MAQASID AL-SHARI’AH AND ISLAMIC FINANCIAL PRODUCTS: A FRAMEWORK FOR ASSESSMENT

The overall aim of Islamic law is to promote welfare or benefit (maslahah) of mankind and prevent harm (mafsadah). According to al-Shatibi, maslahah is achieved by promoting the necessities/ essentials (daruriyat), the complementary requirements (hajjiyat) and the beautifications or embellishments (tahsiniyyat) (Hallaq, 2004). Essentials entail the basic elements of a good life, and protecting them constitutes the goals of the Shari’ah (maqaşid al-Shariah). Al-Ghazālī identifies the maqaşid as safeguarding the faith, self, intellect, posterity, and wealth (Chapra, 2008). Thus, the objective of Islamic commercial law would be to protect and enhance one or several of the maqasid. This is confirmed by Hallaq (2004), who maintains that contractual and commercial transactions are sanctified and encouraged in Islam as these preserve, enhance and support property and progeny.

Islamic finance is considered to be a part of an Islamic economic system which has an inherent social orientation. The overall goal of this system is to realise the maqaşid al-Shariah which should manifest in the economy as enabling growth and justice (Siddiqi, 2004). This implies that other than fulfilling the legal requirements, an Islamic financial system should also cater to the social needs of a society. Accordingly, there is a general agreement that maqaşid should be inherent in the operations and products of Islamic financial institutions (Siddiqi, 2006). Dusuki and Abdullah (2007) study the implication of maqasid on the operations of firms and study the implications of the maslahah pyramid (of essentials, complementarities and embellishments) on corporate social responsibility. There is, however, no specific research that studies the ways in which maqasid can be implemented at the level of financial products. In this note, a characterisation of maqaşid related to products is provided.

Contemporary practice of Islamic finance has been criticised for not fulfilling the maqasid. The debate surrounding the practice of Islamic finance has led to the distinction between Sharī ah-compliant and Shari’ah-based Islamic products. However, there are no clear definitions as to what these terms entail. Whereas some scholars assert that Shari ah-compliant and Shari’ah-based products are the same, there is a need to distinguish between different nuances of Islamic finance in terms of legal and social Shari ah requirements. In this research note (note), an objective way of classifying categories of Islamic financial products is suggested. In particular, the legal and social Shari’ah requirements implied in the maqaşid are used to classify Islamic financial products as Shari ah-based, Shari’ah-compliant and pseudo-Islamic. The note also identifies the role of different stakeholders in choosing the types of products.