Abstract

Sharī´ah legitimacy of Islamic banking has been a subject of intense debate and discussion among the religious scholars. A group of ‘ulama hold the opinion that current Islamic banking practices are un-Islamic. Their major objection on Islamic banking and finance is that it heavily relies on hiyal i.e. stratagems and subterfuges to circumvent sharī´ah prohibitions on riba, which frustrate the higher objectives of the sharī´ah. The purpose of this paper is to examine whether Islamic financial products and banking transactions are in nature of stratagems that frustrate the purpose and spirit of law or they are only clever uses of law with a view to provide solutions to difficult problems without frustrating the purpose of Islamic law. The article is divided into two sections. Section-1 deals with classical approach towards treatment of legal devices. Section-II deals with the application of hiyal to modern Islamic finance. In this section, subversive hiyal such as bai´ al-‘inah, tawarruq, commodity murabaha and sale and lease back sukuk have been discussed. In the analysis of the author, such legal devices oppose the higher objectives of sharī´ah relating to Islamic economics and finance. This section also deals with such legal devices which suggest a way out or outlet from difficult situation. An attempt has been made to determine whether a particular device simply overcomes rigidity and inconvenience or it circumvents sharī´ah prohibitions. The paper emphasizes the centrality of maqasid alsharī´ah in ijtihad and fatwa in the field of Islamic finance. It suggests that in developing financial products, maqasid al-sharī´ah should be given prime consideration; otherwise Islamic finance will lose its real merit and substance.

Keywords

Hiyal; Makhārij; Maqasid al-sharī´ah; Tawarruq; Bai´ al- ‘inah; Shariah Prohibitions; Islamic Finance, Sukuk.