With the rapid “Islamisation” in many areas of the world, an extensive research on Islamic law has considerably saturated the literature, though with multifaceted understandings and meanings projected by their authors, this topic still comprises ample research prospects. Entailing numerous branches, Islamic law also entails businesses and trade concept; the topic grabbed many economists’, researchers’, and practitioners’ attention, likewise the topic under this book’s discussion.
Islam a highly debated theology, influencing almost one-fifth of the world’s population, prejudicially seen by multi-lensed perspectives, is usually misunderstood in today’s world. It would be justifiable to explore any doctrine; one shall stretch back to the roots of that theology genuinely. Hence, rather than relying on the shallow image of Islam portrayed by world’s media nowadays, the concept of Islamic economic system can be well grasped if be stretched back to its very roots, where Islamic economic setup was devised by Prophet Muhammad (peace be upon him) in his times by the command of Almighty Allah.
Islam, as not merely a set of commandments that guide its followers to achieve success in hereafter, is a holistic code of conduct which transforms the human life to achieve its pinnacle in all aspects: individual, social, economic, and political. Therefore, a society of Muslims, practicing Islamic rules in true essence and abiding their religious duties, can exhibit an ideal society of marvelous merits. Though a lot of conscientious efforts are being undertaken to achieve one, such a society of ideal setup can’t be witnessed in today’s world, except for centuries’ old economy, flourished under the supervision of Prophet (peace be upon him) and his followers. This Islamic setup was not structured effortlessly. They had undergone agonizing circumstances before acquiring an Islamic state, where Islamic concepts were pragmatically and freely put into practice.
Its innate feature of human nature that it does not accept change in a sudden nature, rather a gradual and balanced influence, exhibits profound and lasting conduct. The foundations of the first Islamic economic setup, witnessed in the times of Prophet Muhammad (peace be upon him), were laid in parts. The pre-Islamic setup could not easily whip out abruptly. It takes years to inculcate the virtues of an Ideal system comprised of. The revelation of Quran, on which Islamic law is chiefly based, can be bifurcated into two parts: Makkan period, when Prophet Muhammad (peace be upon him) and his followers were in city of Makkah, and Madani period, the period when they migrated to city called “Yathrab” but named Madinah afterward because of the Prophet’s stay in that city. Makkan period can be summarized as a tough and traumatized one, as Muslims had to face numerous challenges to survive with their new Muslim identity in a non-Muslim setup. However, Madani period can be categorized as one with affluence, free will, and harmony. Therefore, the Madani period demonstrated comparatively more reflective Islamic setup than Makkan, presumably the free will and liberty of Muslims in the land. Holy revelations of Quran were therefore revealed by keeping very nature of human being into consideration. Earlier, during Makkan period, the prohibitions came out as disregarded or detested, but not in the form of strict prohibition, for example, wine and usury prohibitions. Later came the strict commandments requiring complete prohibitions of such matters. In this gradual transformational progression, all curses of usury, exploitation of power, ill means of wealth, oppressions of weak, and evils like riba came to an end, and an Islamic society was structured. With an extensive emphasis on justice, honesty, equality, empathy (system of zakat and usher), and welfare at large with interest-free economy, Islamic society laid the foundations of a role model to be worth idealized. This historic civilization demonstrated that Islam emphasizes not only on the physical and spiritual supplications for hereafter, but indeed motivates its followers to thrive in this world too. The prime reference of Islamic law, Quran the holy book, emphasizes the reconciliation between hereafter and worldly endeavors in the form of an important supplication which Muslims implore in their prayers, as: “Our Lord give us in this world which is good and in the hereafter that which is good, and save us from the torment of the fire” (Quran, 2:201). Therefore, following Islamic law connotes striking a balance between worldly life and hereafter. Henceforth, those who falsely claim this religion for inculcating monasticism should refer the very principal references before portraying such an image of Islam. Besides clear references from Quran and Hadith (sayings and acts of Prophet Muhammad peace be upon him), had not the fact enough for criticizers that how Muslim scholars excelled in endeavoring marvelous accomplishments in the field of science and arts, which civilizations followed for? Certainly, an imperative need arises to undertake a fair and thorough analysis in order to surface a just opinion.
Since Islamic law necessitates adherence to both divine and worldly perspectives, this holistic legal system also shapes one’s dealings in means of earnings and occupations. For the reason that choosing business as one’s occupation is highly esteemed in Islamic economic setup, Muslim world encompasses a large majority of business owners, whose individual lives are being shaped by Islamic law, so as their business dealings. One cannot isolate religious duties to worldly ones if following Islamic law. As mentioned in Quran, “Surely my prayer and my sacrifice and my life and my death are (all) for Allah, the Lord of the worlds” (Quran: 6162). Therefore, striving for worldly affluence is not at all condemned in Islam, but certainly not beyond the boundaries of religious prohibitions. Islamic economic system can well be explained as a system of production, resource allocation, and distribution of goods and services within a society, where all these practices are administered under Shariah law (sacred law of Islam). When a whole social order is being directed under such teachings, an Islamic economic setup forms, necessitating equity, justice, economic freedom, honesty, and uprightness observed meticulously. According to Muslim thinkers, the concept of welfare which economic system brings into the economy has to be confined within Islamic framework. Hence, in Islamic economic system, there is no concept of welfare if there is any defiance from Shariah.
Many Islamic economists, thinkers, researchers, and practitioners are seeking ways to pragmatically align the Islamic economic principles and practical frameworks. There is not a single work of knowledge, whose thinkers don’t have differences of opinion and thought that is healthy to bring diversification and innovation, but lack of one positive course of conduct is earnestly needed for practical enforcement of Islamic economic system. The thorough and diligent work of Islamic economists is commendable in pursuing Islamic economic system; still, for achieving economic development goals of Islamic world, a lot of issues are under evolutionary phase to come up with unanimously agreed solutions. Consequently, avenue of Islamic economic system still demands a solemn and thorough research to pave the way for solutions of such issues. Discussing such compelling issues of the Islamic commercial law can lay the very foundations of Islamic economic development.
This book is designed for both Islamic and conventional finance practitioners, policy-makers, and students of Islamic law, economics and finance. It can serve as a guide to be well acquainted with compelling issues of Islamic commercial law.
With extensive emphasis on equity, justice, economic freedom, and welfare, Islamic commercial law puts consumer protection a great precedence over financial innovation, as it can lead to “Gharar,” which is prohibited in Islamic commercial law. Islamic commercial law, though does not abrogate financial solidification, rather it regulates and outcast those practices which can jeopardize economic development, like financial transactions involving “Riba” (riba and gharar explained later in the book’s chapter). By means of financial innovation, many speculative instruments used in today’s conventional financial transactions, at times, render the economic system into a complete failure, as witnessed in economic crisis 2007–2008. Beginning part of this book is primarily reserved for elaboration of such prohibited contracts, transactions and practices in Islamic commercial law, and important insights regarding the issues.
All the religions and doctrines followed in this world have faced once or many sheer criticism and opposition from masses; however, the hatred and prejudice Islam has encountered are incomparable. With incomprehensible abhorrence and conspiracies against it, its true picture has been blurred through misinterpretation of its beliefs and rubrics. The religion which abstains its followers from killing civilians, public, and even trees in the most fervent circumstances of war is labeled as religion associated with terrorism. By the same token, a religion which places utter emphasis on balancing spirituality with worldly matters is deemed to be ultraconservative and stale enough that it curbs its followers from undertaking financial transaction in this modern competitive world. This is truly a discriminating treatment of this doctrine, when seen from a prejudiced lens, and hence needed a fair and deep analysis before crafting any label on it. Islam is not merely a set of beliefs for personal connection with God confined just to houses of worship, rather a code of life from womb to tomb that cannot be isolated from any matter related to life, be it business, economics, law, politics, or any aspect. Henceforth, as soon as many Asian and African Islamic countries have politically liberated from Western rules, the need for tailoring the country-wide system to their very own beliefs and philosophies became more and more eminent among their scholars and practitioners. The globalization, technological advancement along with independence of Muslim countries paved the way for including Shariah into amount of commercial and civil laws. Therefore, a part of the book has also addressed the issue of businesses and trade activities under Islamic commercial law.
Another compelling issue, discussed in this book, is where Islamic finance industry stands in today’s competitive financial innovation and financial deepening arena. Rapid globalization has instigated the researchers and practitioners from Islamic world to devise economic system, conforming to Islamic law, which can substitute the conventional interest-based economic scheme. Consequently, they have come up with, though not just confined to, prohibitions of “riba” and “Gharar,” but also the development of Islamic financial instruments. There is a bunch of such contracts that are utilized to fulfill the needs of the customers in the Islamic finance industry, yet still are under development stage, challenging their conventional counterparts in financial markets. These contracts, due to the complex nature of the products offered by financial institutions, are used in a group to structure particular product, using financial engineering techniques and methods. Since Islamic financial contracts are derived from Shariah, that need to be combined and observe certain parameters which indeed is a challenging task. Accounting and Auditing Organization for Islamic Financial Institutions (AAOFI) is aiding in this matter by providing detailed guidelines for the combination of contracts. Though still under evolutionary process, Islamic financial products are challenging their counterparts by fulfilling their customer financial needs in a Shariah compliant manner.
We have also included discussion on the differences and similarities between Islamic and conventional trading frameworks. Islamic framework is found to be quite compatible with conventional trading framework barring some exceptions which are both practical and philosophical. We have discussed how Islamic trading framework provides more comprehensive and effective way of dealings. We have also discussed the impacts of these trading frameworks on the economies at large. Bringing this discussion forward, we have allocated a whole chapter on the discussion on profit, where we elaborate on how Islam promotes earning profit through fair means but at the same time the philosophy of profit-making in Islam is quite different from the conventional mind-set.
Some auxiliary issues in Islamic trading framework are also heightened in this book. Individual rights are strongly protected in Islamic economic system, presumably the strong ethical base it is erected on. Artificial pampering of markets through tariffs, quotas, and the like is not regarded in Islamic economic system, but indeed some dire issues solemnly require government intervention into the markets. Income disproportionality, poverty elevations, unsatisfied public needs, and environmental degradation are those issues which cannot be left unattended; therefore, government has to play its role in alleviating these issues. Though economic system structured on Islamic principles embodies equity, honesty, justice, and ethical system for common welfare, still a more channelized and dedicated effort is needed in emerging idea of corporate social responsibility (CSR).