Proceedings of International Business and Social Sciences and Research Conference
16 - 17 December 2013, Hotel Mariiott Casamagna, Cancun, Mexico, ISBN: 978-1-922069-38-2
What Drives An Ideal Islamic Finance? A Maqasid Compliance Approach
Nus Sechafia1, Saim Kayadibi2, Ibrahim Guran Yumusak3 and Hamza Ates4
The objectives of the Islamic economic system are derived from the economic objectives of
Islam which currently depend on Maqasid al Shari’ah. These basics (‘usul) can be summarized
as religion, life, mind, prodigy or posterity. Some issues occur while studying these maqasid in
the non Islamic government, especially from the financial system as the main sector of the
economy in this current situation. The three pillars –fiat money, fractional reserve banking
system, and interest rate– combine and create a fragile monetary system that threaten
economic stability in the long term, namely poverty and indebtedness. To solve these impacts,
Islamic finance as comprehensive system creates a positive contribution to the socioeconomic
life through the significance of maqasid al-Shari’ah. The very objectives of Shari’ah interweave
Islamic financial transactions with genuine concern for a just, fair, and transparent society. In
fact, some criticism has been leveled against Islamic banking and finance for depending on the
conventional benchmark. Islamic financial institutions must ensure that all of their transactions
are Shari’ah compliant, not only in their forms and legal requirements but the most important is
in their economic substance. Therefore, comprehension of the concept of maqasid al-Shari’ah
and its underlying principles is crucial before applying in the current financial condition. This
paper tries to analyze and provide the application of the current practices of Islamic finance; the
role of maqasid al-Shari’ah in prohibiting riba in contemporary Islamic finance; the methods of
implementing maqasid al-Shari’ah in Islamic banking; and the application of realizing maqasid
al-Shari’ah in Islamic capital market (sukuk).
In fact, Islamic monetary system still adopts fiat money system and fractional reserve banking
system. At the end, under current dual financial or banking system, it is only the replacement of
interest system by Profit Loss Sharing (PLS) system that distinguishes the Islamic monetary
system from the
conventional monetary system. Islamic finance has to develop products that safety the
requirements of the Shari’ah compliance as well as maqasid compliance. In structuring financial
product, it is not only focusing on the legal forms aof a contract but also its substance in order
to the realization of maqasid al-Shari’ah. To achieve these objectives, it is recommended for the
Government and all stakeholders to encourage the proportion of equity based financings
(musharakah and mudharabah) in Islamic banking and Islamic capital sector. By so doing, it
promotes the genuine concern of Shari’ah for a just, fair, and transparent society.
Track name: Finance
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1
Nus Sechafia , Master of Islamic Economics, Kulliyyah of Economics And Management Science, International Islamic University
Malaysia (IIUM), Malaysia, Email: sechafia@yahoo.com
2
Saim Kayadibi , Assoc.Prof. Department of Economics, Kulliyyah of Economics and Management Sciences, International
Islamic University Malaysia (IIUM), Malaysia. Email: saim@iium.edu.my
3
Ibrahim Guran Yumusak , Assoc Prof. Department of Economics, Faculty of Political Sciences, Istanbul Medeniyet University,
Turkey, Tel: +902162802503. Fax: +902162802555 email: ibrahim.yumusak@medeniyet.edu.tr (The corresponding author)
4
Hamza Ates , Prof., Department of Political Sciences and Public Administration, Faculy of Political Sciences, Istanbul Meneniyet
University, Turkey, Email: hamza.ates@medeniyet.edu.tr