The Foundations of Islamic Banking

The Foundations of Islamic Banking

Theory, Practice and Education

Edited by Mohamed Ariff and Munawar Iqbal

After barely half a century of experience, Islamic banking has become established as a niche industry across the world, offering new and sophisticated financial products designed to be compliant with Islamic legal principles and common law. This comprehensive book explores the theory, principles and practices underpinning this rapidly expanding sector of banking.

Chapter 4: Adapting Understanding of Riba to Islamic Banking: Some Developments

Abdullah Saeed

Subjects: economics and finance, financial economics and regulation, islamic economics and finance

Extract

Abdullah Saeed 1.0 INTRODUCTION Within Islamic economic literature today, there is a reasonable degree of consensus on certain principles. Many of these, in one form or another, are understood to be mentioned in the Qur’an and Sunnah, either directly or indirectly, and are often general enough to be applied to any community at any time or place. Among these principles are the prohibition of riba; freedom to engage in economic activities; private ownership of property; limited public ownership of certain resources; the community’s collective responsibility towards its disadvantaged through the collection and distribution of zakat and sadaqah; and limited intervention by the State in the market to safeguard the interests of all parties concerned and freedom to engage in economic activities in the pursuit of profit. The economic and financial matters dealt with in classical fiqh have been given a high degree of importance by scholars and bankers alike, and newly developed contracts, instruments and tools have been developed to a certain extent on the basis of what classical jurists said. Thus the precedents of the past 1,400 years are a very important part of what the Islamic economic system is seen to be. However, because of the diversity of approaches, interpretations and understandings of these rulings and this historical experience, Muslims in the late 20th and early 21st centuries naturally differ on how a contemporary Islamic economic and financial system should be conceptualised. While some Muslims tend to be more closely bound by the actual practice of the...

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