- Al-Umur Bi Maqasidiha (Acts are judged by the intentions behind it)
- Al-Yaqin La Yazulu Bi Asy-Syak (Certainty is not overruled by Doubt)
- šAl-Masyaqqah Tajlibu At-Taisir (Hardship begets facility)
- La darara wa la dirar (Harm shall not be inflicted nor reciprocated)
- Al-Adah Al-Muhakkamah (Custom is the basis of judgement)
BRIEFLY EXPLAIN SOME
APPLICATIONS OF THE AL QAWAID AL-FIQHIYYAH ON ISLAMIC BANKING AND FINANCE......
Qawaid al Fiqhiyyah (Rule of Conduct (or Maxims) of Islamic Law) are part of Maqasid al Shariah (Objectives of Islamic Law), where there are five objectives to Islamic Shariah, i.e to preserve a person’s religion, life, intellect, procreation (family) and property. These basic principles of Shariah are good values that recognised not only in Islam but the whole humankind as way of life.
ReplyDeleteAs the Qawaid al Fiqhiyyah laid down 5 normative legal maxims as mentioned above, the similar values and principles was applied in Islamic Banking and Finance nowadays. As we observed the growth of Islamic Banking and Finance in late 30 years was overwhelming not only due to the amount of money involved but also the increased participation of in terms of countries and the people.
Examples of the applications of Qawaid al Fiqhiyyah in the modern financial business are as follows:
i. al-Yaqin la yuzalu bish-shakk: certainty is not overruled by doubt.
One of the basic principle of Islamic Finance requires Muslims to avoid transactions that are uncertain or ambiguous; not everyone involved knows what to expect and can make an informed decision. Gharar can exist in these situations:
When two parties enter a contract and one party lacks complete information: For example, a party purposely withholds some information in order to wield greater control over the transaction.
ii. Al-Umur bi-maqasidiha: acts are judged by the intention behind them. This axiom is based on the hadith: ” Acts are valued in accordance with their underlying intention.” This is a fine addition to the existing four normative legal maxims, for al-Shafi’i said: ” This hadith constitutes a third of all knowledge.”
When both parties lack control over the underlying transaction: For example, two parties enter a contract related to the sale of fish that haven’t yet been caught. Both parties lack control over that transaction because outside forces (such as weather or overfishing) may prevent the delivery of all the fish expected per the contract.
noted
DeleteSome application of the qawaidul fiqhiyyah were adopted in Islamic Banking and Finace. Among the relevant applications are:
ReplyDeletei. Acts are judged by the intentions behind it
- This concept is used by Islamic bank in identifying their roles and responsibility towards their customer. For example. In Mudharabah financing, the Islamic bank is perform as an intermediary towards the investors and the entrepreneur. Based on this intention, the Islamic bank cannot guarantee any fund of the investor. All of the fund is not a liability nor an equity to the bank. That is why, according to AAOIFI it must not be treated as a liability.
ii. Certainty is not overruled by Doubt
- This concept is used by the Islamic Bank when there involved 2 party in the contract. For example, in the musyarakah or Al Istisna contract, the investor is in doubt whether the other party has performed the obligation arising from the contract or not, the latter is considered as still liable to perform until there is proof to show otherwise.
Iii. Hardship begets facility
- This concept is used when in one country there is no other Islamic financing facility available. For example, in the case of Muslim minority who live in non Muslim countries whereby no Islamic financial institutions facilities available, they are allowed to use conventional banking due to the important needs to be fulfilled such as home financing.
Iv. Harm shall not be inflicted nor reciprocated
- This concept is used when the Islamic bank need to make the decision which in return make one party suffer in order to protect bigger harm to happen. For example, the imposition of ta’widh or compensation for late payment is based on the principle that the debtor’s act of delaying payment could harm the creditor and must be avoided by having a compensation clause.
V. Custom is the basis of judgement
- This concept is used when the Islamic Bank need to face many new modern business and rapid changes in market. For example, current transaction involved online transaction that does not occur in the traditional buy and selling process. Using this concept, online transaction is allowed as long as there is a sign that there are an acceptance of aqad in the process.
-FADLIANA-
noted
DeleteComments by Mohd Marzuki Ismail (Student No 3160062)
ReplyDeletei. Acts are judged by the intentions behind it
This concepts from the hadith serve as guidance for the Muslim to evaluate and judge what they do and say (Niyyah/Intention & Willingness) whether it is an ibadah in their daily life. Thus, “Niyyah” is very important in Islamic Finance. As an example, a transaction in Islamic Finance must be crystallized its “Niyyah” from both parties using “Ijab & Qabul”.
ii. Certainty is not overruled by Doubt
The meaning of this legal maxim is that the ruling of certainty is not removed by doubt, be it 50/50 or 70/30. The legal basis for this maxim is derived from the hadith:” Whenever one doubts and does not know whether one prayed three or four rak'ats, such person should act on certainty and ignore the doubts." As an example, in Islamic Finance, once an Islamic Finance product is approved by the Shariah Committee, the officers that market the products should act on certainty eventhough there are several opinions from other parties that give the opposite opinion on the Islamic Finance products.
iii. Hardship begets facility
This principle embodies the fact that Islamic Law is built upon achieving esae and not upon imposing hardships. This principle is applicable when a Muslim unable to get Islamic Finance to finance its needs such as owning assets or for business needs. Al Baqarah: 286 stated that “…Allah wants ease for you and he does not want hardship for you.”. Thus, due to the unavailability of Islamic Finance, that person can used financing choices that is only available to him/her.
iv. Harm shall not be inflicted nor reciprocated
This concept applies in Islamic Finance where Islamic Finance prohibited Riba element in its transaction. Riba or interest as we familiarize with it have been proven a damaging and harming element to the wealth and welfare of the mankind. Islamic Finance also didn’t allow the act of imposing penalty that will burdened the customer in the case the customer unable to serve its monthly obligation to the Islamic Finance Institutions. The amount of Taa’widh is very minimum and its served as a reminder to the customer and not to inflict a loss to the customer.
v. Custom is the basis of judgement
This concept apply to Islamic Finance where the currency is one of the element economic transction that have been inherited. Thus, it is not suitable for the Islamic Finance Institutions (IFI’s) to drastically change the currency to other medium. As such, the IFI’s must not cahnged something that been accepted in the community that will go against their custom and traditions.
noted
DeleteThe application of the Al Qawaid Al Fiqhiyyah on the Islamic banking and finance can be divided into 5 legal maxims as per below;
ReplyDelete1- Al-Umur Bi Maqasidiha (Acts are judged by the intentions behind it)
This concept is the acts are judged by the intention behind them and this is an all-inclusive maxim that has implications that scholars have discussed in various areas in commercial transactions. This maxim means everypractice, verbal or physical, brings different impact and judgment from shariah view, depending on one’s intention and objective.
In example, a bank proclaiming their policy of financing customers through interest-free financing, it would be necessary for the banks to do so, not by merely continuing the same practice or just restructure the financing products into Islamic products by simply changing relevant terms, such as by calling it ‘buy back’ or ‘mark-up’.
2- Al-Yaqin La Yazulu Bi Asy-Syak (Certainty is not overruled by Doubt)
The concept is certainty is not overruled by doubt. Explained, doubt cannot overrule certainty in judgment because clear evidence and proof establish the latter. It is not tolerable if it can be invalidated by uncertainty or the proof, which the strength is lower than the latter, to annihilate harmful and hardship.
For example; a partner has no right to assume a minimum rate of profit earned by his business partner and claims his share in that profit as different from the amount stated to have been earned by the partner. The sub-rule provides that in case the working partner declares a certain amount of profit, no more will be presumed unless the contrary is verified to be a fact.
3- šAl-Masyaqqah Tajlibu At-Taisir (Hardship begets facility)
This maxim may be applied in our daily lives either as general practice or for specific activities. It is a globally accepted view that Islam allows benevolent loan, borrowing of assets and property leasing in order to fulfill community needs (that comprise of the materially impoverished and those with insufficient funds). In this regard where provide them usage of other’s property in a form of cash money or tangible and intangible asset.
4- La darara wa la dirar (Harm shall not be inflicted nor reciprocated)
This maxim provides a guideline to control the entire financial system in such a way that forbids imposition of harm and depresses reprisal. Other applications regarding this maxim in fulfilling shariah objectives, is that one is not permitted to sell damaged goods to others because they cannot be used and may cause harm and damage to them after payment has been made.
5- Al-Adah Al-Muhakkamah (Custom is the basis of judgement)
This maxim means ‘custom is arbitrary’; is a judgment in determining the shariah view in common daily practices and transactions that are known among them, provided that it does not infringe with any shariah evidence and principle. If scholars are not unanimous in opposing and objecting the custom, hence the custom can be considered admissible in shariah jurisprudence and taken as shariah parameter in case of absence of other parameters obtained from shariah sources.
For instance, tenant should pay the rental payment early in the month where this has been practiced for many years. Furthermore, the custom is acceptable although the tenant realizes the custom makes him pay for unused usufruct, whether it is in the form of monthly payment or yearly. The objective of taking custom as a mechanism in ruling process is to bring fairness, and to make it accepted between the parties involved for them to mutually agree on the custom used in that specific transaction.
NUR SUHANIZA
Legal maxims of Islamic jurisprudence, known as ‘al-Qawaid al-Fiqhiyyah’ are developed to facilitate a better understanding of Islamic jurisprudence.
ReplyDeleteThese Islamic legal maxims are statements of principle that are extracted from the thorough reading of the rules of Islamic jurisprudence on multiple themes. These inclusive written descriptions empower the jurists to reduce them into theoretical statement of principles at a later stage of development
i) The first maxim is al-umur bi maqosidiha (which means acts are judged by the intention behind them) is an all-inclusive maxim that has implications that scholars have discussed in various areas in commercial transactions. This maxim means everypractice, verbal or physical, brings different impact and judgment from shariah view, depending on one’s intention and objective.
One of its sub legal maxim is al-‘ibratu fi al-‘uqud li al-maqasid wa al-ma’ani la li al-alfaz wa al-mabani (contracts are to be understood in relation to their intention and substance, not by the words and phrases). To illustrate further, in the case of a bank proclaiming their policy of financing customers through interest-free financing, it would be necessary for the banks to do so, not by merely continuing the same practice or just restructure the financing products into Islamic products by simply changing relevant terms, such as by calling it ‘buy back’ or ‘mark-up’.
ii) The second general legal maxim ‘al-yaqinu la yazulu bi al-shak‘ (means, certainty is not overruled by doubt). Explained, doubt cannot overrule certainty in judgment because the latter is established by clear evidence and proof. It is not tolerable if it can be invalidated by uncertainty or the proof, which the strength is lower than the latter, in order to annihilate harmful and hardship.
For example, a partner has no right to assume a minimum rate of profit earned by his business partner and claims his share in that profit as different from the amount stated to have been actually earned by the partner. The sub-rule provides that in case the working partner declares a certain amount of profit, no more will be presumed unless the contrary is verified to be a fact.
By: Nur 'Abidah Mohamed Nasir (3160085)
APPLICATIONS OF THE AL QAWAID AL-FIQHIYYAH ON ISLAMIC BANKING AND FINANCE
ReplyDelete1) Matters are determined according to their intentions
If the members of Shariah Committee just follow the wishes of the Board even though it is against the principles of the Shariah for fear that they may not be reappointed, they would be committing a sin and be accountable for the consequences of the ruling. However, if they are unaware or are given a wrong explanation or description by the management, then it would be depend on their intention of those who provided the elucidation.
2) Certainty is not overruled by doubt
Zaid claims that Amru owes him a debt of RM1000, a debt which Amru has evidence of its settlement. Zaid on the other hand counters back that evidence with another one proving that Amru owes him RM1000. In this case, Zaid's evidence must be rejected if he cannot prove that the RM1000 Amru owes him is different from the one that Amru claimed to have settled. This is because it has become certain that Amru is free from the debt obligation after he successfully presented the evidence that proved so. Therefore, after being certain about Amru's debt settlement, Amru must not obligated to pay debt based on doubts.
3) Hardship begets facility
A contract to sell a commodity which one does not posses at the time of making the sale contract is not lawful. Bay al-salam which technically means prompt payment for a commodity that the seller does not posses is permissible on the case of producers who need finance for inputs. If financial not forthcoming at the time of sowing, production will cease which will be harmful for the entire community. To ensure productive activity is not hampered the cultivator is allowed to sell his expected produce against advance payment.
4) Harm must be eliminated
It is not permissible to conclude an agreement on a commodity before its arrival to the market because of the possible gharar to the seller. The seller in this case does not know the price of the commodity hence may be harmed by selling the item at an undervalued price.
5) Custom is a basis of judgement
It is customary for actuaries in life insurance to use mortality tables for pricing and reserving.These mortality tables are based on mortality experiences in different countries in different times. In the early years of takaful, a takaful company in Malaysia may use the mortality experience of another country such as England twenty of thirty years before. This is permitted as actuaries have been doing this for hundreds of years for pricing life insurance products and there is no injunction against it.
Sources: Islamic Legal Maxims (Essential and applications)by Azman Ismail and Md. Habibur Rahman
SITI NORASHIKIN MISMAN (3160143)