The actualization of maqāṣid al-Sharīʿah in Islamic finance: a conceptual framework

Abstract

Purpose This paper aims to formulate a conceptual framework that will facilitate the actualization of maqāṣid al-Sharīʿah in product design and consumption within Islamic financial institutions (IFIs). Design/methodology/approach This paper relies on the classical and contemporary literature on maqāṣid al-Sharīʿah and Islamic finance and adopts a qualitative content analysis method and an inductive approach to outline the constituent elements that formulate the framework. Findings This study determines six vital constituents of maqāṣid al-Sharīʿah, namely, parameters of maqāṣid, particular objectives, appropriate means, micro provisions, level of need and legal maxims to develop a conceptual framework of actualizing maqāṣid al-Sharīʿah in Islamic finance. The framework covers the following three stages: identification of maqāṣid, operationalization of maqāṣid in product design and consumption based on maqāṣid. Research limitations/implications This paper proposes a conceptual framework without investigating the practice of any particular industry or products. Further research would focus on formulating a practical framework based on a focus group discussion with industry experts, elaborating the parameters of maqāṣid, scrutinizing the maqāṣid available in the literature by the parameters of maqāṣid and assessing the IFIs’ products and services using the proposed framework. Practical implications This paper provides insights into the importance of maqāṣid elements and the effects of overlooking them on IFIs and customers’ product consumption. Furthermore, a major implication of the proposed framework is to learn how to use the maqāṣid approach as the baseline for designing new financial products. Originality/value The novelty of this paper lies in its pioneering attempt of harmonizing all essential maqāṣid elements and using them as constituents to formulate a comprehensive framework that actualizes maqāṣid al-Sharīʿah in the Islamic finance industry.

The Performance of Islamic Organizations Based on Maqasid Sharia Disclosure

“…2.1 MAQASID SHARIA Maqasid is the plural form of maqsad which means aim and target (Monawer et al, 2022). 'What is Maqasid' is the same as 'why' (Auda, 2008).…”

“…There are various understandings about maqasid Sharia among Muslim scholars, because this understanding refers more to the understanding of each scholar or fiqh even though all of its origins are based on God's rules (Quran and hadith). According to Imam Al-Ghazali, the primary objective of Maqasid sharia is to secure human prosperity in this life and the next, encompassing five objectives: safeguarding property, religion, the soul, the mind, and offspring (Hudaefi & Noordin, 2019;Monawer et al, 2022;Sulayman et al, 2022;Tubarad et al, 2022). According to Ibn Ashur, the Maqasid of Islamic law is to uphold human nature, equality, freedom, convenience, and order (Auda, 2008).…”

“…So far, sharia-based performance measurements such as sharia compliance, maqasid sharia, Islamic Social Reporting, Islamic corporate governance, and others have only focused on Sharia banking performance (Monawer et al, 2022). In fact, the sharia business growth is not only dominated by sharia banking and Islamic financial institutions but also by public companies that are starting to operate based on sharia compliance (Rahman et al, 2017).…”

“…In fact, the sharia business growth is not only dominated by sharia banking and Islamic financial institutions but also by public companies that are starting to operate based on sharia compliance (Rahman et al, 2017). The ecosystem for Islamic Banking and Finance has developed drastically such as halal tourism, zakat distribution, or waqf bonds/sukuk (Islam et al, 2021;Monawer et al, 2022). There are fundamental differences regarding the characteristics between Sharia banking or Islamic financial institutions and other organizations that operate based on Sharia compliance.…”

Toward the development of an Islamic banking sustainability performance index

“…Some studies adopt a combined version of both frameworks (Tarique et al , 2021). Recently, Monawer et al (2021) propose an attempt actualizing Maquasid Al-Shariah framework. Ibrahim et al (2004) develop an Islamicity disclosure index to assess IBs’ ability in providing relevant information to their stakeholders in terms of Shariah compliance, corporate governance and environmental involvement.…”