Application of shariah contracts in contemporary Islamic finance: A maqasid perspective

This research exposes the underlying maqasid embedded in Shariah contracts as applied in Islamic banking and finance. It addresses the problem of not observing maqasid in nominated and combined Shariah contracts as well as the problem of not sufficiently imbuing maqasid in products developed by Islamic financial institutions. As a benchmark of the maqasid of wealth, the research adopts Ibn 'Ashur's classification of maqasid to evaluate the conformity of Shari'ah contracts to Maqasid al-Shariah namely, justice, circulation, transparency, and firmness. The study focuses on three markets related to the application of Shariah contracts, namely, banking, Islamic capital market, and takaful. The study concludes that, by and large, the application of Shariah contracts has observed Maqasid al-Shariah during its development and initial application stages of Islamic finance products; however, offering such products in the market has raised economic questions as to their viability and economic values. In addition, the malpractice of some Shariah contracts has long raised concerns as to the maqasid compliance of such products. The research recommends a de-sophistication of Islamic financial engineering to minimise the possibility of convergence with conventional finance. The research also emphasises product differentiation based on less complicated combined Shariah contracts. Copyright © IIUM Press.