Introduction
For several decades, religion has been very important as it carries significant influence on numerous human life aspects including social and economic affairs. All monotheistic religions including Christianity, Judaism, and Muslim have power over everyday living (Wilson, 2008). Their dynamic traditions, scriptures, and laws have significantly contributed important financial and economic matters.
For the Muslim community, the Holy Quran is the powerful authoritative guidance tool in which prophecies and teachings determine their approach to life issues (Wilson, 2008). Religion has greatly contributed in Islamic banking, and philosophy of Islamic jurisprudence has their roots in religion. In Islamic banking, Islamic law (Shariah) and its legal principles have been influential in guiding Islamic banking practices. For such convictions, this essay explores the concept of Usul Fiqh and Qawaid Fiqhiyyah in respect to issues regarding the influence of Shariah on Islamic banking practices
Usul al Fiqh & Qawaid Fiqhiyyah
Under the Islamic community, Fiqh is a terminology that denotes Islamic jurisprudence, which means a practice in which jurists develop regulations, guidelines, and rules following the principles of the Quran and the Sunnah. Notwithstanding the permanency of the principles of the Sunnah and the Quran, Islamic jurisprudence should enlighten human beings on understanding, applying and dealing with these principles (Wilson, 2008).
Shariah appears in consecutive religious generations through critical research, explanation and agreements undertaken by educated jurists. Usul al Fiqh refers to a compilation of ideologies pertaining to practice involved in the extraction or simple strict methodology of developing Fiqh (rulings). It also entails the practice of deriving legal rulings developed from primary sources of Shariah in an honest and unbiased manner as per the intentions of Allah. Qawaid Fiqhiyyah is the philosophy of Jurisprudence of combined readings from various rules and regulations of Fiqh.
Usul al Fiqh on Shariah board & Islamic banking
Usul al Fiqh that means strict follow up of processes in creating judgment has great influence on the Islamic Banking and Finance practices especially on the contemporary banking, which are interest-oriented (IIBI, 2013). Muslim understands that financial issues are critical, cause attrition on cultural norms, and are the bedrock to sinning, and hence, certain regulations must prevail to avoid violence among people.
Through proper interpretations of Islamic laws, the Shariah board strictly ensures that people adhere to rules governing economic and financial transactions, through the process known as ijtihad. The practice of ijtihad, according to Wilson (2008, p. 178), “involves reading the contractual documentation governing economic activity and financial transactions and ensuring that it is consistent with Shariah.” Through proper interpretations of ijtihad, the board of Shariah assists Islamic financial institutions in integrating new banking products in accordance with Islamic principles.
Since there are different interpretations of Shariah among human beings, there is a possibility that malicious businesspersons can use this advantage to oppress innocent humans. Despite possessing independent legal documentations over their financial products, financial institutions must comply with Shariah (Wilson, 2008). Islamic banking hinges upon Islamic laws and all regulations governing financial matters develop from the Shariah, which is an Islamic jurisprudence structure developed from the Holy Scriptures.
According to IIBI (2013), through proper interpretations and follow up of Islamic principles, the board of Shariah ensures that Islamic finance maintains the principles of shunning gambling and speculation, as well as avoiding exploitation, uncertainty and unfairness among the innocent populace. As postulated by IIBI (2012), this Shariah compliance discourages malpractice that normally arises within financial institutions that seek to integrate malicious debt-based instruments and interest-based transactions that put persons at financial risks.
Through the teachings of the Quran and those of Prophet Muhammad prominent as the Sunnah, the majority within the Muslim community believe in exclusion of interest, which is an eminent practice in the contemporary banking practices. Heavy interest on individuals is against the Quran and Muhammad teachings, which state that humans must eliminate harm and uncertainty since they result in human hardship. The ideology behind Shariah within the Islamic financial system is the prevention of Riba, which refers to ‘excess’ and Muslims interpret it as, “any unjustifiable increase of capital whether in loans or sales” (IIBI, 2013, Para. 5).
In normal practice, Islamic financial institutions offer different products and instruments to satisfy fund investors and consumers all, which must comply with the Shariah. Failure to adhere to Islamic financial principles, an Islamic financial institution must quit from the Islamic banking.
Sources of Shariah on Islamic banking
Shariah is an Islamic law or structure of Islamic jurisprudence that emanate from primary religious sources mainly the Quran and the philosophies of Prophet Muhammad (pbuh) well-known as the Sunnah (Wilson, 2008). The two religious tools are integral in developing and implementing regulations, guiding principles and legal philosophies governing Islamic banking and financing. The Quran stipulates that taking excess or practicing unforgivable increase of capital through malicious practice is sinful, as human beings should have genuine intentions of others (Wilson, 2008).
In the Muslim community, the Sunnah is important and provides teachings relating to eternal principles that human must practice. According to IIBI (2012), the Sunnah warns people on manipulating others for their egocentric desires and that Muslims of all ages must exercise or practice ijtihad philosophies as part of eternal principles.
Conclusion
Conclusively, the Muslim banking and financial practices hinge upon the principles of the Islamic jurisprudence that possess Shariah principles and laws. The central tenet behind the Islamic financial system is the prohibition of malicious capitalization practices through unjustifiable debt-based instruments that originate from interest-oriented investments, which are eminent in modern banking systems. In developing Shariah, the Quran and the Sunnah are important instruments where religious principles governing financial practices enhance justice in commercial transactions.
References
Institute of Islamic Banking and Insurance (IIBI), (2013). Shariah Rulings and Finance. Web.
Wilson, R. (2008). Islamic Economics and Finance. World Economics, 9(1), 177-195.