Maqasid Al Shariah is an important Shariah aspect in Finance

UPLOADED BY
kulsanofer Thajudeen

INCEIF
The Global University in Islamic finance

Kuala Lumpur, Malaysia

CIFP

Maqasid al-Shariah is one of the very important Shariah aspects in

Islamic Finance
_________________________________________________________

SH 1002

Semester Jan 2012

Name: Kulsanofer Syed Thajudeen

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Abstract
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This article discusses the importance of Maqasid al-Shariah

in structuring and developing Islamic Finance products.
The technical and literal meaning of Maqasid Al-Shariah
is examined. The important elements of Maqasid Al-Shariah is
defined and further explored to explain how it may contribute
solutions for the many Islamic Finance issues and challenges.

Key terms of the research

1. Maqasid Al-Shariah 2. Islamic Finance 3. Maslahah 4. Wealth

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Table of Contents
Introduction................................................................................................................... 4

Maqasid al-Shariah ..................................................................................................................4

Maslahah ..................................................................................................................................6
Characteristics of Maqasid al-Shariah ............................................................................. 7

Classification of Maqasid al-Shariah .......................................................................................8

Maqasid al-Shariah and Islamic Finance.............................................................................. 10

Maqasid al-Shariah in the prohibition of interest (riba) ..................................................... 11

Promoting Maslahah in Economy ........................................................................................ 12

Maqasid al-Shariah in Islamic Banking ................................................................................ 13

Shariah Compliant : Legality vs Permissibility ...................................................................... 13

’
Hukum Qada i ....................................................................................................................... 14

Hukum Diani .......................................................................................................................... 14

Maslahah in Islamic Banking ................................................................................................ 15

Maqasid al-Shariah in Islamic Capital Market (Sukuk) ....................................................... 16

What is Sukuk........................................................................................................................ 17

Mudharabah Sukuk ............................................................................................................... 17

Musharaka Sukuk .................................................................................................................. 18

Paradox in Structuring equity- based sukuk ......................................................................... 18

Maqasid al-Shariah in Takaful.............................................................................................. 20

The main difference between conventional insurance and takaful ..................................... 21

Conclusion and Findings ....................................................................................................... 24

References ............................................................................................................................ 25

Introduction
Islamic Finance is finance following the Islamic law (or Shari‟ah) principles.
The basic sources of Shari‟ah are the Qur‟an and the Sunna, which are followed by the
consensus of the jurists and interpreters of Islamic law. The central feature of the Islamic

finance system is the prohibition in the Qur‟an of the payment and receipt of interest (or
riba‟). The strong disapproval of interest by Islam and the vital role of interest in modern
commercial banking systems led Muslim thinkers to explore ways and means by which
commercial banking could be organised on an interest-free basis.

The Islamic Finance industry has grown tremendously from its inception in 1975. The
Islamic finance industry is reported to be valued at over $1 trillion, with an estimated
annual growth rate of 10 percent . The industry is continuing to grow and some market
analysts project it will be valued at anywhere from $3 to $5 trillion by 2016.1

Since the Islamic Financial Institutions must ensure that all their transactions and
services must be Shariah compliant, it is vital that it follow the objectives of Shariah also
known as Maqasid al-Shariah. The principles advocated by the Shariah ensure that the
Islamic Finance transactions are just, transparent and prohibit involvement in illegal
activities that are detrimental to society.

This article will discuss the importance of Maqasid al-Shariah in structuring the
framework of Islamic Finance institutions (IFIs) to develop financial products and
services that are Shariah compliant.

Maqasid al-Shariah

Maqasid comes from an Arab plural word which is “maqsad”, the root word is “qasd”
which mean of intuition, aim or objective in an actions. Maqasid, The Arabic root word
of Shariah is the verb “shara‟a”. The literal meaning of “shara‟a” is to open upon a street,
like to open a door upon a street. In legal term “shara‟a” means to make or establish
1
Humayon Dar, Global Islamic Finance Report 2011, 34

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