ISLAMIC

BANKING AND
FINANCE
COMPLIANCE TO THE SCHEME OF
SHARIAH L AWS

CONTENTS
SOURCES OF SHARIAH LAWS
PRINCIPLES GOVERNING OF ISLAMIC BANKING
ETHICS IN ISLAMIC FINANCIAL SYSTEM

SOURCES OF SHARIAH
LAWS
Al-Quran
Primary
Al-Hadith
Ijmak

Sources of
Shariah Laws

Maslahah
Secondary

Sadd Zariah
Urf
Siyasas
Syariyyah

AL-QURAN
The fundamental and main sources of Islamic Law from
which all other sources derive their authority
al-Quran may be defined as:
The book containing the speech of Allah, revealed to Prophet
Muhammad in Arabic and transmitted to us by continuous
testimony, or tawatir.

Consists of the word of Allah SWT revealed on Prophet

Muhammad saw in 23 years divine origin
Address to all humanity, without distinction of race,
region or time
It seeks to guide human beings in all aspect of life

THE SUNNAH
Sunnah
Literally: a way or rule or manner of acting
Technically: What has been (authentically) related to us on behalf of the
Prophet { } from his sayings, actions, and tacit
approvals.

Hadith
Literally: communication, story, conversation
Technically: What was transmitted on the authority of the Prophet{
} ,his deeds, sayings, and tacit approvals, or description of
his sifaat (features).
Both cover the same ground: practice, sayings and tacit
approvals(taqrir)

Quran generally deals with the broad principles or essential of

religion. The details are supplied by Prophet saw through hadith

IJMA
Ijma Consensus of opinion among the jurist on certain issues
and ruling
Literally:
Ijma is the verbal noun of the Arabic word Ajmaa which has two
meanings:
To determine
To agree upon something

Technically
Consensus of mujtahids (jurist) from the ummah oh Muhammad (saw),
after his death in a determined period upon a rule of Islamic law

Consensus of opinion among the jurist of a particular period on a

question of law
Ijma maybe based on Quran, hadith or analogy

QIYAS
Qiyas analogical deduction
Literal
Measuring or estimating on thing in terms of another

Technical
The extension of Shariah ruling from an original case (Asl) to a new case
(far) because the new case has the same effective cause (Illah) as the
original case.

Qiyas or analogy is resorted to in respect of problems about which

there is no specific provision in the Quran or the Sunnah of the
Prophet
Analogical deduction of new issues on existing evidence from the
Quran and Sunnah
Process by which a rule of law is deduced from original text in views
of common effective cause (illah)

SECONDARY SOURCES
OF SHARIAH LAW
Maslahah (consideration of public interest)
Making a judgment based on the principle of general benefits on matters that have no clear
nas from the Quran or the Sunnah
Islamic jurisprudence applies the maslahah in the implementation of a ruling
As such, for anything that is beneficial & necessary to general public, it would establish dalil
(indicative legal text) in form of directives

Sadd Zariah (blocking of means)

Refers to the approach used to curtail anything that can cause a Muslim to do the forbidden
Considered as an early preventive measure to prevent Muslim from doing what is forbidden
by Allah s.w.t

Urf (custom)

Refers to the norms of majority of a society whether applied in speech or deed

Considered as adat jama iyyah (customs that are collectively acceptable) and can be used
as a legal basis so long as it does not contradict the Syara

Siyasah Syariyyah
Refers to the area in Islamic jurisprudence that explains rulings related to the policies and
approaches taken in organizing the national administrative structure (and its people) in
accordance with the spirit of Shariah
Cover the issues of central and regional administration, economy, judiciary, peace,
international relations etc.

PRINCIPLES GOVERNING OF ISLAMIC

BANKING
ISLAM

AQIDAH
(Faith &
belief)

SHARIAH
(Practices
&
activities)

AKHLAQ
(Moralities
& ethics)

IBADAT
(Man to
God
worship)

MUAMALAT
(Man to
Man
activities)

POLITICAL
ACTIVITIES

ECONOMIC
ACTIVITIES

SOCIAL
ACTIVITIES

FINANCIAL
ACTIVITIES

AQIDAH (FAITH &

BELIEF)
Firm belief in the heart and must be applied into actions
The belief in God, the belief in Prophets, The Angels, The
Books, The Hereafter and The Divine Decree

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SHARIAH (PRACTICES &

ACTIVITIES)
The original meaning of word shariah is the path or the road leading to
the water.
In legal term sharaa means to make or establish laws.
In legal term means laws relating to all aspects of human life established
by Allah SWT for his servants.
Laws relating to human life are divided into three:
Those relating to belief
Those relating to deeds
Those relating to ethics

It is the responsible of the Muslim to knows the rules of Allah such as rules
related with:
Man relationship with God like worship (ibadah)
Man relationship with other fellow-human like rules of marriage (Munakahat),
criminal law(jinayah), business (Muamalat), politics (Siyasah), international law
and others.

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OBJECTIVES OF
SHARIAH
Main
object
ive

To construct human life on the basis of marufat

(virtues) and to cleanse it of the munkarat (vices).

Objectives of Islamic Law are the

protection of

Faith

Life

Intellec
t

Posterit
y

Propert
y

These objectives are

of 3 levels that are

Dharuriyy
at (life
and
death)

Hajiyyat
(removing
hardship)

Tahsiniyya
t
(beautifyi
ng)

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AKHLAQ (MORALITIES &

ETHICS)
Covers all aspects of Muslim behavior , attitudes and
work ethics with which he perform his practical action:
Moralities and ethics
Behavior
Thinking
The process of judgement

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IBADAH (WORSHIP)
Ibadah (worship) is actually the main purpose of the
creation of man on earth.
Allah mentions in the Holy Quran :
I created the jinn and humankind only that they might
worship me (51:56)

To serve Allah is not only through the devotional acts of

prayer, fasting, payment of zakat and pilgrimage.
The Muslim serve Him through all their good actions
whether for worldly life or heavenly purposes.

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IBADAH (WORSHIP)
Definition of ibadah
Total submission and obedient physically and mentally based on a belief that the one
whom is worshipped almighty honor and power that will induce the feeling of
degradation and affection.

Concept of ibadah
Covered all human activities physically and spiritually
Covered all worldly and Hereafter affairs
Main condition - sincere oneself in performing

The grouping of ibadah

Specific:
-In time, place, conditionally, directionally and with specific actions
-prayer
-fasting
-pay the tithe/zakat
-perform the pilgrimage
General :
-individual, society, leadership, the whole life

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MUAMALAT
Muamalah is from the verb aamala literally meaning to interact.
Muamalat means interactions or transaction.
Commercial transactions
Through contracts which are permitted by the Shariah as evidenced by the
Quran, the Sunnah and other sources of Islamic law.

Characteristics of muamalah
Free from riba
Comply with (objectives of) shariah
Devoid of gharar (uncertainty, indeterminacy)
Free from qimar (gambling)
Free from maysir (games of chance)
Free from ghishsh (fraud)
Free from khibalah (cheating)
Entitlement to profit depends on liability for risk
Contracts based on free mutual consent

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ETHICS IN ISLAMIC
FINANCIAL SYSTEM
Tawhid
(Unity)

Ihsan
(Benevolen
ce)

Responsibil
ity

ETHICS
IN
ISLAMIC
FINANCI
AL
SYSTEM

Adl
(Equilibriu
m)

Huriyyah
(Free will)

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END OF
CHAPTER
18