Foundations of Islamic Finance series
Edited by Mervyn K. Lewis, Mohamed Ariff and Shamsher Mohamad
Chapter 3: Objectives of Islamic banking: a theoretical discussion
Islamic banking attempts to rearrange modern banking practices to be in line with Islamic Shari’ah (legal) principles and requirements as currently accepted by majority opinion among Islamic scholars. The Islamic banking industry has grown considerably and has a global reach (as at 2012) compared to its very limited reach some 50 years back, when it had just been introduced. We contend such a trend is not only triggered by the fact that Islamic banking and finance is now operating with full compliance of Islamic legal requirements (Shari’ah compliance) but also because the objectives and values it upholds and promotes are consistent with human ethics and pro-society moral precepts. Islamic banking brings Islam’s vision of the economy to the financial sphere in an effort to realize that human wellbeing is achieved within a just and fair order of society. Financial practices are arranged to meet those objectives. Recently, there has been growing interest in discussion of the objective of Shari’ah (maqasid) and its realization in the Islamic financial industry whereby, it is argued, satisfaction of the minimum legal requirement is not considered sufficient. There needs to be a broader perspective of ‘Shari’ah-compliant’ meaning, which carries the expectation of a financial system and practice that are truly based on all the tenets of Shari’ah, namely the beliefs and faith (aqidah) and Islamic ethics (akhlaq), and that serve the noble goals prescribed by Islam (maqa_id al-Shari’ah) rather than merely satisfying the Islamic legal principles (ahk_m al-shar’iyyah).
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