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Foundations of Shari’ah Governance of Islamic Banks

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 Foundations Of Shariah Governance Of Islamic Banks
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Azhar Hamid, Karim Ginena
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The Roots, Characteristics, and Objectives of Sharıˉ‘ah and the Islamic Economic System


This chapter examines the roots of sharī‘ah in order to provide a solid theoretical foundation that is needed for understanding Islamic jurisprudence in general and Islamic transactional law in particular. Without this minimum understanding of sharī‘ah, it would be rather difficult to discuss sharī‘ah governance.

The chapter begins by defining key terms, such as sharī‘ah, the Qur’ān, sunnah, and fiqh. Next, it discusses ijtihād and the differences in juristic opinions that could result from undertaking such an activity. Thereafter, the chapter explores obligation- creating and declaratory sharī‘ah rulings and the subject of these rulings. The characteristics and objectives of sharī‘ah are investigated in order to provide a context for these rulings.

Subsequently, the chapter explores the Islamic economic system and its characteristics, in addition to identifying the objectives of sharī‘ah relating to property.


Sharī‘ah1 etymologically means the source of drinking water,2 and shar‘ means to ordain.3 Muslims believe that sharī‘ah is an ethical way of life revealed by God to secure the success (falāh) of creation in this world and the next.4 It does so by promoting what will benefit beings

and protecting against that which will harm them.5 God, the Divine, uses several derivatives of

the word sharī‘ah when addressing His final messenger to creation, prophet Muhammad (pbuh),6 in the Qur’ān.7

Qur’ān etymologically means the recited one.8 Terminologically speaking, Qur’ān is defined as “the communication of God the Exalted, revealed to prophet Muhammad (pbuh), whose recital is considered worship to God.”9 Muslims believe that the Qur’ān is the word

of God, and that its words and meanings were revealed to prophet Muhammad (pbuh) over a 23-year period.10 They therefore take it to be a holy book of guidance and legislation,11 and see an obligation to ponder over it, deduce from it, and act upon it.12

Imˉam Al-Shˉa.tibi observes that Sharī‘ah was revealed not only to illuminate a way for cre- ation to glorify and worship their Creator, but also to stop people from aimlessly following their whims.13 In commenting on the concept of “worship,” Ibn Taimīyah (d. 728 ah14/1327 ce) states that it encompasses two aspects: first, abiding by sharī‘ah with humility towards the Divine; second, doing so with a loving heart.15 Ibn Taimīyah identifies the realm of worship

as encompassing everything, whether said or performed, that pleases the Divine.16 This entails carrying out prescribed duties and staying clear of outlined prohibitions. He gives examples of acts of worship that extend beyond the main rituals.

These include truthfulness, trustwor- thiness, being dutiful to one’s parents, honoring covenants, being kind to neighbors, orphans, destitute people, wayfarers, and animals, as well as patience, gratitude, being content with God’s decree, and dependence on the Divine.17 He adds that pursuing the means necessary for achieving God’s obligations is an act of worship in itself.

In essence, every act can be considered an act of worship as long as the individual’s intention is to please the Divine and the act is in line with the teachings of prophet Muhammad (pbuh). For example, the brain can contemplate, the tongue can call to good and prevent evil, the heart can love and fear God, etc. Such a holistic understanding of worship is meant to develop a strong personal relationship between the individual and the Divine that holistically covers the different avenues of life.18

While sharī‘ah offers guidance to creation to steer them in the direction of that which is from what is detrimental, it is not meant to be burdensome.19

Ibn Kathīr (d. 674 ah/1372 ce) comments in his exegesis on the verse which reads, “He has chosen you and has not placed upon you in the religion any difficulty” (22:78), by saying:

He has not given you more than you can bear and He has not obliged you to do any- thing that will cause you difficulty except that He has created for you a way out. So, the salah [prayer], which is the most important pillar of Islam after the two testimonies of faith, is obligatory, four rak’as [units] when one is settled, which are shortened to two rak’as when one is traveling … And he [prophet Muhammad (pbuh)] said to Mu‘ādh and Abu Mūsa, when he sent them as governors to Yemen: Give good news and do not repel them. Make things easy for the people and do not make things difficult for them.20

This clement approach of the Divine is embraced by prophet Muhammad (pbuh), as evident in his sayings. For example, “He who is deprived of gentleness is, in fact, deprived of all good.”21 Attesting to this, the Divine says: “And We have not sent you, [O Muhammad], except as mercy to the worlds” (21:107).

This mercy is embodied in the prophet relieving people from their burdens through his teachings. ‘Aishah (d. 58 ah/678 ce), the wife of the prophet (pbuh), reported: “Whenever the prophet was given a choice between two matters, he would [always] choose the easier as long as it was not sinful to do so; but if it was sinful he was most strict in avoiding it.”22 After reflecting on sharī‘ah, Ibn Qayyim (d. 751 ah/1350 ce) observes:

Sharī‘ah is built and founded on wisdom and people’s welfare in this life [on earth] and the afterlife [hereafter]. It is all justice, mercy, benefits, and wisdom. So, any ruling that results in an outcome that replaces justice with injustice, mercy with its opposite, welfare with mischief, and wisdom with futility is not from sharī‘ah, even if it is interpreted in a way that tries to make it a part of it.23

Moving from the wider meaning of sharī‘ah to a more specific definition, the Islamic sharī‘ah has been defined as the laws that God revealed to prophet Muhammad (pbuh) in the Qur’ān and sunnah.24 Sunnah etymologically means a way.25 Terminologically, it

refers to the teachings of prophet Muhammad (pbuh), apart from the Qur’ān, communi- cated through his sayings, actions, and tacit approvals.26 While the Qur’ān is the exact meanings and words of God, adīth is the meanings of God but in prophet Muhammad’s words.27

Some jurists believe that the term sharī‘ah comprehensively includes revelation relating to all topics such as creed, morals, etc., while others disagree and restrict the term to practical rulings28 of conduct (al-ah. kām al-‘amalīyah).29

Approximately 500 out of 6235 verses of the Qur’ān relate to these practical rulings. The majority of the Qur’ān speaks about parables of past nations, the reality of life on earth and the hereafter, creed, morals, and other aspects.30 Ibn ‘Abbās (d. 68 ah/687 ce) limits sharī‘ah to the Qur’ān and minhāj to sunnah.31

Even though the Islamic sharī‘ah came with new rulings, it was not all new, as it approved some of the rulings of society at the time, so long as they did not contradict the principles of sharī‘ah. The Arabs, like any other people, had their own mores of social, economic, and political dealings.

Their reference in these dealings included established customs, inherited traditions, principles from previous religions, and norms from nearby nations such as the Persians and the Romans. They did not have a court system, but voluntarily resorted to vener- ated leaders of tribes or to fortune tellers. These judicators ruled based on the known customs of the people. Furthermore, if a party was convicted yet chose not to abide by the judgment, then matters would escalate beyond retaliation against the culprit to include the individual’s tribe. In other words the counterparty would summon their tribe and wage war against the offender’s tribe. Inevitably, conflicts and wars arose. Injustice was imminent in an environ- ment in which each tribe did what was best for its interests. Amidst this discord the prophet was sent to reform society. Thus, he confirmed some customs that were in place at the time, prohibited certain beliefs and practices, and initiated new ideas and obligations.

For example, he affirmed the Arab’s prohibition of marrying one’s mother, approved bequests, lease, partnership, mudārabah,32 and salam33 contracts, as well as pledges such as pawning personal property. The prophet prohibited other types of marriage contracts that existed such as nikāh.

al-shighār in which one man would marry the daughter of another on condition that the latter

would marry the daughter of the first. He also prohibited fathers from taking their daughters’ dowry, and granted women and children the right to inheritance that they were barred from traditionally, as it was limited to male agnate relatives. The prophet banned specific forms of transaction, such as bay‘ al-mulāmasah wherein a person who touched a garment had to the concept of trusts, which was not known previously. Even

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