Islamic Finance

Islamic Finance

Principles and Practice, Second Edition

Hans Visser

This thoroughly updated and revised second edition analyses the ideas behind Islamic finance, the forms Islamic finance has taken in practice and the tension between the two that may occasionally arise. Along with an expanded section on the history of the ban on interest, this second edition contains a much more extensive discussion of investment and savings accounts, sukuk and tawarruq.

Chapter 2: Sources of Islamic law

Hans Visser

Subjects: economics and finance, financial economics and regulation, money and banking


A Muslim’s life ideally is ruled by Islamic religious law, the sharia. Literally, the word ‘sharia’ can be translated as ‘the path that leads to the spring’ (Ramadan 2004, p._31). Figuratively, it means ‘a clear path to be followed and observed’. Islamic religious law springs from various sources. These are discussed in this chapter, along with the different ways in which the law is interpreted. Separate attention is paid to the question of how Muslims living among a non-Muslim majority should observe the sharia. There are various sources of Islamic legal knowledge. The first of course is the Quran itself, which, Muslims believe, was revealed to the Prophet Muhammad, also called the Messenger of God (Rasulullah), by the archangel Jibril (Gabriel). The second is the sunna, that is, the deeds, utterances and tacit approvals of the Prophet, as related in the ahadith or traditions (the singular Hadith is also used for tradition in general), handed down through a dependable chain of transmitters. Sometimes, the term sunna is used in a wider sense, including the deeds of Muhammad’s Companions and successors. In Shia Islam, the sunna includes the sayings and deeds of the infallible imams that succeeded the prophet Muhammad as spiritual and worldly leaders (Kordvani 2009, p._324). Note that this is not a critical study of the origins of Islamic law; we are trying to understand the Muslim view of Islamic law.

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