Differential approaches to Islamic banking : identification of issues in prospect for harmonization

Abstract

The research involves an analysis of the juristic differences between the scholars of Malaysia and Middle-East including Bahrain and Kuwait in the realm of Islamic banking. Disagreements exist in juristic views and rulings particularly between Malaysia and other governments. Debt financing is the central area where disagreements exist between the scholars of Malaysia and Middle-East. Broadly speaking, the Middle-Eastern scholars prohibit debt trading while the Malaysian scholars in official rulings permit it. The research will also look into the legal and regulatory aspects of the Islamic financial industry as the principles of the Islamic banks are alien to the existing legal structure applicable to the financial sector in general and to the banking sector in particular. The present research is an effort to look at the two divergent approaches from an Islamic jurisprudential perspective. It was revealed that usul al-fiqh has failed to stimulate ijtihad. Ijtihad is a central term with regard to law making in Islamic law. Nonetheless, ijtihad has been held responsible for making Islamic law un-systematic due to the lack of a standard application. A renowned modern jurist, Zaki Badawi has emphsised on the use of maqasid oriented approach to ijtihad for the development of Islamic financial system. The same approach has been suggested by Hashim Kamali, whereby he proposed the extension of the theory of maqasid to ijtihad. The issue of disagreement is very significant and has a far reaching impact on the Islamic banking industry worldwide. It can be said that disagreement is unavoidable, but at the same time, there exist a reconciliatory mechanism in Islamic law to harmonize different interpretations from jurisprudential perspective which is the central theme of the present research. However, the issue of disagreement could be resolved from either juristic or administrative perspectives or both. Harmonization of the different views amongst the scholars from the different schools of thought is necessary to enhance the global development of Islamic banking and finance. The study is mainly based on library research and is analytical, descriptive and comparative. The methodology that was used contains different mechanisms of usul al-fiqh such as ijtihad, istihsan and its other supplementary proofs were applied to the existing juristic differences. The maqasid oriented approach to ijtihad can help to make the legal theory relevant to the needs of the Muslim world. It is recommended that any further move in this direction be made under the purview of siyasah shariyyah. MaÎlaÍah requires that juristic differences be harmonized for the sake of promotion and prosperity of the Islamic banking industry.