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Maqasid Al Shariah in Islamic Economics and Finance

Conference Paper · January 2009

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Ahcene Lahsasna
Salihin Academy (Malaysia)
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Faculty of Islamic Studies. National University of Malaysia, UKM.

Second Islamic Seminar on Islamic thought (ISoIT2 2009)
Islam & Muslims: issues & challenges
6 & 7 October 2009

Maqasid al Shariah in Islamic

economics and finance

Dr. Ahcene Lahsasna

Kuala Lumpur. Malaysia.

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Abstract

The present paper identifies Maqasid al Shariah in Islamic economics

and finance, and explains briefly the underlying concept of each objective
by showing the wisdom behind the overall Shariah enactment and ruling.
The paper emphasizes on the importance of Maqasid al Shariah in
economic and finance and urge the relevant parties concerned to
promote these nobles Shariah objectives in the market space and
implement them respectively in the related industry for better future of
Islamic economics and finance.

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Introduction:
There some important pillar for better improvement of the financial
system, one of them is Maqasid al Shariah. Besides the Shariah rules
and the regulator, we believe that Maqasid al- Shariah or purpose of
Islamic law is the most comprehensive instrument to enhance the
contemporary Islamic finance and banking today. However
understanding the concept of Maqasid al Shariah and its underling
principles is very important before applying it in the current business
scenario. It is very important to understand that Maslahah (Public
Interest) is the core of the theory of Maqasid al Shariah it self. This
strong link lead us to have a specific focus and concern about Maslaha
or interest or benefit or utility, all these words are treated synonymously,
and thus, these terms are used interchangeably in theory of Maslaha . Al
Gazali says in the definition of Maslaha : “It is seeking of benefit or
repelling of harm”.1 Accordingly the general objective of Shariah is to
preserve the society order of the community and insure the continuity of
its healthy progress.2 Allah says: “I desire no more than to set things to
right in so far as it lies within my power, but achievement of my aim
depends on God alone” (11:88). And he said also: “..and do not act
wickedly on earth by spreading corruption” (7:74). And other provisions
from the holy text proof which confirm the objective of Shariah Which it
is to set thing right and remove the corruption in all type of activity in
the society and business community as well.

1 Al Ghazali, al Mustasfa min ilm al-Usul, p 216.

2 See Ibn Ashur, Muhammad al Tahir, Maqasid al Shariah al- Islamiah,(Malaysia:
Islamic book trust, 2006), p.87.

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Concept of Maqasid al- Shariah

Al Imam Al Shatibi who is the founder of Maqasid al Shariah in Islamic
jurisprudence did not provide a definition for this Islamic discipline,3
however there are two other major definition of Maqasid al Shariah
provided by two other scholars who came after Al Shatiti, and they were
behind the development of Maqasid al Shariah in Islamic jurisprudence,
these two definition are provided by Ibn Ashur and Alal al-Fasi, ibn
Ashur defined Maqasid al Shariah base on two aspects, the general
aspect which is the purpose and wisdom behind the enactment of all or
most of the Shariah ruling.4 This definition is more related to the general
objective of Shariah, those overall principles that guide the enactment of
Islamic law in their totality. The second definition of Maqasid al Shariah
is very specific; it is related to specific objective to those objectives that
are designed to achieve specific benefits to people in their daily activities,
such as the importance validation of contracts.5 The other definition is
provided by Alal al-Fasi who defined Maqasid al Shariah as the end
sought behind the enactment of each of the ruling of Shariah and the
secret involved”.6 This definition is more comprehensive because it covers
the public Maqasid (ama) and the private Maqasid (khasa). The above
definition focus on the end sought behind the enactment of each of the
rulings of Islamic law, and the secret of these rulings. The secret of the
Islamic rulings means the goals intended by Allah in the law. As part of
the comprehensive concept of Maqasid al Shariah it’s include various
aspect of benefit, interest public, private, and protection from various
aspect of harm and vices. So Maqasid al Shariah aims to protect the

3 To have some understanding about the reason why Al Shatibi did not provide a
definition of Maqasid al-Shariah, see: Ahcene Lahsasana, maalim al tajdid al usuli inda
al imam al Shatib (Ph.D), p. 21.
4 Ibn Ashur, Maqasid al-Shariah, p171.
5 Ibid, p301. And see: Mohammad Akram Laldin, The Shariah objectives of financial

contract and Islamic banking (International ccnference on Islamic jurisprudence IIUM,

2006) p. 244.
6 Alal al-Fasi, Maqasid al-Shariah (Beirut: daru al-garb al –Islami, edition 5, 1993), p7.

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interest of mankind and prevent the evil from them, and meant to realize
the public benefit for the society, and encourage virtues and avoid vices.

Importance of implementation of Maqasid al Shariah in developing

Islamic finances:
The importance of the Maqasid al Shariah in developing Islamic business
finance comes from the position of the wealth it self in the Islamic law
and Maqasid al Shariah as well. This importance refers also to the
objectives of the Islamic law in finance and business transaction and to
the overall goals of Shariah in wealth. The preservation and protection of
the wealth is classified in the category of necessary interests (daruriyyar).
The meanings of daruriyyat are “are those without the protection of
which there would anarchy and chaos in society. The absence of
protection for these interests would man loss of everything that we hold
dear”.7 This infrastructure and classification of Maqasid al Shariah
shows the primary position of the wealth and the importance of the
finance in Islamic law. Thus, it is clearly mentioned that the finance is
recognize by Maqasid al Shariah as valuable aspect in life. Further more
the finance is protected by Islamic law in form of Islamic legal rulings
and regulation. It is strongly recommended to emphasize on the
implementation of Maqasid al Shariah in the current business
transaction because of the following reasons:
• The suitable connection and smooth relationship between the
objectives of Maqasid al Shariah and the objectives of the business
transaction, we can observe that from the position of the wealth in
Maqasid al Shariah, as mentioned early there is a clear indication
from Shariah text and rules to protect the finance and wealth in
the daily business activities in the society. Therefore the disregards

7Imran Ahsan Khan Nyazee, Islamic Jurisprudence (International Institute of Islamic

Thought, Islamabad, 2000), p 199. also see: Al Ghazali, al mustasfa, p 216. Al shtibi, al
muwafaqat, vol. 2, p324.

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of the objectives of Maqasid al Shariah in business transaction may

lead to hardship and disorder.
• The business transaction in domestic and international trade
should be based on the principles of Islamic law, and the main
objectives of Maqasid al Shariah in finance and business shall be
taken as guideline to execute all types of financial transactions.
• The particular objectives of maqasid al Shariah in business
transactions are a continuity of the general objectives of Maqasid
al Shariah, and this linkage the strong relationship between the
two categories.
• We can conclude as result of that the rules of business transaction
should be within the regulations and the requirement of Maqasid
al Shariah and Islamic law.
• Maqasid al Shariah governs and regulates the Shariah principle of
the Islamic finance.

Maqasid al Shariah in business transaction:

The conventional financial system focuses primarily on the economic and
financial aspects of transactions, whereas the philosophical foundation
of an Islamic financial system goes beyond that. According to the
principles of Maqasid al Shariah the Islamic system places equal
emphasis on the ethical, moral, social and religious dimensions, to
enhance equality and fairness for the good of society as a whole. Maqasid
al Shariah aims to achieve a various objectives in business transaction,
which are as follows:

1: The circulation of the wealth in the market space and business

transaction.
The objectives of Shariah in business transaction is to make the wealth
available in the society members by right, and enable every one who

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deserve it to own it, however it is very important from Maqasid al

Shariah perspective to keep the circulation of the wealth in the market
through exchange and business transaction and avoid all types of
monopoly of monetary in few hands of people. The circulation and
marketability of the wealth has been precisely mentioned as one of the
primary objective of Maqasid al Shariah in business transaction by Ibn
Ashur who defined the circulation of the wealth as: “implies the fair
circulation of wealth in the hands of as many people as possible”.8 This
definition means that the wealth should be moving in the hands of most
people in the society by fair and right. The holy Quran emphasize very
clearly on this concept: “So that it may not be a benefit going round and
round (dulah) amoung such of you as may already be rich” (59:7). Ibn
Ashur in his comment on the mentioned verses says: “The idea of wealth
“going round and round” refers to its transfer from one person to
another, the verse thus means that the circulation of the wealth ensuing
from spoils, and all wealth for that matter, should not be confined to few
people, such as for example, transferring it from the hands of the father
to those of his eldest son or from one person to his friend”.9 Thus, to
protect the circulation of the wealth Islamic law allowed many types of
contracts in business and commerce in form of sales of charity within
same terms and conditions required by the Sahriah. However to facilitate
the circulation of the wealth in the market certain contracts have been
allowed in Islamic law even they contain some ambiguity (gharar) such
as (Salam) forward contract and Mudarabah and other business
transaction.10 These types of contracts are legalized as an exception to
the general rules of Shariah base on the need and necessity and public
interest. In order to achieve the purpose of circulation of the wealth in
business transaction the basic rule in Islamic law is that the financial

8 Inb Ashur, Maqasid al-Shariah p.279.

9 Ibid, p.283.
10 Ibid, p.281.

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contract is biding rather than optional unless it is stipulated.11 Beside

this there are other important tools which play a crucial role in the
circulation of the wealth.

2: Preservation and protection of the wealth in Islamic business

transaction.
Preservation of the wealth in finance and business transaction is one of
the primary Maqasid in Shariah, this objective was clearly stated in
Quran: “O you who have attained faith, do not devour one another’s
possessions wrongfully not even by way of trade based on mutual
agreement, and do not destroy one another” (4:29). This concept is also
supported by prophet statement who said:” No doubt, your blood and
properties are sacred to one another like the sanctity of this day of yours,
in this month (Dhu al-Hijjah) of yours, in this town (Makkah) of yours”.
Another statement from prophet: “No Muslim’s property should be
allowed to be taken from him without his own accord”. The above
provisions from Quran and Sunnah are very strong statement indicate
very clearly the importance and the value of protection of the wealth,
whether for individual people or for the community and society at large.
The test shows as well the great sin of any aggressive action against the
wealth of property of the community.12

3: The right to own and earn: The Shariah gave the right to the Muslim
community to own and earn and create wealth as result of that; however
there are two major ways for the Muslims to create wealth, which are as
follows:

A: Owning (Tamlluk): Owning is a basis of wealth formation by

humans; it consists of possessing anything from which they can gain

11 See Ibid, p.283.

12 See Ibid, p. 290.

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what will satisfy their needs, whether from their produce or their
substitutes, namely, the price of these items.13 Thus the Scholars laid
down some rules in business transaction in order to ensure Shariah
compliance in the business transaction and ensure the generation of
halal income, therefore according to Shariah the sale of commodity
which is not in the possession of the seller is unlawful, the prophet says:
“do not sell what do you not have” which means that the possession is
primary condition to make the transaction valid, according to that no one
is allowed to deal with property of another person unless with his
permission, however if the unauthorized person (fuduli) act on behalf of
the owner without his prior authority, some jurist says that the
transaction is invalid, however the majority of the jurist say that the acts
of unauthorized agent are dependent upon the ratification of the owner of
the property.14

B: Earning (Takassub): The earning consists of exerting oneself to gain

what help to satisfy one’s needs, whether by physical labor or by mutual
consent with other.15 There are three primary pillars of earning, Land,
labor, financial capital. For the land it is everything to which human
labor can be applied on the planet earth, and it is consider as a source of
wealth. Respectively labor is the means of extracting most of the earth’s
bounties, it is also the means of creating wealth from such business as
hire, trade, ect, however the financial capital enables the continuation of
labor to increase one’s wealth. Therefore the financial transaction are
based upon their either ownership, such buying residential property and
foodstuff for consumption, or earning such as buying land, or other types

13 Ibid, p. 274.
14 For further reading on the act of unauthorized person (fuduli) see: Sadiq abdel
rahman al-gariani, Mudawant al-fiqh al-maliki,(Beirut: muasasat al-rayan, edition 1,
2006), Vol.3, p.241.
15 Ibid, p.276.

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of hire contracts. 16 Risk taking is one of the major pillars in earning and
justify halal income.

4: Transparency in wealth and finance:

The transparency is one of the very important objectives of Shariah in
business and finance, the main objective of transparency is to avoid
dispute among people in the daily business activities as much as
possible, we can observe very clearly this noble objective from the various
rules establish by Shariah. Islamic law required security in some
business transaction such mortgage or witnesses might be requested
upon the transaction. Apparently if we look at the musharakah (profit
and loss sharing) as form of partnership whereby two or more person
combine either capital or labor together to share the profits, the
musharakah as financial investment provided to two parties involved on
the basis sharing profits from the business, from this point we can
observe the transparency in the ratio which is fixed and predetermined
and is made known to all parties involves in advance. Further more the
loss will be shared as well in the exact proportion of the two parties
according to total investment capital of the contracting parties. For al
mudarabah transaction it is primer requirement for the validation of the
transaction that the contracting parties agree in the beginning on the a
definite proportion of the actual profit to which each of them is entitled,
however the lam sum amount of profit is not allowed for any party, nor
can of the contracting parties determine the profit share at a specific rate
tied up with the capital, the above requirement is to keep the finance in
the partnership clear and transparent to avoid dispute. In murabahah
transaction which is considered as form of sale, whereby the seller
expressly mentions the cost of the sold commodity he has incurred, and
sells it to another person by adding some profit or mark-up thereon.

16 See: Ibid, p.277.

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From the concept of murabahah it is clearly understood that the

disclosure of the price is required, the scholars required some condition
for morabahah contract to be valid which briefly are:
1) Knowledge of the initial price or cost by the buyer.
2) Knowledge of the profit margin.
3) The original price is fungible.
Such business agreements make the contracting parties more
comfortable to conclude the deal and execute the business transaction
with mutual consent and understanding. In this respect the
transparency in finance is applied, especially if it is related to the subject
matter of the contract which must be known to both parties including
specification, quality and quantity. This Shariah requirement put the
contracting parties involve in the business transaction in full
responsibility in there transactions. In this regards we should take into
consideration that there are a lot of business secret in term of shares,
profits, capitals, operations, marketing and products are not allowed to
be disclose to other parties who not involve in the partnership.

5: Development and investment of the wealth in business

transaction:
Shariah is very concern about the development of the economics and
finance, in supporting this objective the Quran and Sunnah urge the
Muslims to look at this aspect as one of the major objective in business
activities, because the investment and the development of the wealth will
enhance the finance of the members of the society respectively. The
development of the wealth and investment in finance is an obligation
from the Islamic point of view, there are many verses in the holy Quran
and Hadith which emphasize on this matter and address the issues of
investment as a premier requirements and obligation for all Muslims.
From maqasid al Sahriah stand point the investment and development of

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the wealth is not an option but it is an obligation, because it is helping

the growing wealth and protecting the property of the society. Maqasid al
Shariah considers money as potential capital rather than capital,
meaning that money becomes capital only when it is invested in a
business. Accordingly, money which is advanced to a business as loan is
regarded as debt of the business, and not capital as such, it is not
entitled to any return (i.e., interest). Muslims are encouraged to utilise
money and discouraged from hoarding idle money, as hoarding money is
regarded as being unacceptable.

6: Prevent harm and hardship in wealth and finance:

Shariah is trying to achieve comprehensive communal prosperity in the
society, however by making this achievement every member in the
society will be enjoying satisfaction and security, as result of this all type
or harm and hardship will be either removed from the society or
minimize in the finance and business transaction. It is understood that
preventing of the harm in finance is a result of putting into practices
most of the objectives of Shariah in business finance, because those
objectives are the key factor for this achievement.

7: Ensure justice in circulation of the wealth in business

transaction:
The justice is a prime requirement in human life in all aspects, hence we
can observe the justice from Islamic perspective in the circulation of
wealth in economic and finance, and it is very vital objective due to its
implication in the business community and the social activities as well.
However the justice in the wealth starts from earning wealth and
possessing property by right, without any harm. Ibn Ashur emphasize on
this point by saying: “Wealth and property should not have been
acquired wrongfully and unjustly, that is to say, it must be acquired by
personal effort on the basis of substitute given to the original owner, by

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donation or by inheritance”.17 Therefore in order to implement justice in

business transaction Shariah imposed some rules and regulation in
contracts and business transaction such as the requirement of the
mutual consent in the contract to ensure justice and equity, further
more Shariah prohibited all elements that may lead to injustice business
such as bribery, fraud and deception, gambling, uncertainty, riba, and so
on to ensure the establishment of the justice in all aspects in business
and finance, meanwhile Shariah encourage all type of business activities
which create justice and benefit to the business community and social
life as well.

8: Prohibition of Riba
One of the major objective in Shariah is prohibiting usury in all type of
business transactions, the two major kind of riba are strictly forbidden in
Islamic law, either riba al –nasiah which is interest on lent money, or
riba fadl which is taking a superior thing of the same kind of goods by
giving more of the same kind of goods of inferior quality for a particular
products mention in Shariah, the Quran says: “those who eat riba will
not stand (on the day of resurrection) except like the standing of a person
beaten by shaitan leading him to insanity that is because they say:
trading is only like riba” whereas Allah has permitted trading and
forbidden riba” (2:275. According to Islamic law the riba cause harm in
business transaction, and give rich to community by easy way of grow
their wealth in harming the other member of community, the Shariah
looks at this profit as prohibited earning which not allowed. In fact the
riba makes the community lazy and unproductive and remain of minor
contribution to the society.18 Therefore all banks and financial institution
must move away from riba, and conduct pure business transaction

17Ibn Ashur, Maqasid Al Shariah, p. 292-293.

18See: Mohamad Akram Laldin, The Shariah objectives of financial contract and Islamic
banking, p.252.

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without involve in riba, it is a very challenging achievement but it is a

holly duty and primary requirement of Islamic law in trade in order to
introduce pure Islamic product in banking and finance. In this respect
we can say that the only difference between the Islamic banks and the
conventional banks is that the Islamic bank beside the Shariah
compliant in all business activities avoid riba in all activities, whereas
the conventional bank build all type of transactions without taking into
consideration the prohibit of riba. Thus the Islamic bank evaluate the
product from both side, value of the transaction and interest and profit
and return and the purity of the products from all shubha of riba, the
business transaction must be free from riba, whereas the conventional
banks evaluate the product from one side only which is value interest
and profit, without taking into account the requirement of the religion in
that particular transaction.

Establishment of justice and equity in economics and finance

One of the major objectives of Shariah is to establish justice and equity
in economics and finance, this noble objective can be achieved from the
following principles.

• Prohibition of monopoly
One of the objectives of Shariah is to free the market from monopoly,
which one of the forbidden elements in business transaction and trade
activities, because it causes harmful to the society, the monopoly prevent
the circulation of the wealth which is one of the primary objectives of
Shariah in wealth. The profit must be shared and the wealth should be
available in all hand of the community member, apparently the purpose
of monopoly is to accumulate the wealth in the hands of a certain people
who control the movement of the wealth and monopole the circulation of
the finance according to their business plant and their will. This

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approach will keep the prosperity and the happiness in very limited
members in the society which lead to injustice and negative
consequences in the business and society as well. Therefore the Islamic
banks should enhance this Shariah objectives and encourage the
participation of the hall business community in business activities by
giving the chance to the small business man to engage into trade and
various industrial projects, on the other hand the role of the government
is needed by imposing regulation and law which control the market, and
keep it in good condition and health by environment by moving away
from monopoly.

• Prohibition of major uncertainty

In order to facilitate the business and trade, Shariah allowed the minor
uncertainty in business transaction because it is very difficult to achieve
zero gharar in business operation, however the major uncertainty is not
accepted from Shariah point of view, and it is strictly forbidden in all
kind of trade and business activities. In fact some of business
transactions are not allowed or void because of the uncertainty; the
reason behind that is because Shariah insist to avoid all kind of conflict
and dispute between the contractual parties, further more the
uncertainty might result harmful to one of the contractual parties,
however the honesty and transparency in the business transaction is
very important and needed in order to secure benefit for both parties by
justice, and relies the prosperity and happiness for both parties.

• Prohibition of Duress (Ikrah)

Trade and business transaction in from Islamic perspective is base on
the concept of brotherhood environment which is base on free will and
consent of the parties involved in the contract, therefore duress is not
accepted by Shariah and not tolerated in the trade. Duress (ikrah) is to

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force someone to do something that he dislikes, but in order to remove

the more harmful aspect; he does so against his consent. The Shariah,
consider all the contracts under duress as an unlawful transaction,
however there are some conditions that must be fulfilled in order to
consider the action as duress. The majority of jurists maintain that
duress causes nullification of these contracts and consent that may
come following the removal of duress is not accepted. They support their
view through the Hadith of the Prophet (pbuh) "Verily Allah has removed
from my community mistake, forgetfulness and things for which they are
compelled" (Sunan Ibn Majah). This Hadith proves that if anything is done
under duress, it is not considered.19

• Transparency to avoid mistake (Ghalat ) in contract:

One of Maqasidal al Shariah is to put the contracting parties on equal
footing to express their consent, however the expression of the consent is
base on the transparency of the subject matter, according to Islamic law
the subject matter must be clear and well defined to the buyer to enable
him to express his willingness to possess the subject matter of the
contract, therefore the transparency of the subject matter will minimize
the mistake and ghalat in business transactions, however Shariah
imposed some rules pertaining to mistake to ensure the equity and
justice. Mistake (ghalat) is an assumption about anything, which comes
into the brain of a person, but proves to be inaccurate. In other words, it
is that which contradicts reality without intention.20 Mistake in a
contract is that, following its formation, it becomes clear to a contracting
party that the subject matter of the contract contradicts with what has
been contracted for this mistake could either be in the very essence of a
subject, or in its attribute. In the case of a mistake in the very essence of

19 For further reading on Ikrah see: Sadiq abdel rahman al-gariani, Mudawant al-fiqh al-
malik, Vol.3, p.222. and see: Imran, Islamic Jurisprudence, p.135.
20 Ali AL Kafif, Islamic financial transaction, p. 227.

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a subject, a contract is considered as invalid because the difference in

genus makes the subject matter non-existent and a contract for a non-
existing thing is not valid. In this case the purchaser will have a choice
between retaining this contract as valid or cancelling it. This option is
called the option to cancel due to an error in its attribute (khiyar a/-
wasf).21

• Prohibition of inequality (Ghubn)

Ghubn is inequality of price and subject matter of a contract of exchange,
that is, one of them becomes less or more than the other, which was not
known at the time of contract.22 Ghubn is divided into two types:
insignificant inequality (ghubn yasir), and excessive inequality (ghubn
fahish). Jurists have different opinions about the standard of measuring
what is insignificant inequality and what is excessive inequality. Some
jurists maintain that if this inequality falls within the jurisdiction of
evaluators, it is considered insignificant inequality. Other jurists have
determined a fixed amount for measuring what constitutes as an
insignificant inequality and excessive inequality. Muhammad bin al-
Hasan al-Shaibani maintains that this amount is five per cent of the real
price of a subject matter, that is, if inequality is five per cent or less, it is
considered insignificant, but if it is more, it is considered excessive.
However All jurists unanimously agree that insignificant inequality does
not affect most contracts, this is because it frequently occurs in financial
transactions and people tend to forgive each other for this small amount
of inequality.23

• Prohibition of deception (Taghrir)

Deception (taghrir) is to induce a contracting party to think that it is in

21 See: Imran, Islamic Jurisprudence, p.138.

22 Ali AL Kafif, Islamic financial transaction, p. 229.
23 For further reading on ghubn see: Inb Rushd, bidayat al-mujtahid wa nihawat al-

muqtasid, Vol.4, p.534.

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his interest to take the subject matter whereas in fact it is not so.
Deception is divided into two types. Deception related to statements
(taghrir qawli) and deception related to deeds (taghrir fi'li). Taghrir is
alternatively called tadlis. Taghrir Qawli occurs because of the deception
of one of two contracting parties or his representative in order to induce
the other party to conclude a contract even if it happens with inequality.
However Taghrir Fi'li is deception that occurs through doing something
on the subject matter to show it in a condition that contradicts its
reality, both of deceptions are forbidden in Shariah, and should be
eliminated from all business transaction.24

15: Establishing Shariah principles in Islamic finance:

Maqasid al Shariah is aiming to develop Islamic finance on a very solid
ground which can accommodate all innovation in business and finance,
whether it is related to the banking system, capital market, money
market, mortgage market or takaful industry, this solid platform and
strong foundation will enhance the Islamic finance to a better
performance. We have a strong believe that maqasid al Shariah will be
the total solution for Islamic finance by taking into consideration that the
Islam it self is comprehensive code for life in all aspects including
economic and finance. However from the solid ground of Mqasid al
Shariah Muslim jurists and scholars throughout the development of the
business transaction and finance have introduced a quite number of
Shariah principles in order to govern the finance and regulate all
business transaction. These principles should be adopted by Islamic
banks and Islamic financial institutions in financial transactions and
services in all aspect of economic. This is to ensure the stability of the
trade and facilitate the smooth achievement of Maqasid al Shariah in
finance and economic. Maqasid al Shariah aims behind establishing

24 For further reading on gharar see: Ibid, Vol.4, p.534.

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Shariah principle in Islamic finance, to facilitate a dynamic mechanism

for the Islamic financial system in order to achieve the stability of the
economic and finance and all type of business transactions. The
following principles are the major component which distinguishes the
Islamic finance from the conventional finance system and most of the
contract in Islamic commercial law is based on them. The profit and loss
sharing principles, principles based on trade, fess-based principles, free of
charge principles, supporting principles.

16: Rejection of the idea of a fixed rate of return in financial capital.

Riba essentially applies to money lending, as this is a predominant
source of income for the conventional financial institutions. Therefore,
the presence of an advance contract on the return on capital is
considered the distinctive and unique characteristic of interest. There is
a debate between the two financial systems, the Islamic financial
institutions is considering the interest illogical and unjust and must be
avoided in all transaction, on the other hand conventional financial
system try to find similarity between the contractual return on lending
and contractual sale based financing. However the conventional
argument has been refuted very early in the Quraic provision,
furthermore by rejecting fixed rate return Shariah replaced it with profit
loss sharing concept as benchmark for the return in the financial
institutions. We have to mention that there are two important points
here to be established in order to clarify the difference between riba and
trade, which are:
1: The normal trade transaction is subject to natural process and
conditions of the market such as uncertainty and risk, whereas the riba
is not. As a result of that the capital involved in trade may grow or
decline through time depends of the conditions of the market while
capital in riba-based transactions may automatically increase over time.

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2: The increment to the amount and the value is different between debt
created by loan (qard) and increment created by credit sale, the value
amount in the riba is related to loan and time, whereas in the sale is
attached to the assets and the transaction it self.

17: Asset-backing financing.

Islamic financial system is based is the insistence on it being asset-
backed, whereas in the conventional concept of financing, banks and
other financial institutions deal only in money and monetary papers
without taking into account the factor of asset-backing in there financial
system. In fact this issue is related to the structure of the national
reserve in the bank and the value of the fiat money which is one of the
critical issues in the banking and finance today. This issue is related to
the value of non asset-backing finance, and policy and framework
regulation of centre bank. The asset-back financing gives a solid ground
for the banking operations, and ensure the protection of the benefit of
the parties involved in the investment.

18: Money as means of exchange:

Islamic finance does not recognise money as a subject matter or
commodities subject to trade but as a medium of exchange. Therefore
there is no room for making profit through the exchange of units from
the same currency. From Shariah point of view profit is generated only
when something having intrinsic utility is sold for money or when
different currencies are exchanged, one for another. Thus, the profit
earned through dealing in money (of the same currency) or the papers
representing them is interest.

19: Maqasid al-Shariah in Utility and Work:

Maqasid al Sahriah has a specific objective in some contracts when the
subject of the contract is not tangible such as utility and work, however

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the labor is one of the basic element of the wealth, therefore Shariah
apply a special objective in this type of transactions in order to maintain
the noble Maqasid in this category of transaction such as modarabah
and Ijara.
If we look at Ijarah it means the Personal service or Manfa’at al-‘amal,
which is hiring of the service or labor, to undertake a specific task, these
type of work the subject of contract consist from the physical and mental
labor and effort. The purpose of Shariah in these type of contract is to
protect the worker’s right, by stipulating some requirement and condition
in order to secure their right from being violated or be wasted or
undervalued, meanwhile Shariah protect the invertors’ wealth to be
taken by the workers unjustly, therefore the purpose of Shariah is to
make balance of rights and obligation between the contracting parties by
justice without any harm, Shariah in this aspect is more on the favor of
protecting the labor right due the inequality which is more in his side.
Thus, the Shariah objectives in ijarah are:
1. Increase the volume of the business transaction in the labor base,
whereby the subject of the contract in not tangible, in this respect
the Shariah ignore the element of risk involve in this type of
contract and the uncertainty as well. Likewise these type of
transaction belong the category of Hajiyyat as we mentioned early.
2. Shariah allowed uncertainty in this type of contract because it is
one the characteristic of these transactions; on the other hand the
Shariah did not allow uncertainty to be in other type of contract
especially when the subject of the contract is tangible. In this
respect it is important to understand and keep in mind that
Shariah allowed the uncertainty in business transaction which is
minor and difficult to asses it such as the amount value of the
work, the duration of the work, and other thing which is consider
as a part of the contract performance.

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3. Prevent anything that overburdens the worker in the contract

concluded; therefore Shariah did not allowed the investors to take
advantage on the worker by seeking the maximum profit from
them because of their need to enter into that contract. The duty
and task should be fair and accepted according to the normal and
standards requirement of the market.
4. These type of contract are not binding contracts until the
commencement of the work, except al musaqat, its binding by its
conclusion due to the harm result to the tree and crop, this maliki
school view has further explanation base on Ibn Ashur’s view who
is one the maliki Scholar who said: “That all contracts entailing
physical labor should not be considered binding by verbal
conclusion. Since this reverts to the notion of the option for the
worker, it would be appropriate that in these contracts a specific
time must be fixed for the worker to commence the work, just as
optional sale (bay al-kiyar), so as to prevent any harm to the
investor”.25
5. It is permissible to give the workers extra benefit beyond what they
are receiving according to the contract.
6. Paying the workers their due immediately upon completion of
work, without any delay, due to the need of using that return in
their life.
7. Providing the worker with the means necessary to complete the
work, to avoid forcing the worker to complete it by him self.
8. Shunning all type of terms and conditions in the contract that
required the employees to work a very long period, and they have
no way out from that contract.26

20: Maqasid al- Shariah in donation:

25 Ibn Ashur, p.299.

26 See: Ibid, p.297-301.

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Contract of donation and gift is based on the mutual help among

Muslims, however the meaning of donation and gift here are those which
intended to invest the recipient with ownership or transfer of property,
enrichment, and establishment of crucial welfare institutions that
represent, such as the yield or real estate or large amount, these kind of
contracts are known in Islamic commercial law as Uqud Tabaruatt, thus
Shariah has specific objective in these type of contract which are:
• Increase donations and gifts in view of their public and private
benefits.
• The donation must be made voluntarily and should not be
accompanied by any hesitation, because these gifts are consisted
from generosity of giving away a portion of valuable property
without any immediate replacement.
• Tolerance and flexibility should be applied to the means of
validation contracts according to the wishes of donors. Therefore
Shariah allowed making gifts conditional upon the donors death
through wills and testaments, further more the Maliki School of
law stated that the stipulation regarding endowments, gifts and
charities are biding such as the retraction of the a charity or gift.
• The donation and gift must not lead to the violation and loss of the
right of others, such as heirs and creditors. Accordingly, a
seriously ill person is forbidden to make donations rather than
exchanges by sale or otherwise, because a sale entails
compensation, in contrast to donation in which suspicion arises
concerning the donor’s intent.27

27 See: Ibid, p.303-310.

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Conclusion: (Finding & Recommendations)

As conclusion we should understand that Maqasid al Shariah is an
important discipline which can play a crucial role in the economics,
finance and business transactions nowadays, it is time to go forward
with full implementation of Maqasid al Shariah in finance business and
economic activities to achieve the noble objectives of the Shariah. These
objectives give value to finance, banking, trade and all business
transactions. We believe that the implementation of Mmaqasid al Shariah
will enhance the performance of the finance and the trade and establish
justice in the business community and society at large. Further more the
achievements of Shariah objectives in business transaction create
happiness and satisfaction and fulfill the needs of the society in wealth.
At the end we conclude our discussion with some finding and result and
recommendation as follows:

1. There is no doubt that Maqasid al Shariah has noble objectives in

economics, finance and business transactions.
2. The objectives of Maqasid al Shariah in business transaction create
communal prosperity and happiness and satisfaction in the
society.
3. The concept of Maqasid al Shariah and its nobles objectives are
considers universal goals.
4. Maqasid al Shariah balance between the private interest by
meeting the demand of the individual according to their self
interest, and the public interest by providing the need to the
society and lead them to welfare programme.
5. The duty of implementation of Maqasid al Shariah in economics
and finance is not the responsibility of scholars only, but it is the
responsibility of all members involved in finance, business and
economic activities. However it is very important to have an

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interaction and debate and open discourse between the Shariah

scholars, researcher, economists and practitioners expert from the
industry in order to collaborate and cooperate hand to hand to
promote Maqasid al Shariah in finance.
6. There is a mechanism and process we have to take it into account
in order to implement Maqasid al Shariah in finance and banking
and business transaction.
7. It is very important to address Maqasid al Shariah in the current
business scenario and apply it in all type of business activities.
8. Maqasid al Shariah helps to enhance the financial market and
banking system by making significant progress to the domestic
market and international trade.
9. Maqasid al Shariah helps to overcome the current issue in the
finance and banking and business transaction because Maqasid al
Shariah is about essences and real attributes not names and
forms.
10. It is recommended to promote Maqasid al Shariah and
Qawaid Usuluyah, and Qawaid Fiqhiya as additional tools to
understand finance and banking and enhance the application of
business transaction and support and assist the fast growing of
the Islamic banking and finance.
11. Maqasid al Shariah is a solid platform for the Shariah
advisory to understand the current Shariah issues in finance and
banking, further more it helps them in dealing with the current
issues through a valid examination and provide alternatives
solutions within the noble objective of Shariah.
12. We have to record here that the full comprehensive and
understanding of the Maqasid al Shariah is a primary requirement
before the stage of their implantation in economics and finance.

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