International Shari'ah Research Academy for Islamic Finance (ISRA)

One of the most popular instruments used today in the Islamic Capital Market is sukuk. Various sukuk structures based on ijarah, musharakah, mudharabah and hybrid forms have evolved. However, these innovations have raised many Shari‘ah issues and controversies. This paper argues that some innovations which try to achieve the same economic outcome as conventional instruments distort the vision of Islamic economics based on justice and equitability. This vision is deeply inscribed in the objectives of the Shari‘ah (Maqasid al-Shari‘ah). The distortion stems from a restricted understanding of the Shari‘ah that focuses on the legal forms of contracts rather than their substance, especially when structuring financial products. The overemphasis on form over substance may lead to abuse of Shari‘ah principles in justifying certain contracts that are, in fact, contradictory to one or more Shari‘ah texts and that ultimately undermine the higher objectives of the Shari‘ah. The paper concludes that the substance of a contract, which has greater implications for the realisation of Maqasid al-Shari‘ah should be equally looked into.  

The topic of promises needs clarification and precise determination. It is vitally important because promises are relevant to a great number of contemporary issues. The paper thus reviews the types of promises in the Shari’ah and juristic opinion as to whether promises are legally binding. It concludes by highlighting nine (9) Shariah parameters that must be applied in allowing promises. It argues that if fulfilling promises is a binding obligation, then promises should be not be used indiscriminately; rather, parameters must be laid down to govern their use. Among the suggested parameters are that promises should not displace and impede the objectives of contracts. For example, partnership contracts are intended to make the contracting parties share in the profit and loss; therefore, promises should not be used to negate this essential feature. For the remaining 8 parameters, download the paper! 

This paper seeks to examine the application of insurable interest to takaful practices in general, with special reference to section 152 of the Insurance Act 1996. It is found that the unique features of takaful do allow for the application of insurable interest, but section 152 should be adopted in the Takaful Act only with certain modifications and guidelines, as have been discussed in the paper. However, it was found that there are still some unresolved issues in current takaful practice that require significant attention, issues related to the fundamental principles underlying takaful practices, such as the contract itself. It must be stressed, once again, that this paper only intends to bring forward a perspective or view on insurable interest in takaful practice, especially from the perspective of the Shari’ah, which can be further discussed, examined and modified, if necessary. 

The paper discusses and analyses the perspectives of both opponents and proponents of tawarruq with the view of ascertaining the soundness of the Fiqh Academy ruling. Interestingly, the tawarruq ruling epitomizes the growing divide between proponents and opponents of the contemporary Islamic finance industry as a whole. Generally, those who oppose tawarruq also abhor murabahah lil amir bi shira’, Ijarah muntahiah bittamlik, contemporary sukukal-mudharabah, musharakah and wakalah and many other contemporary Islamic finance products. The critics view the ban on tawarruq as the tip of the iceberg. The critics want the whole iceberg, the contemporary Islamic finance industry itself, to be exposed and transformed in its totality. Many of the critics believe that the transformation can only be realized by banning all the contemporary contracts mentioned above and rejuvenating the classical mudharabah and musharakah contract. Hence, it is important to discuss the tawarruq ban within the overall Islamic Finance context. 

The main purpose of this paper is to review the microfinance scheme and discuss how Islamic banks can participate in such an endeavor without compromising institutional viability and sustainability. The paper conducts an extensive review of microfinance to build a case that Islamic banking should participate in a microfinance initiative. It concludes with a proposal to use a special purpose vehicle (SPV) as one of the possible means for Islamic banks to channel funds to the poor.  It is worth mentioning that this paper won the Emerald Literati Network 2009 Outstanding Paper Award.