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THE OBJECTIVE OF THE SHARÔÑAH IN ISLAMIC FINANCE: IDENTIFYING THE ENDS (MAQÓØID) AND THE MEANS (WASÓ’IL)

ASSOC. PROF. DR. MOHAMAD AKRAM LALDINDR. HAFAS FURQANI

RESEARCH PAPER (No: 32/2012)

THE OBJECTIVE OF THE SHARÔÑAH IN ISLAMIC

FINANCE: IDENTIFYING THE ENDS (MAQÓØID)

AND THE MEANS (WASÓ’IL)

Assoc. Prof. Dr. Mohamad Akram Laldin*, Dr. Hafas Furqani**

ABSTRACT

Islamic finance attempts to rearrange modern financial practices in line with SharÊÑah

principles and requirements. The industry has grown considerably over the last three

decades and has a global reach. As it rapidly develops in Muslim countries, it is also

penetrating the Western world. We contend that this trend is being driven not only by

operational compliance with the requirements of Islamic law but also because of the

objectives and values it promotes. Islamic banking and finance (IBF) was intended to

bring an Islamic vision of the economy to the financial sphere in an effort to realize

human wellbeing (maÎlaÍah) and a just and fair order of society. Financial practices

are to be arranged to meet those objectives. Recently, interest has been growing in the

industry regarding the objectives (maqÉÎid) of the SharÊÑah. This interest has been

driven by the perception that satisfying the minimum legal requirements of SharÊÑah

compliance may not be sufficient. The paper attempts to elaborate the concept

of maqÉÎid al-SharÊÑah and its application in the financial sphere. This is done by

investigating the ends (maqÉÎid) that ought to be realized and the means (wasÉ’il)

employed to realize those goals.

Keyword : maqÉÎid al-SharÊÑah, maÎlaÍah, Islamic finance, wealth, bank

* Assoc. Prof. Dr. Mohamad Akram Laldin is the Executive Director of ISRA. He can be contacted at [email protected].

** Dr. Hafas Furqani is a Researcher, ISRA. He can be contacted at [email protected].

ISRA RESEARCH PAPER (NO. 32/2012)Mohamad Akram Laldin, Hafas Furqani

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1. INTRODUCTION

The development of Islamic finance is widely considered as phenomenal. Islamic

finance is not only used by Muslims but also by non-Muslims. While it continues to

develop rapidly in Muslim countries, it is also now penetrating the Western world.

Islamic finance is seen as a movement to translate religious teachings in the financial

sphere and economic life in general. Considerable attention has been given by scholars

and practitioners to both the theoretical and practical levels.

IBF’s emergence as a practical financial system is viewed as timely in the midst of a world

financial crisis and uncertain solutions to solve the crisis. Although the phenomenon

might be seen by some as part of the global Islamic resurgence to reconstruct Islam’s

legacy in modern times, the interest in its practice is actually triggered by the philosophy

and system of value it offers. It is expected that Islamic banking and finance can offer

a coherent perspective for understanding real economic problems as well as a genuine

alternative to the very foundations of how economics and finance should be managed

for human prosperity.

This spirit is very much reflected in the concept of maqÉÎid al-SharÊÑah (objectives of

the SharÊÑah), which comprise the basic philosophical foundations that give guidelines

and justifications for IBF’s raison d’être in contemporary times. In Islam, finance is

viewed as part of the SharÊÑah. Adherence to maqÉÎid al-SharÊÑah as the grand objective

of Islam is necessary for developing genuine and indisputable ‘Islamic’ finance. We see

recognition of this reflected in increased interest in using the maqÉÎid as a guide for

developing Islamic finance. During the first three decades (1970s-1990s) of attempts

to Islamize modern financial products, scholars and practitioners who structured

Islamic financial contracts mostly focused on technical considerations for fulfilling

Islamic legal requirements. However, there is growing acknowledgement that meeting

legal requirements through comprehensive and systematic technical procedures is not

sufficient. Attention should also be paid to the objectives of the SharÊÑah. The ‘SharÊÑah

compliant’ title carries the expectation of a financial system and practices that are truly

based on all the tenets of the SharÊÑah, namely the ÑaqÊdah, Islamic legal principles (al-

aÍkÉm al-sharÑiyyah) and ethics (akhlÉq), and that serve the noble goals prescribed by

Islam (maqÉÎid al-SharÊÑah).

In that light, this paper attempts to discuss the issue by exploring the objectives of the

SharÊÑah, which signify the philosophy and goals that Islam propagates in the effort to


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establish an Islamic financial system. The maqÉÎid discussion will give us insight on

the raison d’être of Islamic finance and provide guidelines for the direction the industry

should be developed and what objectives are to be achieved. The discussion covers an

investigation of the meaning of maqÉÎid al-SharÊÑah, its dimensions and scope, how it

has been conceptualized, and the means (wasÉ’il) to apply in order to realize maqÉÎid

al-SharÊÑah in Islamic banking and finance.

2. MAQÓØID AL-SHARÔÑAH: MEANING AND SCOPE

MaqÉÎid al-SharÊÑah is translated as the objectives of the SharÊÑah. In the financial

sphere, maqÉÎid al-SharÊÑah is considered the grand framework that provides guidelines

and directions for ensuring the realization of maÎlaÍah (benefit) and the prevention of

mafsadah (harm) in all financial contracts. However, these objectives remain theoretical

until they are applied and brought into the realm of reality.

Before we discuss the concept of maqÉÎid al-SharÊÑah, it is important to understand

the meaning and scope of the SharÊÑah. This is because the SharÊÑah is the crux of the

discussion, and the maqÉÎid are only the goals derived from it. Al-QaraÌÉwÊ (2007:

16-22) points out that there are differing conceptualizations of SharÊÑah. One view

identifies it with Islamic laws (aÍkÉm) regulating ÑibÉdah (the Man-God relationship)

and muÑÉmalÉt (interactions between people). SharÊÑah in this perspective is limited to

the domain of law that regulates practical aspects of human life: personal, societal, state

or international relationships. When SharÊÑah is reduced to Islamic law, it is then often

equated with fiqh. In this dimension, maqÉÎid al-SharÊÑah are put in the framework of

the objectives of “Islamic law” or the objectives of Islam in legislation.

A second view of SharÊÑah is wider, considering it a system of life that encompasses all

aspects of the belief system (ÑaqÊdah), the system of ethics and morals (akhlÉq), and the

rules (aÍkÉm) governing the Man-God relationship (ÑibÉdah) and human relationships

(muÑÉmalÉt). SharÊÑah in this perspective covers the entire spectrum of Islamic life,

including belief, morality, virtues and principles of guidance on economic, political,

cultural and civilizational matters that concern not only the Muslim community but

all of humanity (Berghout, 2006: 55; cf. Abdul Rauf, 2002: 3). By this consideration,

SharÊÑah could be understood as synonymous with religion (al-dÊn), encompassing all

of human life: the uÎËl (roots) and furËÑ (branches).


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This understanding comes from the original linguistic meaning of sharÊÑah as a “source

of water” or “path to a watering place”. SharÊÑah is therefore an all-embracing concept

and framework that exists to support human existence and provide the necessary

principles, values and means to establish human wellbeing (maÎÉliÍ al-ÑibÉd) in this

worldly life and the hereafter (Qur’an, 2:30; 3:191; 6:165; 38:27; 44:38-39; 42:13, 21;

45:18; 67: 1-2).

This paper embarks from the second definition of SharÊÑah. What is meant by maqÉÎid

al-SharÊÑah is all the goals and objectives of Islam as a system of life that constitutes

standards and criteria, values and guidance based on divine revelation (waÍÊ) to be

applied in practical life to solve human problems and guide the direction of human life.

More narrowly framed, maqÉÎid al-SharÊÑah are the underlying purposes upon which

the SharÊÑah is established.

The SharÊÑah as a system of life has been revealed primarily to protect human wellbeing

(maÎlaÍah; pl. maÎÉliÍ). All the SharÊÑah’s teachings, injunctions and prohibitions

are related to the grand wisdom (Íikmah) of blessing mankind and securing human

interests. All the SharÊÑah rules that contain obligations and duties bring benefit and

prosperity and all its prohibitions prevent them from harm and hardship (Laldin, 2010:

65).

To quote Ibn ÑÓshËr (2001: 273):

من مقاصدها على الدالة اإلسالمية الشريعة موارد استقرينا حنن إذا التشريع، استبان لنا من كليات دالئلها ومن جزئياهتا املستقراة أن املقصد العام من التشريع فيها هو حفظ نظام األمة واستدامة صالحه بصالح عقله، صالح صالحه ويشمل اإلنسان. نوع وهو عليه، املهيمن وصالح عمله، وصالح ما بني يديه من موجودات العامل الذي يعيش

فيه.From a comprehensive thematic analysis of textual sources of the

SharÊÑah pertaining to its objectives in tashrÊÑ, as well as from the

general rules and specific proofs, it is clear to us that the all-purpose

goal of the SharÊÑah (maqÎad ÑÉmm) is to preserve the social order

(ÍifÐ niÐÉm al-ummah) and ensure its healthy progress by promoting


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the wellbeing and righteousness (salÉÍ) of that which prevails in

it, namely the human species. The wellbeing and virtue of human

beings consist of the soundness of their intellect (Ñaql), their deeds

(Ñamal) as well as the goodness of the things of the world where they

live that are put at their disposal.

MaqÉÎid al-SharÊÑah are therefore, in the literature, often equated with maÎlaÍah. Al-

QaraÌÉwÊ (2007: 116) states, “Wherever there is SharÊÑah, there is maÎlaÍah.” It is

impossible that the SharÊÑah, which has been created by God, would have been revealed

to harm human beings or the creation (Qur’an, 2: 143; 67: 14) or to make human life

difficult (Qur’an, 2:185, 220; 4:28, 5:6). Instead, it has been revealed to cause humans

and the whole creation to flourish in this life and the hereafter.

... ير يد الله بكم اليسر وال يريد بكم العسر“Allah intends every facility for you; He does not want to put you to

difficulties.” (2:185).

The Qur’an describes the role of Allah’s Messenger (peace be upon him) thus:

يأمرهم بالمعروف وينننهاهم عن المنكر ويل لم الطيبات ويرم عليهم البائث ويضع عننهم إصرهم واألغالل الت كانت عليهم فالذين آمنوا

به وعزروه ونصروه وا�نبنعوا النور الذي أنزل معه أولئك هم المفلحون“[H]e commands them to what is decent and forbids them what is

evil; he allows them as lawful what is good and pure and prohibits

them from what is bad and impure; He releases them from heavy

burdens and from the yokes that are upon them” (7:157).

The discussion of maqÉÎid al-SharÊÑah in Islamic finance should be seen in the broader

perspective. It should not be confined to Islamic objectives in laws related to financial

activities. In fact, it encompasses the purpose of Islam in financial activities. While

we agree that observing the philosophical underpinning of legal rulings is important,

a maqÉÎidic discussion would extend the subject matter to why and for what purposes

the contracts and financial activities are permitted or prohibited. The discussion of


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SharÊÑah in Islamic finance does not halt at what contracts are permitted or prohibited,

what elements should be observed or what mechanisms should be followed to make

the contracts legally valid, as per the dominant current discourse in SharÊÑah-compliant

finance. Instead, the maqÉÎid discussion will open up the horizon of raison d’être: why

we need to develop Islamic finance in the first place, what goals are to be realized, and

in what direction the industry should proceed.

3. MAQÓØID AL-SHARÔÑAH : SOURCES AND DIMENSIONS

The ultimate source of maqÉÎid al-SharÊÑah is the Qur’an and Sunnah. The two are

the prime textual sources of Islam. The maqÉÎid are often found in texts (nuÎËÎ)

that explicitly or implicitly declare the purpose of the SharÊÑah in human life. In this

endeavour, intellectual reasoning (Ñaql) is significant. The interaction of Ñaql and nuÎËÎ

is not only legitimate but encouraged; the combination is necessary for elaborating the

comprehensive objectives (maqÉÎid ÑÉmmah), which are relevant to every aspect of

life, and those that relate to particular domains (maqÉÎid khÉÎÎah).1 They are derived

through direct interaction with the nuÎËÎ, which necessarily involves a certain measure

of independent reasoning and intellectual exertion (ijtihÉd) as those texts (particularly

in muÑÉmalÉt) tend to be expressed in general terms, leaving the technical procedures

and details of application to the wisdom of human beings. The Qur’anic statements on

economics, in particular, lay down ethical guidelines and principles as the foundations

for an Islamic value system in economics, instead of supplying operational mechanisms

for how the system would work. IjtihÉd, therefore, is required to elaborate detailed

rules and ensure that the SharÊÑah is applied in an appropriate way so that the objectives

it promotes are realized.

Al-ShÉÏibÊ (1997: II/6) proposes comprehensive istiqrÉ’ (inductive reading of the texts)

as an approach to identify the maqÉÎid al-SharÊÑah. This is done by collective thematic

reading of a variety of textual proclamations in the Qur’an and the authentic Prophetic

traditions to derive conclusions about the purposes of the SharÊÑah. Ibn ÑÓshËr (2006:

14-5), a well-known contemporary scholar who has elaborated al-ShÉÏibÊ’s work in

the modern context, elucidates that it is possible to derive the maqÉÎid by thematic

inferences (istiqrÉ’) of the Ñillah (ratio legis) behind the commands and prohibitions.

This is done by: (1) exhaustively surveying the SharÊÑah commands for which the text

1 Kamali (1999) observes that close interaction can be seen between SharÊÑah and fiqh. While SharÊÑah is the primary source and indicates the heavenly guide, it is fiqh (literally: understanding) that discovers the SharÊÑah’s underlying essence in the effort to find answers to contemporary issues.


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provides verbal indication of the effective cause (Ñillah) and inferring the specific

objective that unites similar effective causes, or (2) surveying the textual proofs (nuÎËÎ)

in which the ratio legis (Ñillah) of the command or prohibition is not verbally indicated

but must, instead, be identified by contemplation and mental effort. When a number

of commands or prohibitions have a similar or common ratio legis (Ñillah), it can be

concluded that it is an intended objective of the SharÊÑah.2

This requires an integrative approach that looks beyond the particular concerns of

individual texts to pursue a comprehensive perspective of the general philosophy and

objectives of the SharÊÑah behind all injunctions or prohibitions. The texts are not

approached in a separated or scattered way (Qur’an, 2:85). Instead, they are read all

together in conjunction with their rationale and purposes so that a balance between process

and purpose, form and substance, literal interpretation and substantive understanding

in formulating the law can be achieved.3 Through a comprehensive reading of the texts

that captures the essential spirit that underlies the SharÊÑah’s objectives, we are able to

develop a grand framework of the SharÊÑah for real life application.

Embarking from the grand objective that the SharÊÑah is revealed in order to create

a balanced order in human life whereby justice (ÑadÉlah) is achieved and human

wellbeing (maÎlaÍah) is preserved, the derivative objectives can then be deduced

(Qur’an, 57:25). Comprehension of the grand objective of the SharÊÑah and the

principles that serve it provides a theoretical framework within which particular texts

are properly understood so that detailed legal rulings can be derived accordingly. Thus,

understanding of the maqÉÎid is an essential prerequisite for undertaking the process

of ijtihÉd and determining the operational framework and direction (al-QaraÌÉwÊ,

2007: 137). In ijtihÉd, all aspects, including Ñillah, maÎlaÍah, Íikmah and maqÉÎid al-

SharÊÑah, should be taken into consideration so that a good result is achieved that links

the universal with the particular, uÎËl (roots) with furËÑ (branches), and practical law

with its objectives.

Such a process would lead us to a balanced approach in deriving laws from the nuÎËÎ

and produce a moderate, balanced and just output (Qur’an, 55:8-9). This approach is

2 The best example is the classification of maÎlaÍah into three categories of ÌarËriyyÉt (essentials), ÍÉjiyyÉt (complementaries) and taÍsÊniyyÉt (embellishments). As we shall discuss later on, this classification is not detailed or explicitly mentioned in the texts of the Qur’Én and Sunnah. However, the scholars have deduced it based on their reading and understanding of the general objectives of the SharÊÑah mentioned in a wide variety of texts.

3 Kamali (2002: 17-19) discusses examples of possible errors that arise from deriving the law from a literal reading of the text without pondering over its objective and meaning.


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the middle course between two extremes. On the one hand is an ultra-literal approach,

which ignores the maqÉÎid in favour of rigid textual understanding. On the other extreme

is an ultra-liberal approach, which throws around terms like maqÉÎid and maÎlaÍah in

the absence of any clearly defined methodology, and ends up disregarding, overriding

or twisting the meaning of the SharÊÑah texts.4

The rigorous technical rules of uÎËl al-fiqh for interpreting texts and deducing laws have

undergone centuries of discussion, debate and refinement. When the science of maqÉÎid

is used in tandem with this time-tested methodology, it opens up the avenues of ijtihÉd

in the effort to realize the spirit of the SharÊÑah in practical legal rulings (Kamali, 2002:

22). This approach would not only observe the “correct mechanisms” in the technical-

procedural sense but, most importantly, be able to capture the essential spirit and noble

goals with regard to particular actions. Hence, errors arising from a rigid literal reading

of the text could be avoided. It will open up the horizons by understanding texts in

relation to the context of practical realities and view the SharÊÑah as a unity in which the

detailed rules are to be read within a general framework and detailed actions are to be

set in line with larger goals. MaqÉÎid-based ijtihÉd would link the SharÊÑah principles

and objectives to all situations in a two-way process that ensures “correspondence”

between human circumstances in all places and times and the grand framework of

the SharÊÑah (El-Mesawi, 2006: 92). In the literature, the effort is identified as jalb al-

maÎlaÍah (confirming benefits); taghyÊr aw dafÑ al-mafsadah (changing or repelling

the harmful); sadd al-dharÊÑah (blocking apparently lawful means that lead to harmful

results); and rafÑ al-Íaraj (removing hardship).

This should be done continuously until we arrive at what Ibn al-Qayyim (IÑlÉm al-

MuwaqqiÑÊn, 3/14-15) says:

All of [the SharÊÑah] is justice, all of it is benefits, and all of it is

wisdom. Any issue [in which the ruling] departs from justice to

injustice, from mercy to its opposite, from benefit to harm or

corruption, and from wisdom to arbitrariness is not, in fact, part

of the SharÊÑah, even if it has been attributed to it by a process of

interpretation.5

4 Contradiction between texts and maÎlaÍah derived from the reading of the texts is possible in practice and can be seen in the literature. Al-QaraÌÉwÊ (2007: 141), nevertheless, limits this to the case of ÐannÊ (probable) texts or ÐannÊ maÎlaÍah. QaÏÑÊ (definitive) texts will not contradict qaÏÑÊ maÎlaÍah, and vice versa. Therefore, ta’wÊl (interpretation) of ÐannÊ texts is important in order to find the qaÏÑÊ maÎlaÍah.

5 The full quotation in IÑlÉm al-MuwaqqiÑÊn (3/11) is as follows:

فإن الشريعة مبنناها وأساسها على الكم ومصالح العباد ف المعاش والمعاد، وهي عدل كلها، ورحة كلها، ومصالح كلها، وحكمة


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All the SharÊÑah rules that contain obligations and duties bring benefit and prosperity

and all its prohibitions prevent them from harm and hardship (Laldin, 2010: 65).

MaqÉÎid al-SharÊÑah are basically related to human interest by providing for a good

order of life and wellbeing (maÎlaÍah). Therefore, the discussion of maqÉÎid embraces

all dimensions of human life in the individual and community spheres, the micro and

macro dimensions, as well as religious (dÊn) and worldly (dunyÉ) matters.6 The SharÊÑah

would ensure the benefits to the individual and to the community, and all its rulings

are designed to protect those benefits and facilitate improvement and perfection of the

conditions of human life on earth (Kamali, 2008: 1).

This is reflected in the maqÉÎid discourse, in which scholars have attempted to clas-

sify them into various classifications to capture the essential Islamic spirit and di-

rection in human life. Al-GhazÉlÊ is widely acknowledged as the first to attempt to

systematize thinking about the maqÉÎid of the SharÊÑah. In al-MustaÎfÉ (1993: I/74),

he classifies the maqÉÎid based on a hierarchy of priority into essentials (ÌarËriyyÉt),

complementaries (ÍÉjiyyÉt) and embellishments (taÍsÊniyyÉt).7

The essentials refer to five fundamental matters: faith (dÊn), life (nafs), intellect (Ñaql),

lineage (nasl), and property (mÉl). Their protection is essential to normal order in

society as well as to the survival and wellbeing of individuals, in their religious and

worldly affairs; and their destruction will lead to chaos and collapse of normal order

in individuals’ lives and/or the society. As the essential maÎÉliÍ constitute an all-

encompassing theme of the SharÊÑah and all of its laws are in one way or another related

to the protection of these benefits, the SharÊÑah takes affirmative and also punitive

measures to promote and protect these values (Kamali, 2008: 4).8

ها، وعن المصلحة إل المفسدة، وعن الكمة إل البنعث؛ كلها؛ فكل مسألة خرجت عن العدل إل الور، وعن الرحة إل ضدالة فنليست من الشريعة وإن أدخلت فيها بالتأويل؛ فالشريعة عدل الله بنني عباده، ورحته بنني خلقه، وظله ف أرضه، وحكمته الد عليه وعلى صدق رسوله - صلى الله عليه وسلم - أت داللة وأصد�نها، وهي نوره الذي به أبصر المبصرون، وهداه الذي به اهتدىالمهتدون، وشفاؤه التام الذي به دواء كل عليل، وطريقه المستقيم الذي من استنقام عليه فنقد استنقام

6 If fiqh is related to knowledge of Islamic rulings mainly related to the practical aspects of individual conduct, maqÉÎid will bring societal dimensions into the formulation of law.

7 Al-GhazÉlÊ clarifies what he means by maqÉÎid and maÎÉliÍ as follows:

أما المصلحة فهي عبارة ف األصل عن جلب مننفعة أو دفع مضرة، ولسنا ننعن به ذلك، فإن جلب المننفعة ودفع المضرة مقاصد اللق وصالح اللق ف تصيل مقاصدهم، لكنا ننعن بالمصلحة المحافظة على مقصود الشرع، ومقصود الشرع من اللق خسة: وهو أن يفظ عليهم ديننهم وننفسهم وعقلهم ونسلهم ومالم، فكل ما ينتضمن حفظ هذه األصول المسة فنهو مصلحة، وكل ما.ينفوت هذه األصول فنهو مفسدة ودفنعها مصلحة

Al-ShÉÏibÊ (1997) and Ibn ÑÓshËr (2006) acknowledge the classification and elaborate further on details. A recent elaboration in the contemporary context has been done by Umer Chapra (2008).

8 While this classification is widely recognized in the literature and applied in fiqh, it has also received


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The complementary benefits (al-ÍÉjiyyÉt) supplement the five essential maÎÉliÍ

facilitating people’s affairs in a better way and removing severity and hardship, although

their loss does not pose a threat to the very survival of normal order. The taÍsÊniyyÉt

(embellishments) are the maÎÉliÍ whose realisation leads to life’s improvement (taÍsÊn),

beautification (tazyÊn), and perfection (kamÉliyyÉt), and the attainment of that which

is desirable without any violation of good moral standards (makÉrim al-akhlÉq) or an

excessive or extravagant lifestyle (maÍÉsin al-ÑÉdÉt) (al-ShÉÏibÊ, al-MuwÉfaqÉt, II/22).

The maqÉÎid are further classified, based on their scope, into the following:

1. The Divine purposes in the SharÊÑah (maqÉÎid al-ShÉrÊÑ) and human goals

and purposes (maqÉÎid al-mukallaf).

2. The primary objectives (al-maqÉÎid al-aÎliyyah), which are the primary

goals intended in the SharÊÑah and the basic purposes by which human

conduct is evaluated, and subsidiary goals (al-maqÉÎid al-tÉbiÑah).

3. The comprehensive purposes (al-maqÉÎid al-ÑÉmmah), which characterize

Islam as a system of life and guide the enactment of regulations in their

totality, and the particular goals (al-maqÉÎid al-khÉÎÎah), which are theme-

specific and relate to specific areas of life.

4. The definitive goals (al-maqÉÎid al-qatÑiyyah), which are supported by

clear evidence in the texts (nuÎËÎ), and speculative purposes (al-maqÉÎid

al-Ðanniyyah), which are not supported by clear evidence and are, hence,

subject to disagreement.

The classification shows the wide-range dimensions and varieties of maqÉÎid al-

SharÊÑah. Realizing maÎlaÍah and avoiding mafsadah is essentially a timeless agenda

that requires constant effort. This is because maÎlaÍah is characterized by iÍÉÏah

(comprehensiveness, covering all dimensions of human well-being), tawassuÑ (its

scope expands with human progress) and ziyÉdah (improvement from one level to the

highest level of well-being). The effort to achieve maqÉÎid al-SharÊÑah improves the

self and society. Movement from maÎlaÍah ÌarËriyyÉh to ÍÉjiyyÉh and taÍsiniyyÉh;

criticism from scholars who say the classification is arbitrary in limiting the scope of human wellbeing to five categories, excluding other important dimensions and unnecessarily narrowing the maqÉÎid. Attia (2007: 18-19) points out that many classical scholars added a sixth category, ÑirÌ (dignity or honor), to the ÌarËriyyÉt. Dignity is clearly considered important in the SharÊÑah and, indeed, in all societies. Among those who have explicitly expanded the list of ÌarËriyyÉt, or expressed the need to do so, are Ibn Taymiyyah, Ibn FarÍËn and contemporary scholars such as Ibn ÑÓshËr, al-QaraÌÉwÊ, MuÍammad al-GhazÉlÊ, and al-RaysËnÊ. Among the additional maqÉÎid that have been proposed are equality, justice, and freedom. (Attia, 2007: 77 passim).


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from maÎlaÍah ÑÉmmah to maÎlaÍah khÉÎÎah; and from maÎlaÍah dunyÉwiyyah to

maÎlaÍah ukhrÉwiyyah, reflects an increase in an individual’s or society’s level of well-

being. The more that benefits are acquired and the more that harm is eliminated in all

dimensions of human life, the better the conditions will be. Consequently, as realizing

maÎlaÍah means realizing falÉÍ, an individual’s behavior should always be oriented

to realize maÎlaÍah. Therefore, realizing maÎlaÍah is a positive force for individuals

as well as society. For an individual, it is a continuous effort to reach a perfect state

of being (insÉn kÉmil). For society, it is a constructive force that guides it and helps to

remove its imbalances in order to become a good society (khayr ummah).

Figure 1.1

Dimension and Characteristics of MaÎlaÍah

111111 1

2

3

D

E A

B

C

2

2

2

2

3

3

3 3

Notes:

1. MaÎlaÍah dimensions:

(A). DÊn (Religion); (B). 'Aql (Intellect); (C). Nafs (Life); (D). Nasl (Lineage);

(E). MÉl (Property).

2. MaÎlaÍah hierarchy:

(1) ÖarËriyyÉt (the essentials needs); (2). ×ÉjiyyÉt (the comforts needs); and

(3). TaÍsiniyyÉt (the embellishments needs).

3. MaÎlaÍah characteristics:

(1) Tawassu’ (Expansion); 2). ZiyÉdah (Improvement); 3) IÍÉÏah

(comprehensiveness); and 4). Boundaries: Goals, Visions, Moralities, Values.


12

On the other hand, the classification also reflects a hierarchical order in practical

application. The order is structured based on the level of authority, reference to the

nuÎËÎ, and scope of application. The order can then be classified as follows. The highest

comprise maqÉÎid al-ShÉrÊÑ, al-maqÉÎid al-aÎliyyah, al-maqÉÎid al-qatÑiyyah, and al-

maqÉÎid al-ÑÉmmah. The lowest comprise maqÉÎid al-mukallaf, al-maqÉÎid al-tÉbiÑah,

al-maqÉÎid al-Ðanniyyah and al-maqÉÎid al-khÉÎÎah. This means, in identifying the

maqÉÎid, that the lower level should logically follow the higher level and the higher

level should embrace all dimensions of the lower levels. This also means, in the case of

differences and contradictions, that priority is to be given to the higher level over the

lower level.

4. SHARÔÑAH OBJECTIVES IN FINANCIAL ACTIVITIES:

IDENTIFYING THE GOALS (MAQÓØID)

As the SharÊÑah is designed on the basis of and for the purpose of human maÎlaÍah,

maqÉÎid al-SharÊÑah9 constitute the various dimensions of human needs, and their

fulfilment will create balanced satisfaction in human life at the level of both the

individual and the society and help realize human wellbeing. Therefore, maqÉÎid

would encompass the micro and macro dimensions of individual and collective life.

With reference to Islamic finance in particular, maqÉÎid al-SharÊÑah refer to the overall

goals and meaning that the SharÊÑah aims to achieve from its principles and rulings

related to financial activities and transactions (Laldin, 2008: 77).

The maqÉÎid discussion in the literature on Islamic finance is usually framed in terms

of the protection of wealth (ÍifÐ al-mÉl) as mentioned by al-GhazÉlÊ in his classification

of maÎlaÍah (Al-Khelaifi: 2004; Laldin: 2010; Dusuki and Bouheraoua: 2011; Ahmed:

2011). This approach is justified as the subject matter of finance is basically how to

allocate resources from the surplus sector (capital providers) to the deficit sector (capital

users) so that wealth is smoothly circulated and human welfare is realized. As finance

deals with wealth allocation and appropriation (from mobilization until utilization), the

maqÉÎid that come under the rubric of ÍifÐ al-mÉl should, therefore, be understood and

discussed by looking at the nature, function and role of wealth in relation to the primary

objective of realizing human wellbeing, individually and collectively, by acquiring

benefit (maÎlaÍah) and preventing harm (mafsadah) (Qur’an, 5:6).10

9 To quote Ibn al-Qayyim (1991, 3/11) “الشريعة مبنية على مصالح العباد”.10 The principle of realizing maÎlaÍah (benefit) and repelling harm (mafsadah) is viewed as the general

objective of SharÊÑah in realizing human wellbeing. SharÊÑah is designed in order to accomplish this mission.


13

Reflecting upon various texts of the Qur’an and the Sunnah on financial activities, it can

be stated that the SharÊÑah has observed specific objectives in the enactment of financial

laws and principles. These objectives serve the financial needs of human beings. They

include the circulation of wealth in the society, enjoining fair and transparent financial

practices and promoting socioeconomic justice.

4.1. Wealth Circulation

Wealth circulation comprises all processes related to its creation, consumption and

distribution. This objective is derived from the Qur’an, which provides, as a rationale

for instructions to distribute one source of wealth among a number of different groups,

“…so that wealth is not circulated among the rich in the society only” (Qur’an, 59: 7).

Islam intends to ensure that resources are circulated in the economy to activate human

potential in the pursuit of wellbeing and intergenerational continuity.

This perspective embarks from the concept that wealth is considered as God’s bounty

(faÌl AllÉh) entrusted (amÉnah) to its recipient. As God’s bounty, wealth itself reflects

the blessings of God on man (Qur’an, 62: 10) and it is, therefore, naturally good (khayr)

(Qur’an, 2: 215, 272-3; 11:84; 22:11; 31:32; 50:25; 68:12; 70:12). Working to acquire

wealth is, therefore, not only legitimated but highly praised (Qur’an, 16:97; 4:32).

Wealth is also God’s trust (amÉnah) to be directed to the higher objective as implied

in the mission of khalÊfah (Qur’an, 23:51-52; 115). While private ownership and

consumption are recognized (Qur’an, 3:14-15), they have not been created to merely

satisfy man’s wants (Qur’an, 30:34) and, hence, deny and neglect the right (Íaqq) of

society (Qur’an, 89:17-20). Instead, wealth is to be used in the best way to fulfil the

need of individuals and society for a better life (Qur’an, 16:97) without any corruption

or misuse (ifsÉd, 11: 86), wastage (isrÉf, 6: 141; 25: 67) and squandering (tabdhÊr, 17:

26). Likewise, shortsighted, self-interested behaviour in acquiring and utilizing wealth

by spoiling the environment, or at the expense of society and future generations, is

strongly condemned (Qur’an, 28:77). Wealth should be created and augmented through

the right means (Qur’an, 4:29) and spent for the right ends (Qur’an, 3:92).

Commercial and financial activities are viewed positively as mechanisms to circulate

wealth among all the sections of society so that it is not concentrated in the hands

of a few and instead goes into all sectors of the economy that would benefit human

wellbeing. Islam encourages wealth to be employed in productive activities. The funds


14

should not be wasted, left idle (Qur’an, 9:34) or managed unprofessionally (Qur’an,

4:5). In fact, any funds that are not employed will be “penalized” through zakÉh, which

will gradually reduce the volume of wealth and put it back into circulation. ZakÉh is a

mechanism that necessarily keeps wealth in continuous circulation.

The Islamic economic system as a general framework would ensure fair and equitable

mobilization and distribution of resources. Islamic finance, in particular, is developed

in line with Islam’s objective of wealth circulation by observing Islamic rules on

transactions, which have been legislated to protect wealth (ÍifÐ al-mÉl). Islamic

financial institutions, including Islamic banks, takÉful companies, mutual funds, etc,

play a role in circulating resources in society and increasing human wellbeing.

4.2. Fair and Transparent Financial Practices

Permissibility (ibÉÍah) is the overarching principle governing commercial and

financial transactions. This ibÉÍah principle is aimed to facilitate the realization of

maÎlaÍah and the removal of hardship in financial transactions. Freedom of contract is

therefore not only recognized as part of the system but is also guaranteed and treated as

a necessary element of a valid contract. Nevertheless, this freedom is to be used within

an atmosphere of fairness, equity, justice and high morality. Any contract stipulated and

agreed by both parties should be respected and enforced (Qur’an, 5:1).

Transparency means that all financial transactions must be conducted in such a manner

that all the parties are clear about all important facts concerning the transactions. This

information symmetry prevents the main cause of disputes and damage to any party

in all dimensions of the contract. The Qur’an has stressed that all agreements and

contracts should be as transparent and clear as possible (Qur’an, 2:282, 17:35, 11:84,

26:181-182, 55:9, 83:1-3).

Fairness means equity between the transacting parties, honesty and truthfulness, as well

as efficiency in transactions. Fraud, deception, manipulation of any kind are therefore

condemned. Islam insists that the contract is only legitimate if there is mutual consent

of the parties. A transaction that takes place under pressure or accompanied by fraud or

misrepresentation by any party is not valid. Likewise, Islam disapproves all commercial

practices that involve explicit or implicit harm and injustice to one of the contracting

parties or to the public at large or which restricts freedom of trade, or stands in violation

of the Qur’anic injunctions and the approved business conduct (Balala, 2011: 6).


15

The purpose is to protect the contracting parties from mutual injustice and resulting

disputes (Qur’an, 2: 282). In addition, this objective also seeks to rid Islamic finance

from misuse and squander, and to prevent disputes, arguments and grudges among the

community regarding financial matters as well as to prevent one party’s gain at another’s

expense. Kamali (2008: 22), in this regard, firmly notes that justice and fairness are the

hallmark values in commercial contracts. If it proves to be an instrument of injustice,

such a contract must be set aside, and justice, which is the goal and maqÎËd of the

Lawgiver, must be given priority over considerations of conformity to an untenable

contract.

4.3. Justice in the Macro and Micro Dimensions

The maqÎad of wealth circulation is a macro goal of the SharÊÑah while the maqÉÎid

of fair and transparent financial practices are related to micro goals of the SharÊÑah in

transactional instruments and mechanisms. The maqÎad of justice embraces both micro

and macro dimensions. This maqÎad is related to the desire of having a just order of

society as well as just dealings among individuals in financial transactions. Justice in

Islam embraces the individual and social dimensions.

حسان وإيتاء ذي القرب وينننهى عن الفحشاء إن الله يأمر بالعدل واإلوالمنكر والبنغي يعظكم لعلكم �ذكرون

“Allah commands justice, doing of good, and generosity towards relatives,

and He forbids what is shameful, blameworthy and oppressive. He teaches

you so that you may take heed” (Qur’an, 16:90).

This objective is characterized in the Qur’an with the concepts of right, fairness, putting

things in their right place, equality, harmony, balance and moderation. It is a right

(Íaqq) to have equal opportunity, to be free from exploitation and to receive true value

in exchange for one’s labour. This objective underlies the substantive and regulative

rules of the SharÊÑah, the formation of the community and the behaviour of individuals

(Iqbal and Mirakhor, 2007).

At the macro level, the goal is to realize social justice. The Islamic financial system

attempts to realize economic justice through wealth circulation, efficiency in resource

utilization, fulfilling society’s basic needs, elimination of poverty and improving

human wellbeing. The main purpose of resource circulation (distribution) is to achieve

justice, maximum efficiency and improvement of human wellbeing in general.


16

This is really a challenge as earthly human life has a natural tendency to end up with

unequal distribution, i.e., inequality is natural; humanity is made up of the rich and the

poor, the bright and the dull, the strong and the sick, the haves and the have-nots. The

very structure of society is built up on the basis of human inequality as a “test”, a moral

struggle by individuals on the basis of mutual dependency despite the differences in

Divine gifts (Qur’an, 2:255; 4:37; 8:74; 16:74). Human beings are expected to cooperate

among themselves to properly perform the task and mission of khilÉfah (Qur’an, 11:61)

in line with their role as ÑÊbÉd AllÉh (the slaves/worshippers of Allah). Inequality

requires the rich to help the poor and the needy (Qur’an, 9:71; 24:22) rather than taking

the opportunity to exploit others (Qur’an, 107:1–7). While competition among society

is appreciated, cooperation that results from the spirit of brotherhood among society

is more appreciated (Qur’an, 2:277; 6:165; 16: 71; 17:30). Such social commitment is

praised in the Qur’an as a mark of the individual’s spiritual ascent. God’s love is in this

spirit of sacrifice for others to create a just society (Qur’an, 4:80–81; 16:55).11

The Islamic system of economics is structured to coordinate and harmonize the various

economic interests of individuals and groups within the society to achieve the ideals

mentioned above. Islam sustains this social dimension by establishing important

economic institutions such as zakÉh, irth (standardized distribution of inheritance),

waqf (charitable endowment), Îadaqah (charity), infÉq (spending for good purposes)

and others.12 This is done on the basis of obligations as well as voluntary actions that

emerge from an individual’s consciousness of human brotherhood to contribute to

society’s development. This mix of individual freedom and social justice describe the

egalitarian principles of Islam that ensure the system is both efficient and equitable

(Sharif, 2005: 102). This framework guarantees a free market with a fair process and just

mechanism that ensures fair circulation of resources in society and maintains a stable

yet dynamic economic life. The State also plays a role in an Islamic economic system

to ensure that individual freedom is respected while social objectives are achieved.

Justice also embraces individual dealings. Economic transactions demand equal rights

and opportunities and cannot become effective without the mutual consent (tarÉÌÊ)

11 In this perspective, sacrifice for society is in human self-interest (Qur’an, 12:88; 34:38; 4:114) in that it purifies the soul and makes it beautiful so that love of God may be produced in it (Qur’an, 9:103) and hence God will bless the person (Qur’an, 9:71) with wellbeing in the eternal life of the hereafter (Qur’an, 30:38).

12 In addition to that, several economic actions that lead to social enmity/exploitation or reduce social wellbeing are prohibited. RibÉ, for example, is prohibited as this action only aims at increasing one’s personal welfare through unjustified means. ZakÉh, on the other hand, is obliged and encouraged, as it improves the welfare of the whole society.


17

of the contracting parties. Likewise, unfair dealings or unjustified actions that lead

to economic injustice or exploitation, such as bribery (rishwah), fraud or deception

(ghish), cheating (tadlÊs), uncertainty and lack of clarity (gharar) or unjustified

increase in wealth (ribÉ) are condemned. RibÉ is highly correlated with injustice. The

prohibition is not limited to interest on loans. Instead, it is a comprehensive concept

that encompasses all factors of production and distribution, such as capital, land and

labour whereby one party attempts to gain benefit at the expense of the other party

without giving a reasonable counter value (ÑiwaÌ) (AbuSulayman, 1998: 99). RibÉ is

forbidden on the ground that it fosters the unjust acquisition of wealth at the expense of

social justice, the equitable distribution of wealth and the wellbeing of the community

(Choudhury, 2012). The abolition of ribÉ also implies that Islam promotes cooperative

and participatory financing for the mobilization and circulation of resources in society

as a means of realizing general productivity and wellbeing.

5. MAQÓØID AL-SHARÔÑAH IN ISLAMIC FINANCIAL ACTIVITIES:

INSTITUTING THE MEANS (WASÓ’IL)

As the objective of the SharÊÑah is none other than human wellbeing, the SharÊÑah

provides the necessary ways and means (wasÉ’il) to establish and preserve it in the

actual human context. Our previous discussion of the nature of maqÉÎid established

that they aim at establishing maÎlaÍah and preventing or removing mafsadah. WasÉ’il

(means) can be classified, in accord with the nature of maqÉÎid, into those that help

achieve maÎlaÍah (in this case, facilitating the circulation of wealth, promoting fair

and transparent financial dealings and realizing social justice) and those that prevent

mafsadah (i.e., factors that would prevent wealth from smoothly circulating, lead to

unfair financial dealings or undermine social justice).

MaqÉÎid and wasÉ’il, however, differ in certain aspects of their nature. While principles

and objectives (maqÉÎid) are permanent and unchanging, the means (wasÉ’il) are

relatively temporary, dynamic, conditional and amenable to change. WasÉ’il are not

restricted or limited, and hence creativity and elaboration are required so that the

maqÉÎid can be effectively achieved. The following discussion will investigate some

of these directives and mechanisms.


18

5.1. Facilitating Financial Contracts

To institute smooth circulation of wealth in society, the SharÊÑah facilitates various

types of transactions and strongly encourages Muslims to participate and undertake

necessary types of financial activities (Laldin, 2008). In commercial activities, the

underlying principle is that of permissibility (ibÉÍah). The transactions validated in the

Qur’an and Sunnah are not exhaustive, and new transactions can be introduced as long

as they do not contradict the principles of the SharÊÑah. Therefore, freedom of contracts

is guaranteed as long as it does not annul fairness and good measure as propagated by

maqÉÎid al-SharÊÑah (Kamali 2000: 69-70).

In general, Islamic nominate contracts related to economic transactions are classified

into three main categories: exchange (muÑÉwaÌÉt), partnership (ishtirÉk), and gratuitous

(tabarruÑÉt). Exchange contracts include simple spot sales (bayÑ), sales creating debt

like bayÑ mu’ajjal, salam, istiÎnÉÑ, ijÉrah, and work done for a reward (juÑÉlah).

Partnership contracts are ones in which one party assigns work/capital/obligation

to one or more other parties. These contracts include agency (wakÉlah), partnership

(sharikah) contracts in the forms of muÌÉrabah and mushÉrakah, debt assignment

(ÍawÉlah), and pledge or mortgage (rahn). In gratuitous contracts, ownership or rights

of use are transferred without consideration (payment) or compensation. Gratuitous

contracts include loans (ÑÉriyah and qarÌ), deposits (wadÊÑah), gifts (hibah), and

guarantees (ÌamÉn or kafÉlah).

Every contract is designed to serve a particular purpose. Therefore, the contract should

be respected and fulfilled, not only in order to protect the interests of the parties

involving in it, but also to serve the very purpose of the contract that caused the parties

to enter into it and willingly bind themselves to it (Qur’an, 5:1).

If a contract were irregular due to some of its conditions (shurËÏ), it would have to be

fixed. If it is defective in its pillars (arkÉn), it would be considered void (bÉÏil), and

is irreparable. Dissolution (inÍilÉl) of a contract after it has become valid (ÎaÍÊÍ) and

enforceable (nÉfidh), but before or during its execution, is possible through: (1) mutual

agreement (iqÉlah), or (2) revocation and termination due to special reasons (faskh),

such as impossibility (istiÍÉlah) of contractual performance, or automatic dissolution

by death, destruction of the subject matter, expiry of the period, achievement of purpose,

etc (Islam, 1998: 339). This is because the SharÊÑah firmly stands for cooperation and

fair treatment among the contractual parties. Therefore, it does not allow a loophole to

exist so that unfair or unjust treatment could happen.


19

This spirit marks the Islamic approach in commercial (financial) dealings as not

only formal but also substantial. While certain formalities and substantive elements

are essential for a transaction to become legally binding on the parties, this should

be done through mutual agreement that brings about mutual consent and satisfaction

(riÌÉ) (Qur’an, 2:282). Therefore, along with approval of various contractual facilities

and the emphasis on fulfilment of contractual obligations, Islamic law also provides

various ways to remove contractual obligation in situations of unavoidable difficulties

and necessities (Islam, 1998: 368).

5.2. Establishing Values and Standards

Transparent and fair dealings are considered among the main objectives of the SharÊÑah

in financial transactions and activities. The SharÊÑah, in this regard, aims at creating an

equal and fair transactional atmosphere and at protecting the parties against exploitation

or imbalance between their reciprocal rights and obligations. Such imbalances tend to

result from a lack of fair and objective criteria by which their rights and obligations can

be determined with an acceptable degree of exactitude and certainty (Omar, 1998: 44).

The application of the SharÊÑah in the financial sphere should therefore not result in

injury, harm or difficulties to either individuals or the public at large as the SharÊÑah

intends to create a positive atmosphere in commercial transactions whereby exchanges

are done on the basis of brotherhood, cooperation and mutual benefit to both parties.

Therefore, the SharÊÑah institutes some values, measures and standards to be upheld in

the transactions and indicates certain negative elements to be avoided, as they would

nullify the objective. Those values and standards would relate to both the macro-

maqÉÎid dimension of having wealth circulate smoothly in society and the micro-

maqÉÎid aspect of having fair and transparent financial dealings.

Economic exchange in Islam is inseparable from Islamic values, which must be

translated into practical rulings that prevent fasÉd (corrupt acts) such as unfair dealing,

abusiveness, stinginess, greed, unbridled individualism and exploitation of others.13At

the same time, truth and honesty, responsibility, trust, generosity, justice, friendship

and cooperation14 are highly encouraged and must be preserved in financial dealings.

These values would not only protect customers, stakeholders and the public, they

would also promote smooth allocation of resources and fair dealings in transaction. 13 Qur’an, 2:195; 7:31; 11:85; 28:77; 107:1-3.14 Qur’an, 5:119; 39:33; 16:90; 4:58; 52:21;4:58; 40:32; 56:77; 44:17, 26; 2: 278-9; 49:13; 49: 10, 13.


20

According to Abtani (2007), “Islamic law cannot be separated from its moral,

ethical and religious principles; otherwise, its rules will be useless. In other words,

the Islamic system cannot be secular. This is because all Islamic rules, including

economic and political, are connected with the faith, beliefs and worship of Islam.”

Beyond the realm of values, the Islamic economic system has instituted various ways

to spend for the sake of Allah such as zakÉh, infÉq, Îadaqah, hibah and qarÌ. These

would cultivate the spirit of brotherhood and mutual cooperation in society, assist the

circulation of wealth, activate the economy and increase productivity. Conversely,

destructive tendencies have been prohibited, for example, isrÉf (unnecessary spending),

itrÉf (self-indulgence), tabdhÊr (spending on unlawful activities), and bukhl (stinginess).

IÍtikÉr (hoarding) is also prohibited as it prevents wealth from circulation by halting

supplies. Likewise, illegal means of wealth acquisition or causing harm to others in

wealth creation are also prohibited (Qur’an, 5:33, 38).

From the micro-perspective of transactions, in the effort to achieve justice, Islam puts

in place measures to “level the playing field” among the parties to a contract. That

includes the removal of factors that would distort equality or allow one party to gain

at the expense of the others. Among the main negative elements are ribÉ and gharar.

RibÉ is banned because it allows unjustified increase in wealth in transactions, whether

in loans (qurËÌ) or sales (buyËÑ) (Qur’an, 2: 275-277). An essential feature of ribÉ

is that it transfers risk onto one party and shields the other from it and guarantees

it a fixed return. In a loan, ribÉ transfers risk to the debtor, by requiring him to pay

back the money lent with increment. Certain sales, especially those involving delayed

payment, can be structured to transfer all risk to the buyer without the seller assuming

risk (ghurm) or liability (ÌamÉn) or effort (kasb). RibÉ could also arise due to unequal

exchange in a sale.

Gharar is also prohibited and considered a major negative element that would prevent

a fair financial transaction. Gharar is defined as a characteristic that renders the

consequences and future outcome of a transaction unknown or uncertain (majhËl). It is

a transaction done on the basis of pure speculation in a state of ignorance (jahÉlah) due

to uncertainty about the existence of the contract’s subject matter or failure to properly

identify it, e.g., its genus, type or quantity, or uncertainty about the ability to deliver

it, time of delivery, time of payment, etc. Transactions containing gharar usually lead


21

to dissatisfaction on the part of the parties involved and cause harm and/or conflicts

between them due to the attendant ambiguity.

In the maqÉÎidic approach, law and ethics, values and practices, form and substance

should integrate and not contradict one another. SharÊÑah prohibitions and parameters

should not, therefore, be understood in a merely legalistic or formalistic manner.

Instead, attention should be focused on the core and substance of values and principles.

In banking and finance activities, for example, the SharÊÑah injunctions should be

integrated in the operational activities with genuine concern for fair and transparent

practices that contribute to the development of society and human wellbeing (Dusuki

and Abozaid, 2007: 161).

5.3. Instituting Social Responsibility

In the spirit of social justice, Islam balances individuals’ rights and their duties and

responsibilities towards others. The concept of farÌ kifÉyah (social obligation) puts a

responsibility on those who are capable or better off to assist those who are not capable

or worse off. As it is an obligation (farÌ), social responsibility is therefore not an option.

This framework of mutual cooperation and assistance should become the social context

of an Islamic economy, whereby society will grow without disparity, indifference or

exploitation (Fazlurrahman, 1969: 1).

As wealth is an amÉnah, the Qur’an indicates that a person may consume according

to his need. The rest of income or wealth (al-Ñafwu) should be spent in charity, or

the cause of Allah (fÊ sabÊlillÉh), or reinvested in a business where it may produce

more wealth and contribute to employment and income for others. ZakÉh and Îadaqah

are formal institutions of social responsibility instituted by Islam that ought to bring

society close to the ideal of distributive justice (Al-Faruqi, 1983: 221).

While it is preferred that this responsibility be undertaken from moral consciousness

that it is right to take care of and assist fellow human beings, an Islamic economy is

also realistic in acknowledging the responsibility of the state. It is a factual reality that

man, left to himself and to market forces, would most likely not reach the desired goals

and objectives spelled out above due to weaknesses in individuals (Qur’an, 96:6). Some

other mechanisms are therefore needed. This calls for state involvement by setting up

regulations, laws and policies, as well as institutions of civil society to help, along


22

with government, to provide a social safety net for the disadvantaged. The constraints

imposed, and incentives offered, by the norms, values and culture adopted in a society

are also important.

The emergence of Islamic banking and finance should be viewed in this context. IBF is

a part of Islamic economics that has the potential to contribute richly to the achievement

of the major socioeconomic goals of Islam such as socioeconomic justice and equitable

distribution of income and wealth (Chapra, 1985: 34). The establishment of IBF is not

an attempt to merely fulfil Muslim society’s desire to have a “legal” (ÍalÉl) form of

financial services in a strict legalistic (formalistic) sense by cleansing economic and

financial practices from interest (ribÉ), gambling (maysir), uncertainty (gharar) and

other prohibited (ÍarÉm) elements commonly found in conventional financial services.

Corporate social responsibility on the part of IBF is more expected in society since the

institutions carry the “Islamic” name, which implies that the institutions would promote

Islamic ideals and objectives in human life (Dusuki and Abdullah: 2007; Sairaly, 2011).

Islamic banks and financial institutions should take maqÉÎid into account in setting their

corporate objectives and policies and also use them to verify compliance to true Islamic

principles; IBF’s progress will be monitored by how well it realizes the maqÉÎid in

producing a good economy marked by the spirit of brotherhood (ukhuwwah) and

cooperation (taÑÉwun), social equality and social justice (ÑadÉlah), just and fair

allocation of resources, elimination of poverty, protection of the environment and

achievement of general wellbeing (maÎlaÍah).

6. CONCLUSION

MaqÉÎid is a comprehensive concept that explicates the very ideals/objectives of

the SharÊÑah related to human life. As the SharÊÑah is an all-embracing concept that

is concerned with human life and human wellbeing, maqÉÎid should not be reduced

to objectives in the legal dimension. The maqÉÎid discussion in the financial sphere

should always refer to the general objective of the SharÊÑah, which provides a grand

framework and direction for how financial transactions should be arranged in an Islamic

economic system. Our perspective should not be limited to fulfilling the minimum

legal requirements and calling that SharÊÑah compliant.

In the framework of maqÉÎid, Islamic finance and banking activities lead to the

actualization of SharÊÑah objectives by realizing maÎlaÍah (benefit) and preventing


23

or repelling mafsadah (harm). In this endeavour, the discussion would embrace the

micro and macro dimensions of individuals and of society in general. The maqÉÎid

(objectives) would include smooth circulation of wealth, fair and transparent financial

practices, and justice and equity at both the micro and macro levels. In order to realize

those objectives, the means instituted by the SharÊÑah include facilitating financial

contracts, establishing values and standards as well as inculcating a sense of social

responsibility. The future trend in the development of Islamic banking and finance is

expected to adopt maqÉÎid al-SharÊÑah as the indispensable framework for structuring

Islamic financial contracts and as the directional guideline for further development of

the industry. Fulfilling minimum SharÊÑah legal compliance in product structuring is

viewed as insufficient. Instead, movement towards realizing maqÉÎid al-SharÊÑah is

highly valued as the means to give Islamic banking and finance a meaningful presence.

This would have an impact of economic substance in the form of just and fair allocation

of resources, real economic sector development, and fair and transparent financial

dealings with all the ethical hallmarks of brotherhood, cooperation and risk sharing.


24

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