Search Results (12)

Credit relations in Muslim societies have attracted significant scholarly attention across disciplines due to the prohibition of interest. In the Ottoman Empire, renowned for its vast resources, the presence of sophisticated credit mechanisms alongside its strong Muslim identity has often been perceived as paradoxical. While this apparent contradiction has been extensively studied, the perception and legitimacy of these credit mechanisms within Islamic law, particularly in English-language scholarship, remains underexamined. This study addresses this gap by analyzing bayʿ al-wafāʾ, a significant financing mechanism in which asset ownership is temporarily transferred to a lender in exchange for a loan, with the understanding that the asset will be returned upon full repayment. This transaction, employed for centuries across diverse regions as an interest-avoiding solution, has been extensively debated within Hanafi jurisprudence. This research chronologically examines bayʿ al-wafāʾ’s integration into Hanafi legal thought from its emergence through the 18th-century Ottoman Empire, drawing on primary sources across various genres of Hanafi legal literature. The findings reveal that bayʿ al-wafāʾ could not be categorized within existing Islamic contract frameworks. Instead, it is recognized as a contract with unique provisions deriving legitimacy from custom and necessity. This study illuminates both how this transaction achieved legal and legitimate status within Hanafi jurisprudence and, more broadly, demonstrates the dynamic evolution of Islamic law within the Hanafi school from the 10th to 18th centuries. Through this analysis, this study demonstrates how the paradoxical challenge of providing interest-free financing was resolved within the framework of Islamic legal principles. Full article

The “Dana Gas” case is considered one of the pivotal cases in the development of the Islamic financial industry. The case raised concerns about the limits of legal certainty, particularly the judiciary’s right to exercise “ijtihad” (juristic interpretation). This study highlights the extent to which Islamic financial institutions adhere to their contractual obligations in good faith based on Shariah compliance. It also outlines how the judiciary preserves its inherent right to exercise due diligence in relation to protecting the public economic order and applying its authority in evaluating the practical application of Islamic finance contracts and instruments. Based on the dialectical approach, this article analyzes the case by presenting the background of the dispute and its legal dimensions, emphasizing the necessity of achieving legal certainty in the Islamic financial industry. This study also advocates for applying judicial jurisprudence in resolving disputes related to sukuk. Finally, it unfolds the legal lessons learned from this case. This study concludes that more effort should be made to localize judicial jurisdiction in resolving disputes related to sukuk, regulating the process of selecting the applicable law, and to develop the legal infrastructure in systems participating in Islamic finance. Accordingly, this study highlights the significant role that Shariah standards could play in this field in the future. Full article

This study examines the relationship between Environmental, Social, and Governance (ESG) disclosures and perceived financial performance within the context of Islamic finance, with a focus on Maqasid al-Shariah—the overarching goals of Islamic law. Using a quantitative approach, the study surveyed 350 stakeholders in Saudi Arabia’s Islamic finance sector, including corporate managers, investment professionals, and financial analysts, over a six-month period (May to October 2024). The findings indicate that stakeholders perceive a positive relationship between ESG disclosures and financial performance, particularly when companies align their ESG practices with Islamic finance principles. However, the study does not measure actual financial performance; rather, it assesses stakeholders’ perceptions of ESG’s influence on corporate governance, risk management, and investment attractiveness. Results suggest that companies integrating ESG principles with Maqasid al-Shariah foster greater stakeholder trust, enhance corporate responsibility, and promote long-term sustainability. However, variations in trust and investment decisions exist based on industry type, ESG disclosure levels, and demographic factors such as experience and familiarity with ESG practices. The study provides novel insights into how Islamic finance principles shape ESG disclosure practices, offering practical recommendations for improving corporate governance and sustainability. By emphasizing transparency, ethical investment, and regulatory alignment, these findings contribute to ongoing discussions on sustainable finance and the role of ESG in shaping Islamic financial institutions. Full article

In essence, Islamic law (Maqasid al-Shariah) and the sustainable development goals (SDGs) initiated by the United Nations have the same goal: to achieve the perfection of a sustainable human life. Meanwhile, Islamic finance is regarded as an implementation of Islamic law, as many Islamic finance products and instruments are derived from Islamic law. Prior studies on Islamic law, Islamic finance, and SDGs tend to be scattered, and the role of Islamic finance in SDGs is still questionable. This paper uses a systematic literature review to investigate the intersection of Islamic finance, Islamic law, and SDGs. We selected papers that focused on Islamic finance as an inclusion criterion and excluded papers that only discussed Islamic countries as an exclusion criterion. We retrieved 65 papers and book chapters published from 2008 to 2022 from the Scopus database to analyze which parts of Islamic finance and law can contribute to the SDGs. We use thematic analysis for data synthesis by grouping findings into their relation to Islamic law using Al-Ghazali’s Framework of Maqashid Al-Shariah and SDGs from the UN, and then explaining the research results using a narrative method. Through this study, we found that Islamic finance supports the SDGs with the most significant contribution to humanity. In addition, it is essential to know that the support of the government, regulators, and related institutions is much needed to improve Islamic finance for the achievement of SDGs. Full article

This manuscript critically discusses the current implications of the scriptural injunctions against gharar and maysir. It elaborates how overlooking the features of the contemporary world and adopting a formalistic approach in Islamic jurisprudence have led to absurdity in the implication of the doctrines of gharar and maysir for Muslims’ financial activities. The manuscript also underscores the necessity of adopting the maqāsid approach (purposivism) in Islamic jurisprudence. It propounds that the cogent concern of the injunctions could have been an initiative for Islamic scholars to establish an advanced contract law and to promote transparency in economic activities if a maqāsid approach had been adopted in Islamic jurisprudence. Full article

American Muslims regularly encounter a tacit distinction between the civic and religious spheres of their daily lives. Islamic legal norms are not invoked incessantly to highlight the differences between Muslims and their fellow citizens, but instead are considered relevant for particular issues at particular times. Through examining examples of how Muslims engage with the American economic and legal system, it is shown that much of one’s engagement with the civic structures of American life is seen as unproblematic. Understanding this distinction helps Muslims participating in American life to properly conceptualize the relationship between their religious faith and their roles as citizens in the larger body politic. Full article

Despite being a foundational practice in Islam, deeply rooted in law and reflected in the theological and spiritual concepts of wealth and sustenance (rizq), discussions of applying obligatory alms (zakāh) rulings to majority non-Muslim countries are limited. The Muslim’s spiritual attitude toward finances is informed by a theological view that all forms of wealth ultimately belong to God. Sunni Muslim theologians define rizq to be what one actually (not potentially) consumes and benefits from (not possesses), which, alongside plentiful verses and Prophetic traditions, continuously motivate philanthropic giving without fearing scarcity. This article aims to investigate some major issues resulting from the unregulated procedures of zakāh collection and disbursement as practiced by North American Muslim organizations and religious leaders. The article (1) doctrinally analyzes how North American practices diverge from the rules of Islamic law (fiqh) regarding zakāh distribution, (2) examines the ramifications of contemporary Eastern–Western legal opinions (fatāwā) expanding the eligibility of charitable institutions to receive zakāh, and (3) investigates the practices of administering zakāh resources. Full article

This article seeks to recover the financial rights of separated women living in the Muslim communities of Russia’s Volga-Ural region in the eighteenth and early nineteenth centuries. It argues that by the 1780s–1820s, separated Muslim women were guaranteed certain rights and powers over their marital finances and personal property. These rights emerged out of a complex plural legal landscape created by the Volga-Ural region’s complicated religious and political history in the late medieval and early modern periods. By the end of the eighteenth century, separated Muslim women could claim certain financial rights under both Islamic law and Russian civil law, but had to pursue different kinds of claims through different legal systems. The legal landscape and practices that evolved in relation to separated women’s rights during the early modern period became formalized and institutionalized in the nineteenth century and persisted until the collapse of the Russian empire. Full article

Risk is a big concern for anyone contemplating investing in new, especially innovative ventures. However, if successful, the returns can be extraordinary, serving as an impetus for many venture capitalists to provide greater funding. Still, many new ventures never see the end of the tunnel, and success stories are scant. The venture capital market is growing, yet many investors feel on edge when investing in new and innovative ventures. This paper is based on field survey data to evaluate the importance of risk and return components of an alternative venture investment approach called diminishing Musharakah (DM). DM has roots in Islamic modes of investment that are more suited for ventures with a higher risk profile. This paper focuses on four key ingredients, i.e., due diligence (DD), flexibility (Flex), moral hazard reduction (MHR), and risk reduction (RR) inherent in this mode of investment. All these components contribute towards the end goal of any investment, i.e., value enhancement (VE). DM is based on investment modes approved by Islamic law, called Shariah, and Islamic jurisprudence, called Fiqh. The analysis and the paper’s results show that the proposed model is perceived as flexible enough to accommodate a wide variety of investment possibilities. The model carries the potential to encourage venture investment through various stages of growth of a venture. The findings are based on original perception data through a field survey across a broad spectrum of banking users who were interested in alternative and Islamic modes of investment. Findings and analysis of the survey data strongly support our connotations. We propose that the Shariah-based investment model presented in this paper will bring a vast new market into play, i.e., the Islamic money market, thus providing greater venture financing possibilities. As a result, we hope that the number of successful venture investment projects will significantly increase over time as we put the proposed investment model into use. Full article

This paper demonstrates how the contract theory framework can and should complement standard financial mathematics for analysing Islamic financial securities (IFSs). It is motivated by the perception that most valuations of IFSs are rather simplistic and are as simple as risk and reward, leading to very simplistic investment strategies, especially by buyers. In fact, there are more dimensions to IFSs and IF in general which can only be properly analysed with more advanced approaches, such as contractual issues which are well-recognised and discussed in the fields of Islamic commercial law and contract theory but not always considered in valuation models. Contract theory can bring together financial mathematics and contractual issues, providing a more sophisticated framework for analysing IFSs. This paper aims to demonstrate this by providing a brief outline of the contract theory approach, followed by a simple demonstration of its use in the analysis of diminishing mushārakah (DM) contracts. The resulting model led to three main conclusions regarding DM contracts: That (i) finance seekers have no ready incentive to spend on asset maintenance, (ii) finance seekers will only spend on asset maintenance if their marginal benefit from the asset’s appreciation is greater than the financier’s share of the asset, and (iii) if the magnitude of asset appreciation and depreciation is equal, an increase in either will also increase the optimal level of spending on asset maintenance. Full article

Very little research has examined the emergence of Western Muslims into the elite professions that are central to the operation of the capitalist free market and that serve as a central location of economic and political power. Less research still has examined how this is shaping citizenship among Muslims and the future of Islam in the West. These professions include finance, trade and auditing and supporting free market infrastructure including commercial law, consulting and the entrepreneurial arms of government public service. Many Muslim men and women in these professions maintain a commitment to their faith and are often at the forefront of identifying opportunities for the application of Islamic principles to the free market through the development of social engineering mechanisms such as Islamic finance and home loans, Islamic wills, marriage contracts, businesses and context-specific solutions for Muslim clients. These may have a potentially profound impact on belonging and practice for current and future generations of Western Muslims. The political and economic clout (and broader potential public appeal) of these new Muslim elites often significantly outweighs that of Imams and Sheikhs and thus challenges traditional textually based Islam. This article, grounded in empirical research, seeks to build upon very limited research looking at Muslim elites, exploring these developments with specific reference to professionals working in Islamic finance and law across the Western contexts of Australia and the United States, two countries with capitalist free markets and significant Muslim minorities. Full article

A body of work has emerged that examines human capital from the perspective of skills to better understand the types of expertise that influence innovation. The relationship between skill and financial innovation, however, is poorly understood in the context of Islamic financial institutions (IFIs). IFIs are distinct from their conventional counterparts by their compliance with Shariah law. Based on a survey of IFIs in Bahrain and Malaysia, this paper examines the effect of different skills on IFI innovation. The findings indicate that while skill in Islamic finance positively influences innovation, skill in Shariah law does not. Cognitive-technical skill is also highly significant, but marketing skill has a negative effect. The results suggest that Islamic financial innovation relies on continuous improvement that sustains markets, product and service innovation. Sustaining innovation lends itself to abilities that are oriented towards problem solving and computation of Shariah and business risks. This favors skills of programming and expertise in Islamic finance over marketing and Shariah legal proficiency. Full article