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ISLAMIC BANKING AND FINANCE
Mahyuddin Khalid
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COMPLIANCE TO THE SCHEME OF SHARIAH LAWS
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CONTENTS
SOURCES OF SHARIAH LAWS PRINCIPLES GOVERNING OF ISLAMIC
BANKING ETHICS IN ISLAMIC FINANCIAL SYSTEM
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SOURCES OF SHARIAH LAWS
Sources of Shariah Laws
Primary
Al-Quran
Al-Hadith
Secondary
Ijmak
Maslahah
Sadd Zari’ah
Urf
Siyasas Syar’iyyah
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AL-QURAN
The fundamental and main sources of Islamic Law from which all other sources derive their authority
al-Quran may be defined as: The book containing the speech of Allah, revealed to
Prophet Muhammad in Arabic and transmitted to us by continuous testimony, or tawatir.
Consists of the word of Allah SWT revealed on Prophet Muhammad saw in 23 years – divine origin
Address to all humanity, without distinction of race, region or time
It seeks to guide human beings in all aspect of life
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THE SUNNAH
Sunnah Literally: a way or rule or manner of acting Technically: What has been (authentically) related to us on
behalf of the Prophet { سلم و عليه الله ,from his sayings {صلىactions, and tacit approvals.
Hadith Literally: communication, story, conversation Technically: What was transmitted on the authority of the
Prophet{ سلم و عليه الله his deeds, sayings, and tacit,{صلىapprovals, or description of his sifaat (features).”
Both cover the same ground: practice, sayings and tacit approvals(taqrir)
Quran generally deals with the broad principles or essential of religion. The details are supplied by Prophet saw through hadith
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IJMA’
Ijma’ – Consensus of opinion among the jurist on certain issues and ruling
Literally: Ijma is the verbal noun of the Arabic word Ajma’a
which has two meanings: To determine To agree upon something
Technically Consensus of mujtahids (jurist) from the ummah oh
Muhammad (saw), after his death in a determined period upon a rule of Islamic law
Consensus of opinion among the jurist of a particular period on a question of law
Ijma’ maybe based on Quran, hadith or analogy
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QIYAS
Qiyas – analogical deduction Literal
Measuring or estimating on thing in terms of another Technical
The extension of Shar’iah ruling from an original case (Asl) to a new case (far’) because the new case has the same effective cause (Illah) as the original case.
Qiyas or analogy is resorted to in respect of problems about which there is no specific provision in the Quran or the Sunnah of the Prophet
Analogical deduction of new issues on existing evidence from the Quran and Sunnah
Process by which a rule of law is deduced from original text in views of common effective cause (illah)
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SECONDARY SOURCES OF SHARIAH LAW
Maslahah (consideration of public interest)• Making a judgment based on the principle of general benefits on matters that have
no clear nas from the Quran or the Sunnah• Islamic jurisprudence applies the maslahah in the implementation of a ruling• As such, for anything that is beneficial & necessary to general public, it would
establish dalil (indicative legal text) in form of directives
Sadd Zari’ah (blocking of means)• Refers to the approach used to curtail anything that can cause a Muslim to do the
forbidden• Considered as an early preventive measure to prevent Muslim from doing what is
forbidden by Allah s.w.tUrf (custom)• Refers to the norms of majority of a society whether applied in speech or deed• Considered as ‘adat jama ‘iyyah (customs that are collectively acceptable) and can
be used as a legal basis so long as it does not contradict the Syara’
Siyasah Syar’iyyah• Refers to the area in Islamic jurisprudence that explains rulings related to the
policies and approaches taken in organizing the national administrative structure (and its people) in accordance with the spirit of Shariah
• Cover the issues of central and regional administration, economy, judiciary, peace, international relations etc.
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PRINCIPLES GOVERNING OF ISLAMIC BANKING
ISLAM
AQIDAH(Faith & belief)
SHARIAH(Practices
& activities)
IBADAT(Man to
God worship)
MUAMALAT
(Man to Man
activities)
POLITICAL ACTIVITIES
ECONOMIC
ACTIVITIES
FINANCIAL ACTIVITIES
SOCIAL ACTIVITIES
AKHLAQ(Moralities & ethics)
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AQIDAH (FAITH & BELIEF)
Firm belief in the heart and must be applied into actions
The belief in God, the belief in Prophets, The Angels, The Books, The Hereafter and The Divine Decree
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SHARIAH (PRACTICES & ACTIVITIES)
The original meaning of word shariah is “the path or the road leading to the water”.
In legal term “shara’a” means to make or establish laws. In legal term means laws relating to all aspects of human
life established by Allah SWT for his servants. Laws relating to human life are divided into three:
Those relating to belief Those relating to deeds Those relating to ethics
It is the responsible of the Muslim to knows the rules of Allah such as rules related with: Man relationship with God like worship (ibadah) Man relationship with other fellow-human like rules of
marriage (Munakahat), criminal law(jinayah), business (Muamalat), politics (Siyasah), international law and others.
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OBJECTIVES OF SHARIAH
Main objecti
ve
To construct human life on the basis of ma’rufat (virtues) and to cleanse it of the munkarat (vices).
Objectives of Islamic Law are the protection of
Faith Life Intellect Posterity
Property
These objectives are of 3 levels that are
Dharuriyyat (life and
death)
Hajiyyat (removing hardship)
Tahsiniyyat (beautifyin
g)
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AKHLAQ (MORALITIES & ETHICS)
Covers all aspects of Muslim behavior , attitudes and work ethics with which he perform his practical action: Moralities and ethics Behavior Thinking The process of judgement
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IBADAH (WORSHIP)
Ibadah (worship) is actually the main purpose of the creation of man on earth.
Allah mentions in the Holy Quran : I created the jinn and humankind only that
they might worship me (51:56) To serve Allah is not only through the
devotional acts of prayer, fasting, payment of zakat and pilgrimage.
The Muslim serve Him through all their good actions whether for worldly life or heavenly purposes.
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IBADAH (WORSHIP)
Definition of ibadah Total submission and obedient physically and mentally based on a
belief that the one whom is worshipped almighty honor and power that will induce the feeling of degradation and affection.
Concept of ibadah Covered all human activities physically and spiritually Covered all worldly and Hereafter affairs Main condition - sincere oneself in performing
The grouping of ibadah Specific:
-In time, place, conditionally, directionally and with specific actions-prayer-fasting-pay the tithe/zakat-perform the pilgrimage
General :-individual, society, leadership, the whole life
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MUAMALAT
Muamalah is from the verb “aamala” literally meaning to interact.
Muamalat means interactions or transaction. Commercial transactions
Through contracts which are permitted by the Shariah as evidenced by the Quran, the Sunnah and other sources of Islamic law.
Characteristics of muamalah Free from riba Comply with (objectives of) shariah Devoid of gharar (uncertainty, indeterminacy) Free from qimar (gambling) Free from maysir (games of chance) Free from ghishsh (fraud) Free from khibalah (cheating) Entitlement to profit depends on liability for risk Contracts based on free mutual consent
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ETHICS IN ISLAMIC FINANCIAL SYSTEM
ETHICS IN
ISLAMIC FINANCI
AL SYSTEM
Tawhid(Unity)
‘Adl(Equilibriu
m)
Huriyyah(Free will)
Responsibility
Ihsan(Benevolen
ce)
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