Takaful and Islamic Cooperative Finance
Show Less

Takaful and Islamic Cooperative Finance

Challenges and Opportunities

Edited by S. Nazim Ali and Shariq Nisar

Islamic finance distinguishes itself from conventional finance with its strong emphasis on the moral consequences of financial transactions; prohibiting interest, excessive uncertainty, and finance of harmful business. When it comes to risk mitigation, it is unique in its risk sharing approach.
Buy Book in Print
Show Summary Details
You do not have access to this content

Chapter 3: Mutuality, reciprocity and justice within the context of a unified theory of riba and gharar

Mahmoud A. El-Gamal


The general thrust of Islamic jurisprudence of financial transactions is to approach the ideal of justice in exchange. The Islamic finance envisioned by Islamic economists wrongly emphasized contract forms (namely, partnership finance, ostensibly more approbated than debt finance, without any supporting evidence from Islamic scripture or classical jurisprudence). This gave rise to an industry based on legal arbitrage, synthesizing conventional finance at a cost, thus replicating any injustice or inefficiency therein, and adding inefficiency through arbitrage procedures. Mutual contracts were traditionally exempted from juristic prohibitions, for example, in interest-free loans, which are technically riba, mutual insurance and so on, because of their apparent charitable purpose, as argued by Al-Qarafi in his Furuq. However, mutual structures can be arbitraged just as easily (and inefficiently) as commutative ones. The regulatory substance of classical Islamic law – seeking justice – cannot be enforced solely through contract and corporate forms, mutual or otherwise.

You are not authenticated to view the full text of this chapter or article.

Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.

Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.

Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.

Further information

or login to access all content.