The Application of Islamic Legal Maxims to Islamic Banking and Finance

Mohamed Ibrahim Ismail

September 2011

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

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

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 ( الفقهية These Islamic legal maxims are very important to .(القواعد

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 ( الفقه (األصول

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

3

Al-qawa’id al-fiqh الفقهية ((القوعد

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 ( والحدود القصاص ), 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

4Securities Commission Malaysia(2009) Islamic Commercial Law(fiqh al-Muamalat), LexisNexis, Kuala Lumpur

4

any rigidity in the text. Allah SWT says: العسر بكم واليريد اليسر بكم الله (يريد

۱٨۵البقرة: )

“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

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Leading Islamic Legal Maxims and their Evidences ( واألدلة النصوص ) from the

Quran and Sunnah

1. Matters are determined according to their intentions بمقاصدها األمور ))

The evidence for this legal maxim is from an authentic Hadith. The Prophet عليه صلى اللهنوى said: 7 وسلم ما إمرئ لكل وإنما بالنيات األعمال Deeds are judged by intentions“) .((إنما

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 ( التيسير تجلب (المشقة

The evidence for this legal maxim is from the Quranic verses in which Allah SWT says:

( حرج من الدين في عليكم جعل وما ) : ۷٨: الحج تعالى, اليسر ( وقال بكم الله يريد

العسر بكم ۱٨۵: البقرة )واليريد

“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.

And in a Hadith the prophet وسلم صلى عليه الله said: "10"بعثت بالحنفية السمحة

3. Certainty cannot be overruled by doubt (اليقين اليزال الشك)

This maxim originated from a hadith where the prophet وسلم عليه الله صلى was reported to

have said:

)٦٦٨۹: (البخاري أخرجه ) ۱٩۰۷: (ومسلم 78 See 79 Taqi-u-Din, M. and Muhsin, M. op. cit., p.454۲٦٦\۵: أحمد أخرجه 10

6

المسجد من يخرجن فال ال؟ أم أخرج عليه فأشكل شيئا بطنه في أحدكم وجد إذاريحا يجد أو صوتا يسمع “ 11"حتى

“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 (األصل في األشياء اإلباحة)

This legal maxim originated from this Quranic verse. Allah SWT says:

۲۹البقرة: ﴾هو الذي خلق لكم ما في األرض جميعا ﴿

“He it is Who created for you all that is on earth”13 Al-baqara: 29

5. Harm should not be inflicted nor reciprocated ال ضرر وال ضرار))

The origin of the legal maxim is found both in the Qur’an and hadith. Allah SWT says:

رحيما ﴿ بكم كان الله إن أنفسكم تقتلوا ۲٩﴾ النساء:وال

“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 وسلم عليه الله صلى said:

ضرار 15 وال ضرر ”"ال

11 ( برقم ماجه )۵۱٦وابن برقم ( داود مسلم ( ۱۷۷وأبو )۳٦۲برقم)أخرجه برقم ( (۷۵والترمذي12 See 1113 Taqi-u-Din, M. and Muhsin, M. op. cit., p.714 Taqi-u-Din, M. and Muhsin, M. op. cit., p.112

15 ماجه ) ابن السنن( )۲٣٧۰أخرجه في ۱۰/والبهقي الدراقطني( )۱/۳۱۳وأحمد ) ۱٣۳ والحاكم( )٤/۲۲۸والموطأ( )۲/۵۷ في : ۲/۷٤۵ومالك , ص( المراسيل وأبوداود األقضية وصححه ٤٤كتاب اإلضرار في باب

ماجه ) ابن صحيح في (۱۹۱۰األلباني

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“Harm should not be inflicted nor reciprocated.”16

6. Freedom from liability is a fundamental principle (األصل براءة الذمة)

This origin of this maxim is founded on the Quranic verse declaring the original permissibility of

all things.

: وجل عز الله يكون ﴿ قال أن Yإآل يطعمه طاعم على ما محر إلي أوحي مآ في أجد آل قل طر Yاض فمن به الله لغير أهل فسقا أو رجز فإنه خنزير لحم أو مسفوحا دما أو ميتة

رحيم غفور ربك فإن عاد وال باغ : ﴾غير ۱٤۵األنعام

Say ( O Muhammad وسلم عليه الله صلى ): “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-

Forgiving, Most Merciful.”17 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. مةYمحك ((العادة

16 See 1117 Taqi-u-Din, M. and Muhsin, M. op. cit., p.195

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The origin of this maxim is found in the Qur’an and Sunnah

( : تعالى بالمعروف قال :وعاشرواهن ۱۹النساء(

“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 وسلم عليه الله صلى about the stinginess of her husband he then said to her:

بالمعروف وولدك مايكفيك خذي " 19”

“Take for yourself and your children to suffice your needs according to what is customary”20

7. Damage and benefit go together21 ( بالغنم (الغرم

This maxim is based upon the hadith of the prophet وسلم عليه الله صلى saying: الخراج “ 22"بالضمان

“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 (صحيح), others such as Imam Al-Bukhari told that it is weak (ضعيف)

and as we always seek refuge from Allah to falsely label upon the prophet وسلم عليه الله صلى

what he did not say( يقل لم ما وسلم عليه الله صلى الله رسول على نتقول أن بالله ونعوذ ), 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.110واألقضية ۵۰٤۹برقم: 19 والنفقات البيوع في البخاري رواه20 See 1921 Majalla art. 86. see also Hasanuzzaman, S.(2007) the economic relevance of shariah maxims(al-qawa’id al-fiqhiyah), Scientific publishing, Jeddahماجه 22 ابن رواه23 See 22

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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 بمقاصدها األمور ))

That Quran reiterates that Muslims should demonstrate consistency in faith and practice and in

words and deeds.

يا ايها الذين ءامنوا ادخلوا في السلم كافة ﴾قال الله تبارك وتعالى: ﴿ ۲۰۸البقرة:

“O you who believe! Enter perfectly in Islam (by obeying all the rules and regulations of the

Islamic religion)”25 Al-baqara: 208

إنY الYذين قالوا ربنا الله ثم استقاموا فصلت: ﴾قال الله تبارك وتعالى: ﴿ ٣۰

“Verily, Those who say: “Our Lord is Allah (Alone) and then they stand firm26” Fusilat: 30

24 Hasanuzzaman, S.(2007) the economic relevance of shariah maxims(al-qawa’id al-fiqhiyah), Scientific publishing, Jeddah25 Taqi-u-Din, M. and Muhsin, M. op. cit., p.4426 In Arabic Istaqamu(استقاموا), 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

10

The rule embodied in this maxim has been applied by early jurists mostly on acts of rituals 27 but

it is just as equally applicable to other spheres of activity. The liability of a person who finds

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 (الغاصب) 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 (الحيل) 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’ ( المباني و لفاظ لأل ال والمعاني للمقاصد العقود في (العبرة

was ordained by Allah(good deeds), and abstained from all that was forbidden by Allah(sins and evil deeds)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.628 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

11

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

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 ( التيسير تجلب (المشقة

This legal maxim means difficulty is to be accompanied by easiness. Another similar maxim

reads: “necessity renders prohibited things permissible” ( المحظورات تبيح (الضرورة

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.”) بقدرها تقدر ,Therefore.(الضرورات if

permissibility is granted in case of hardship, it must be granted up to the extent required for

29 ISRA (2011) ISLAMIC FINANCIAL SYSTEM principles and operations, ISRA, Kuala Lumpur

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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 following sub-rule (sub-maxim) “what is lawful for a reason becomes invalid

when such reason disappears”30 ( جwاز مwا

بزواله بطل (لعذر

3. Certainty cannot be overruled by doubt (اليقين اليزال الشك)

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”( م العد العارضة الصفات في (األصل

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.

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

13

The above sub-maxim is further strengthened by another sub-maxim that says: “No reliance

(should be made) on mere imagination” ( للتوهم عبرة (ال

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 (األصل في األشياء اإلباحة)

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 ال ضرر وال ضرار))

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” ( يزال provides a guideline to regulate the (الضرر

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

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denied service so as to avoid further harm to the property of the owner or a service he is

entitled to.

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 ( اإلمكان بقدر يزال .(الضرر A practical

manifestation of this maxim is the validation of the option of defect ( العيب in Islamic (الخيار

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 ( بالضرر يزال ال .(الضرر

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 ( األخف بالضرر يزال األشد .(الضررThis 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

31 Abu Umar Faruq Ahmed et al. (n.d)Shariah Maxims and their application on modern financial transactions, Australia.

15

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.

6. Freedom from liability is a fundamental principle (األصل براءة الذمة)

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. مةYمحك ((العادة

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 society32 Securities Commission Malaysia (2009) Islamic Commercial Law (fiqh al-Muamalat), LexisNexis, Kuala Lumpur p.72-73

16

غلبت ( أو اطردت إذا العادة تعتبر (إنماc. The custom must have been in effect at the time the activity or transaction is carried out

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 ( العقد the delay of two business days has now been recognized as ,(المجلس

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 ( بالغرم (الغنم

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

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

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

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), Scientific publishing, Jeddah

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

commentary, King Fahd Complex, Madinah

Appendix

Legal Maxims used in the paper

20

األمور بمقاصدها

المشقة تجلب التيسير

اليقين اليزال الشك

األصل في األشياء اإلباحة

ال ضرر وال ضرار

األصل براءة الذمة

العادة محكYمة

الغرم بالغنم

العبرة في العقود للمقاصد والمعاني ال لأل لفاظ و المباني

الضرورة تبيح المحظورات

الضرورات تقدر بقدرها

ما جاز لعذر بطل بزواله

األصل في الصفات العارضة العد م

ال عبرة للتوهم

الضرر يزال

الضرر يزال بقدر اإلمكان

الضرر ال يزال بالضرر

الضرر األشد يزال بالضرر األخف

إنما تعتبر العادة إذا اطردت أو غلبت