Shari’ah Board, The Task of Fatwa, and Ijtihad in Islamic Economics, and Finance

The rulings of Mua‟malat in today‟s Islamic Economics, and Finance can be adapted through the process of Ijtihad. While the basic principles or doctrines of the Mua‟malat are given in Shari‟ah, the interpretation of these principles to suit circumstances in different times and places constitutes the Fiqh Mua‟malat. New rulings can be reached by understanding the effective cause (Illah) and rationale (hikmah) of the original ruling and the importance of Maslaha (benefit) under the changed circumstances (Usul Fiqh); which is normally evaluated by the Shari‟ah Board members of the concerned entity. Fatwa issuing via Ijtihad is used to derive laws from the basic principles of Shari‟ah to address the needs of people in different places and times. The important aspect of these new rules is that they may at times change depending on the context of application. Islamic Finance contemporary practices of Ijtihad through various bodies like Islamic Fiqh Academy, have resolved the practice of taqlid (limitation). The doctrine of maqasid al-Shari‟ah establishes Maslahah as an essential element of the ends of law, so that it becomes an important goal in framing new rules (Shari‟ah parameters and guidelines) through Ijtihad. Thus, both the principles set by Shari‟ah and use of Ijtihad to frame new rules has Maslahah or benefit of people as the underlying basis and goal. On the other hand; the standardization of Shari‟ah may become against the fundamental premise of Ijtihad which has existed for centuries and especially in today‟s finance. If rules become standards, and imposed by legal authorities, then Ijtihad cannot be applied towards a critical and dynamic industry like Islamic Finance today. This will eventually damage the very reason that we are able to apply Shari‟ah in all times and places, that is, Ijtihad is the main reason why Shari‟ah is dynamic and is able to be applied in different circumstances. In addition; to standardize Shari‟ah rulings may mean the precedence of one Islamic school of thought over the other, which cannot be universally acceptable. There is no doubt that the synchronization of these two views has to be done through mutual understanding and collaboration between Shari‟ah scholars and various Shari‟ah key board members, market leaders, and regulators. To be very clear and accurate, the question of whether Shari‟ah standards can be harmonized is a matter to be dealt with by Shari‟ah scholars and not market professionals or regulators. The simple reason for this is because Shari‟ah scholars are specialized in their field and whether a Fatwa can be standardized or not is a matter of religious reasoning and should be taken from Shari‟ah own instructions and judgments.Fatwa , fatawa , Ijtihad , Shari’ah Board, Islamic Economics Jurisprudence , GCC , Ijma,

The Uses and Misuses of Commodity Murabaha: Islamic Economic Perspective

Some exciting Economical developments have taken place in the area of Islamic finance during the preceding two years. There has been a fast expansion in its market share, diversification of products picked up pace and the rapid globalization of the services ensures their future expansion. Commodity murabahah is one of the most commonly used financing contracts in Islamic banking. But of no less consequence may prove, the lurch one finds commodity murabahah in at the close of 2008 (Hasan 2009) . Commodity Murabaha is clearly the Islamic treasurer’s funding product of choice, as it is flexible enough to facilitate many structures for financing, hedging, and currency exchanging. It is time to apply the shari'ah objective of “sa’dd-aldharai” that closes the potential avenues for outwitting the shari’ah objectives and spirit .Islamic Economics; commodity murabahah; Time share in price; Shari’ah objectives; Bai al Inah, Commodity Murabahah House (Suq Al-Sila), Commodity Murabahah Program (CMP) , deferred contracts, GCC, IIMM , Islamic Banking Scheme (IBS ); “sa’dd-aldharai”

Economic Pricing Mechanisms for Islamic Financial Instruments: Ijarah Model

The Islamic Economic and banking industry have been trying for the last two decades to extend its outreach to expand its operation business and services in a comparable footing to conventional banking. This paper discusses one of the important hurdles in the growth of Islamic banking which is the use of KIBOR as benchmark for pricing the Islamic banking products. Muskun home financing product of BankIslami Pakistan Limited is used in this paper to elaborate the pricing and benchmarking of product, spread between the conventional interest rate and Islamic profit rate as well as the alternative product pricing mechanism to be used by Islamic banks for this product. Details of Muskun home financing product are discussed in this paper in addition to the marketing strategy, market approach, economic product development, and all other relevant processes.Islamic Economics, KIBOR, Benchmarking, Pricing, Riba based system, Confidence

Alternative Pricing Mechanisms for Islamic Financial Instruments: Economic Perspective

The Islamic banking industry has been trying for the last two decades to extend its outreach to expand its operation business and services in a comparable zone to conventional banking. This paper discusses one of the important hurdles in the growth of Islamic banking which is the use of KIBOR as benchmark for pricing the Islamic banking products. Muskun home financing product of BankIslami Pakistan Limited is used in this paper to elaborate the pricing and benchmarking of product, spread between the conventional interest rate and Islamic profit rate as well as the alternative product pricing mechanism to be used by Islamic banks for this product. Details of Muskun home financing product are discussed in this paper in addition to the marketing strategy, market approach, product development, and all other relevant processes.Islamic Economics, KIBOR, Benchmarking, Pricing, Riba based system, Confidence

The Working Pillars of the Internal Audit Committees in Improving the Financial Performance of the Jordanian Commercial Banks

This study aims to recognize the effect of the working pillars of the internal audit committees in improving the financial performance in the commercial banks in Jordan.The study population included all the banks listed in Amman's stock exchange market, the whole 23 banks, while the sample consisted of 184 of the audit committee members, internal auditors and financial managers.The research then reached a conclusion that there are statistically significant effects of the working pillars of the internal audit committees represented by committing to the tasks and responsibilities, powers of the internal audit committees, their financial experience and the number of the audit committees.The study wants to ensure the importance of the banks adherence by presenting reports about the effectiveness of the internal audit committees in their yearly reports, for their obvious influence in improving the banks financial performance, moreover ensuring that the standards set by the current study are met by the committees working pillar ensuring effectiveness and efficiency Keywords:  Internal Audit Committees, Financial performance, Jordanian commercial banks

Shari’ah Board, The Task of Fatwa, and Ijtihad in Islamic Economics, and Finance

The rulings of Mua‟malat in today‟s Islamic Economics, and Finance can be adapted through the process of Ijtihad. While the basic principles or doctrines of the Mua‟malat are given in Shari‟ah, the interpretation of these principles to suit circumstances in different times and places constitutes the Fiqh Mua‟malat. New rulings can be reached by understanding the effective cause (Illah) and rationale (hikmah) of the original ruling and the importance of Maslaha (benefit) under the changed circumstances (Usul Fiqh); which is normally evaluated by the Shari‟ah Board members of the concerned entity. Fatwa issuing via Ijtihad is used to derive laws from the basic principles of Shari‟ah to address the needs of people in different places and times. The important aspect of these new rules is that they may at times change depending on the context of application. Islamic Finance contemporary practices of Ijtihad through various bodies like Islamic Fiqh Academy, have resolved the practice of taqlid (limitation). The doctrine of maqasid al-Shari‟ah establishes Maslahah as an essential element of the ends of law, so that it becomes an important goal in framing new rules (Shari‟ah parameters and guidelines) through Ijtihad. Thus, both the principles set by Shari‟ah and use of Ijtihad to frame new rules has Maslahah or benefit of people as the underlying basis and goal. On the other hand; the standardization of Shari‟ah may become against the fundamental premise of Ijtihad which has existed for centuries and especially in today‟s finance. If rules become standards, and imposed by legal authorities, then Ijtihad cannot be applied towards a critical and dynamic industry like Islamic Finance today. This will eventually damage the very reason that we are able to apply Shari‟ah in all times and places, that is, Ijtihad is the main reason why Shari‟ah is dynamic and is able to be applied in different circumstances. In addition; to standardize Shari‟ah rulings may mean the precedence of one Islamic school of thought over the other, which cannot be universally acceptable. There is no doubt that the synchronization of these two views has to be done through mutual understanding and collaboration between Shari‟ah scholars and various Shari‟ah key board members, market leaders, and regulators. To be very clear and accurate, the question of whether Shari‟ah standards can be harmonized is a matter to be dealt with by Shari‟ah scholars and not market professionals or regulators. The simple reason for this is because Shari‟ah scholars are specialized in their field and whether a Fatwa can be standardized or not is a matter of religious reasoning and should be taken from Shari‟ah own instructions and judgments

The Uses and Misuses of Commodity Murabaha: Islamic Economic Perspective

Some exciting Economical developments have taken place in the area of Islamic finance during the preceding two years. There has been a fast expansion in its market share, diversification of products picked up pace and the rapid globalization of the services ensures their future expansion. Commodity murabahah is one of the most commonly used financing contracts in Islamic banking. But of no less consequence may prove, the lurch one finds commodity murabahah in at the close of 2008 (Hasan 2009) . Commodity Murabaha is clearly the Islamic treasurer’s funding product of choice, as it is flexible enough to facilitate many structures for financing, hedging, and currency exchanging. It is time to apply the shari'ah objective of “sa’dd-aldharai” that closes the potential avenues for outwitting the shari’ah objectives and spirit

The Guide to Islamic Economics, Banking, and Finance

A full array of frequently asked questions and their Shari’ah approved answers in today’s modern Islamic Economics, Finance, and Banking

Shari’ah Board, The Task of Fatwa, and Ijtihad in Islamic Economics, and Finance

The rulings of Mua‟malat in today‟s Islamic Economics, and Finance can be adapted through the process of Ijtihad. While the basic principles or doctrines of the Mua‟malat are given in Shari‟ah, the interpretation of these principles to suit circumstances in different times and places constitutes the Fiqh Mua‟malat. New rulings can be reached by understanding the effective cause (Illah) and rationale (hikmah) of the original ruling and the importance of Maslaha (benefit) under the changed circumstances (Usul Fiqh); which is normally evaluated by the Shari‟ah Board members of the concerned entity. Fatwa issuing via Ijtihad is used to derive laws from the basic principles of Shari‟ah to address the needs of people in different places and times. The important aspect of these new rules is that they may at times change depending on the context of application. Islamic Finance contemporary practices of Ijtihad through various bodies like Islamic Fiqh Academy, have resolved the practice of taqlid (limitation). The doctrine of maqasid al-Shari‟ah establishes Maslahah as an essential element of the ends of law, so that it becomes an important goal in framing new rules (Shari‟ah parameters and guidelines) through Ijtihad. Thus, both the principles set by Shari‟ah and use of Ijtihad to frame new rules has Maslahah or benefit of people as the underlying basis and goal. On the other hand; the standardization of Shari‟ah may become against the fundamental premise of Ijtihad which has existed for centuries and especially in today‟s finance. If rules become standards, and imposed by legal authorities, then Ijtihad cannot be applied towards a critical and dynamic industry like Islamic Finance today. This will eventually damage the very reason that we are able to apply Shari‟ah in all times and places, that is, Ijtihad is the main reason why Shari‟ah is dynamic and is able to be applied in different circumstances. In addition; to standardize Shari‟ah rulings may mean the precedence of one Islamic school of thought over the other, which cannot be universally acceptable. There is no doubt that the synchronization of these two views has to be done through mutual understanding and collaboration between Shari‟ah scholars and various Shari‟ah key board members, market leaders, and regulators. To be very clear and accurate, the question of whether Shari‟ah standards can be harmonized is a matter to be dealt with by Shari‟ah scholars and not market professionals or regulators. The simple reason for this is because Shari‟ah scholars are specialized in their field and whether a Fatwa can be standardized or not is a matter of religious reasoning and should be taken from Shari‟ah own instructions and judgments

Sukukization: Islamic Economic Risk Factors in Shari’ah View

Despite the Economic closeness of overall concept, Sukukization (Islamic Securitization) is not equal to “Securitization” as it is known in its conventional sense. Securitization, generally relates to the converting of loans of various sorts into marketable securities by packaging the loans into pools and then selling shares of ownership in the pool itself. Sukukization, on the hand; refers to, Islamic Sukuk Investment (as defined by AAOIFI) are certificates of equal value representing undivided shares in ownership of tangible assets, usufruct and services. The development of innovative Economic financial solutions in the Muslim world has been dormant for centuries. It is only recently, since the early 1970s that significant work that has been done in the field of Islamic Capital Market. In order to take benefit from Western financial structures, care must be taken to make sure that the concepts are acceptable by Shari’ah. The West has had significant success in linking the End-Investor (Excess Capital) with the most optimal user of this Excess Capital; be it the Stock Market, Debt Market or the Securitization structures, they all serve the purpose of linking Capital with its most optimal (on a risk-adjusted basis) user. It must be kept in mind, that even though the West has had more success than the Muslim world in implementation of a financial system, it has been plagued with constant cycles of boom and bust. The most recent financial markets crisis has again opened the discussion for the need of structural changes to the current financial models/instruments in place. Most commentators have stressed for the need of more regulation whereas the stress should be on making changes to the structural features of the financial instruments. An in-depth discussion of the financial system is beyond the scope of this article and for now the focus will only be on the Islamic Securitization structures (Sukukization) for the housing capital market and the relevant Economic factors