Banking and Finance
ISLAMIC FI A CE WITHI TRADI G FRAMEWORK:
THE WAY TO LEGITIMATE PROFIT
Mirza Vejzagic∗
ABSTRACT
In an Islamic financial system, leading regulations are derived from the Quran and
Sunnah. The Shariah embraces the Quranic philosophy in three magnitudes, explicitly
Aqidah (faith and believe), Akhlak (ethics and morality) and Muamalat (transactions).
The latest one, Islamic law of transactions (fiqh muamalat) has become inevitable in contemporary Islamic finance. The main rationale could be found in the fact that to some level, companies engaging in the business of Islamic finance act upon on the foundation of profit maximization. This must be practiced by embracing the Shariah doctrine, one of which is the disallowance of interest or usury as riba. By doing so, profit maximization will be free of unethical practices, and will put Islamic banking business in the vanguard of ethical distinction. Although the central idea of Islamic banking and finance has been the elimination of interest, the comprehension of trade and commerce (al-bay’) in Islamic financing activities has not be recognized in a similar capacity as had the interest (riba) feature. This has directed many people to believe that Islamic bank is a banking firm that operates without interest, without further elaboration. Even though this evolves a right concept of thinking, it does not precisely portray what actually an Islamic bank stands for. In fact, it would be more truthful to utter that Islamic banking industry runs on the basis of commercial and trading doctrine (al-bay’) where acquired profit embrace valueaddition (kasb) and risk-taking (ghorm) activities. It is important to emphasize that
Shariah requires all genuine exchange to contain ‘iwad – an equal counter value.
According to Rosly ”Every increase, which is without ‘iwad or an equal counter-value, is riba. ‘Iwad is therefore the basic trait or condition sine qua non of the lawful (halal) sale”1. This is because a sale
THE WAY TO LEGITIMATE PROFIT
Mirza Vejzagic∗
ABSTRACT
In an Islamic financial system, leading regulations are derived from the Quran and
Sunnah. The Shariah embraces the Quranic philosophy in three magnitudes, explicitly
Aqidah (faith and believe), Akhlak (ethics and morality) and Muamalat (transactions).
The latest one, Islamic law of transactions (fiqh muamalat) has become inevitable in contemporary Islamic finance. The main rationale could be found in the fact that to some level, companies engaging in the business of Islamic finance act upon on the foundation of profit maximization. This must be practiced by embracing the Shariah doctrine, one of which is the disallowance of interest or usury as riba. By doing so, profit maximization will be free of unethical practices, and will put Islamic banking business in the vanguard of ethical distinction. Although the central idea of Islamic banking and finance has been the elimination of interest, the comprehension of trade and commerce (al-bay’) in Islamic financing activities has not be recognized in a similar capacity as had the interest (riba) feature. This has directed many people to believe that Islamic bank is a banking firm that operates without interest, without further elaboration. Even though this evolves a right concept of thinking, it does not precisely portray what actually an Islamic bank stands for. In fact, it would be more truthful to utter that Islamic banking industry runs on the basis of commercial and trading doctrine (al-bay’) where acquired profit embrace valueaddition (kasb) and risk-taking (ghorm) activities. It is important to emphasize that
Shariah requires all genuine exchange to contain ‘iwad – an equal counter value.
According to Rosly ”Every increase, which is without ‘iwad or an equal counter-value, is riba. ‘Iwad is therefore the basic trait or condition sine qua non of the lawful (halal) sale”1. This is because a sale