. This rule is of great significance in the event of controversy
on rights and obligations of contending parts in the absence of a proof on either side. The
benefit of doubt arising out of a controversial position can never go to a person on whom the
onus of proof lies; thus the position of an indebted person even after his death will not be
affected by doubt as to a probable discharge of debt. Likewise a claim as to the discharge of a
debt 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 its
application.
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 business
partner and claim his share in that profit as different from the amount stated to have been
actually earned by the partner. The sub-maxim provides that in case the working partner
declares a certain amount of profit no more will be presumed unless the contrary is proved to
be 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. 13
Given the above sub-maxims, in case of loss in business a partner cannot allege willful neglect
and require the latter to indemnify him for the loss unless he proves the contrary. Failing this
proof the partner will not be personally made liable to the loss or to indemnify the other
partner. Any doubt affecting his position of freedom from liability will be untenable. No
arbitrary 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 way
for inventions and wide room for innovations for different financial tools and instruments for
financial transactions without necessarily finding the authority for their permissibility.
Nevertheless, it must be ensured that the innovations do not transgress any of the agreed
principles 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, a
firm is prohibited from inflicting injury or causing grief to others. This guiding maxim when read
with its sub-maxim, “wrong is to be undone” ( ) provides a guideline to regulate the
entire 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 the
affected bank (or its representatives) to retaliate by damaging the car, the house or any other
property belonging to the customer. If a customer has been denied to use his credit card or had
his accounts frozen by a discretionary order from the management of a bank, the customer is
not permitted to retaliate by causing damage to the equipment of the Bank. This is because
such action is deemed to aggravate the damages without any benefits in return, hence it is
harmful. The alternative is paying compensation to the same value of the damaged property or
denied service so as to avoid further harm to the property of the owner or a service he is
entitled to.
16. 14
This maxim allows individuals to act unilaterally to protect themselves or others from harm. For
example, in case the buyer of perishable goods absents himself without taking possession of
the purchased goods the seller, in order to protect himself and the from loss, has a right to
unilaterally revoke the contract of sale and sell the goods to some other party lest commodity
should 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 manifestation
of this maxim is the validation of the option of defect ( ) in Islamic law, which is
designed to protect the buyer against harm. Therefore, when a customer buys a car and then
discovers that it is substantially defective, he has the option to revoke the contract. For there is
a legal presumption under the Shariah, that the buyer concluded the contract on condition that
the object of sale was not defective.31
The 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 the
purchased article has developed similar fault while in possession of the purchaser he will lose
his option to return the goods because, in order to protect himself from harm, he will also be
harming 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 rule
says that in cases where the choice is between two harmful alternatives the one fraught with
less harm may be chosen. For a example a customer loses his credit card in a slot in an ATM
machine, his card may be allowed to go waste rather than to dismantle the machine which has
greater value than the credit card. But in case a very valuable case of jewellery is lost in a less
expensive 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 financial
transactions, Australia.
17. 15
6. Freedom from liability is a fundamental principle ( )
Thus in case of loss in a business, a partner cannot allege willful neglect and require the latter
to indemnify him for the loss, unless he proves the contrary. Failing this proof the partner will
not be personally made liable to the loss or to indemnify the other partner. Any doubt affecting
his position of freedom from liability will be untenable. No arbitrary judgment of the contender
would be acceptable.
This maxim states that a person is innocent until proven guilty and any claim made against him
should be rejected unless a proof is found and the person will remain in his original state. If for
example, a bank claims that a given customer owes him a debt amounting to RM 500,000 the
bank must actually prove that the mentioned customer owes him this amount. If it does not
bring any proof, the customer will be free from liability. The proof should be enough for the
matter to attain a degree of certainty.32
7. Custom is a source of judicial decision. )
This legal maxim rules that customary practices of society in terms of their words and action are
acknowledged and recognized by shariah in the absence of textual injunctions, provided they
have 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 out
32
Securities Commission Malaysia (2009) Islamic Commercial Law (fiqh al-Muamalat), LexisNexis, Kuala
Lumpur p.7 -73
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.33
With reference to contemporary Islamic financial transactions, a good example which is
deemed to be a valid customary practice by scholars is the acceptance of the definition used in
spot trading for cross border transactions. Even though the common understanding for spot
trading from the Islamic financial transaction’s perspective is on the same day and within the
contractual session ( ), the delay of two business days has now been recognized as
spot transaction due to the prevalent market practice to facilitate the transfer of fund from one
country to another.34
8. Damage and benefit go together ( )
This legal maxim implies that if the merchandise not yet possessed by the buyer is lost, it is the
seller 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 increase
will benefit the one who is deemed to be liable to suffer from an adverse fluctuation in price of
the goods.
The depositary who is liable to return the deposit is entitled to take away the profit of the
deposit if the same has been invested, even though the permission (express or implicit) has
been given by the depositor. But if the depositor lays down the condition of transferring profits
33
ISRA (2011) ISLAMIC FINANCIAL SYSTEM principles and operations, ISRA, Kuala Lumpur p.171
34
ISRA (2011) ISLAMIC FINANCIAL SYSTEM principles and operations, ISRA, Kuala Lumpur p.172
19. 17
to him he will have to bear the loss, when incurred, on these investments. The depositor is
liable to bear the expenditure of safe-keeping because it is he who benefits from this safety.35
These rules are to be made applicable to all situations where an owner earns benefit from the
property which he has transferred or intends to transfer fully or partially to others under a
contract of sale, hire, lease, tenancy, agency, etc; or joins with another person with a view to
earning through partnership (Shirka or Mudaraba) or sharecropping (Muzaraa)36
Conclusion
At the outset, an introduction to Islamic banking and finance as well as the legal maxims was
developed. The paper highlighted the development of Islamic banking and legal maxims in the
light of contemporary issues. The paper emphasized the importance of legal maxims and their
crucial role in today’s banking and finance activities. It further indicated the necessity for
knowledge shariah scholars who mastered in the area of Islamic fiqh and contemporary issues
for them to spearhead the ongoing efforts in the Islamic finance industry to device new
products without violating shariah principles.
As the paper underlined the importance of Islamic legal maxims, it shed light on the
applications of such maxims in the financial and banking practices as well as other related
business and economic matters. Great importance was given to maxims most commonly used
in the area such as those concerning solving controversies, profit and loss sharing, preventing of
unnecessary damage inflicted by either of the contracting parties, customary practices in
financial transaction and other important issues.
35
Hasanuzzaman, S.(2007) the economic relevance of shariah maxims(al-qawa’id al-fiqhiyah), Scientific
publishing, Jeddah p.43
36
Hasanuzzaman, S.(2007) the economic relevance of shariah maxims(al-qawa’id al-fiqhiyah), Scientific
publishing, Jeddah p.43
20. 18
To achieve truly halal products and valid financial transactions according to the Shariah, the
legal maxims, should be given greater consideration and a throughout analysis should be made
to base banking and financial transactions upon legal maxims which are derived from the
Qur’an and Sunnah. And to void any misinterpretation of the maxims they should be applied
and analyzed in an honest and unbiased manner by qualified and knowledgeable Muslim
shariah scholars in the area of fiqh.
REFERENCES
Abu Umar Faruq Ahmed et al (n.d) Shariah Maxims and their application on modern financial
transactions, Australia
21. 19
AI-Suyuti, JaIaIuddin ‘Abd aI-Rahman(1959) Al-Ashbah wa'nnaza'ir, Cairo
Al-Bukhari, Muhammad ibn Ismail :( n.d) Sahih Bukhari, Muhammad Said and Sons, Karachi
Al-Zuhaili, W. (1996), Fiqh-al-Islami wa adillatuh, Damascus, Dar-al-fikr
Dziyauddin bin Ahmed, (2007) Handbook on Fiqh Muamalat: Compilation of Class Notes on Fiqh
Muamalat, IIUM, Kuala Lumpur
Hasanuzzaman, S.(2007) the economic relevance of shariah maxims(al-qawa’id al-fiqhiyah),
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Ibn Maja, Muhammad b. Yazid:(n.d) Sunan, Muhammad Said and Sons, Karachi
Ibn Nujaym, Zayn al-‘Abidin: (1270 H.)Al-Ashbah Wa'n-nazair, Calcutta
ISRA (2011) ISLAMIC FINANCIAL SYSTEM principles and operations, ISRA, Kuala Lumpur
Kamali.M (n.d), Principles of Islamic jurisprudence, Islamic Text society, Cambridge
Majalla al-Ahkam al-Adliyya,(n.d) Reprint, Karachi
Nasa'i, Ahmad ibn Shu'ayb: (n.d)Sunan, Lahore
Securities Commission Malaysia (2009) Islamic Commercial Law (fiqh al-Muamalat), LexisNexis,
Kuala Lumpur
Taqi-u-Din, M. and Muhsin, M.(1982)The Noble Qur’an English Translation of the meanings and
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Appendix
Legal Maxims used in the paper