IRP 5 – Challenges of Realizing Maqasid Al-Shari’ah (Objectives of Shari’ah) in the Islamic Capital Market : Special Focus on Equity-Based Sukuk Structures

One of the most popular instruments used today in the Islamic Capital Market is sukuk. Various sukuk structures based on ijarah, musharakah, mudharabah and hybrid forms have evolved. However, these innovations have raised many Shariah issues and controversies. This paper argues that some innovations which try to achieve the same economic outcome as conventional instruments distort the vision of Islamic economics based on justice and equitability. This vision is deeply inscribed in the objectives of the Shariah (Maqasid al-Shariah). The distortion stems from a restricted understanding of the Shariah that focuses on the legal forms of contracts rather than their substance, especially when structuring financial products. The overemphasis on form over substance may lead to abuse of Shariah principles in justifying certain contracts that are, in fact, contradictory to one or more Shariah texts and that ultimately undermine the higher objectives of the Shariah. The paper concludes that the substance of a contract, which has greater implications for the realisation of Maqasid al-Shariah should be equally looked into.