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Reconstructing the Maqasid Blueprint for Islamic Finance

Reconstructing the Maqasid Blueprint for Islamic Finance

Intro–Construction
In recent times, thought leaders of the Islamic finance (IF) industry have come to the realization that the industry, at some point, had skidded off its original track whilst ‘religiously’ competing with conventional financial institutions for market share. Since then, the IF industry’s fruits have germinated from seeds planted by the prophet of capitalism, Adam Smith, rather than the prophet of Islam, Muhammad (peace and blessings be upon him).
 
In hopes to recultivate the industry’s roots and disinfect its spirit, the said industry has recentered the core discussion in its respective conferences, webinars and training on the base frameworks and foundational principles intended to fulfil the Maqasid al-Shariah as opposed to the means and strategies intended to produce so-called “innovative instruments and products” using the latest technological tools of A.I., machine learning and others.

This has propelled Maqasid al-Shariah to reappear in the spotlight; only this time, the scope of the discussion has progressed beyond the ultimate objectives of the Shariah and their Kulliyat al-Khams (five essentials) enunciated by classical scholars like Imam Abu Ishaq al-Shatibi (1320 – 1388) and Imam Abu Hamid al-Ghazali (1058 – 1111).
 
The Revamper: Imam Muhammad al-Tahir ibn Ashur
The new wave was led by the contemporary Ez-Zitouna University-educated Imam Muhammad al-Tahir ibn Ashur who brilliantly noted that there should be a dedicated set of Maqasid for each chapter of fiqh (i.e. Islamic jurisprudence), meaning there would be a set of Maqasid specifically for marriage and another set specifically for financial transactions. Based on this approach, Ibn Ashur developed the 5 Maqasid of financial transactions (or al-Muamalat al-Maliyyah):

  1. RAWAJ: meaning growth (so as to avoid decay) and circulation (tadawul) (so as to prevent hoarding and monopoly)
  2. WUDUH: meaning clarity and transparency through witness attestation, documentation, collateralization, and minimization of gharar/uncertainty.
  3. HIFZ: which is to protect and safeguard public and private wealth through managing and growing it as well as preventing attacks on it
  4. THABAT: which is to ensure wealth is accorded to its rightful owners through lawful acquisition of ownership and validation of contracts
  5. ADALAH: meaning justice which is upheld by preventing forms of injustice (zulm) in gaining, dealing and spending wealth.
Ibn Ashur’s sharp observation has served as the basis upon which scholars succeeding him have contributed to the Maqasid discussion in Islamic finance. Of such notable scholars is Shiekh Abdullah ibn Bayyah, Chairman of the UAE Council for Fatwa, who established that ‘earning income and searching for wealth’ (i.e. RAWAJ), and ‘protecting wealth’ (HIFZ) are the highest Maqasid of financial dealings in terms of priority/necessity. Sheikh Dr. Koutoub Sano, Secretary General of the OIC Fiqh Academy, incorporated the sustainable paradigm (ISTIDAMAH) under the Maqsad of THABAT.

Maqasid al-Shariah 2.0: Levelling up Standards and Guides
Other contributors include Tan Sri Azman Hj. Mokhtar, Chairman of INCEIF University and MIFC Leadership Council, who advocated for the development of a Maqasid-based, sustainable economy through, among a number of other things, a transitive move away from the shareholder economy towards the stakeholder economy; from being purely profit-driven to being purpose or impact-driven.
He and his team have called upon the industry’s leaders to raise the Shariah compliance standard from halal to tayyib. What’s the difference? Well, Sheikh Dr. Mohammed Kirat described ‘tayyib’ as a wasf or descriptive feature of ‘halal’. In other words, a ‘halal’ that is tayyib sits a level above a halal that is not tayyib in terms of Shariah endorsement or certification. This would simply mean that not all halals are tayyib, but all tayyibs are halal.

Malaysia and Its New Maqasid Guidance!
Over in the field of Islamic Capital Market (ICM), Malaysia’s Securities Commission (SC) had engaged with various local and international bodies to produce the ‘Maqasid Al-Shariah Guidance’ for its Islamic Capital Market (herein referred to as the Guidance).

As the title suggests, this document or Guidance was intended to serve as a Maqasid-based framework guiding the activities within Malaysia’s Islamic Capital Market. Since its publishing in November 2023, the SC has conducted several webinars and face-to-face sessions with relevant industry personnel to deliberate on how the framework may further be developed.

The Guidance draws inspiration from Ibn Ashur’s segmentation of the Maqasid into chapters of jurisprudence and, accordingly, builds upon it. Additionally, it sets moving towards sustainability, upholding ethical virtues and producing economic value as its core objectives. Speaking on the Guidance’s role in achieving the ultimate objective of the Shariah within the IF industry, the Deputy Director of Islamic Capital Market, Dr. Azrul Azlan Iskandar, stated in a recent SC deliberative webinar session that it serves as “a bridge to attain it and give more clarity towards it.”

The Guidance is structured in a manner that sees the attainment of human welfare through achieving benefit and preventing harm as the ultimate objective of the Shariah and the ‘roof of the ‘house’. Next, it positions the 5 necessities of the Maqasid (Kulliyat al-Khams) relating to the protection of religion, life, intellect, lineage and wealth at the level beneath the roof. And right after that is the SC’s unique set of Maqasid for financial dealings/transactions, namely,

  1. Humanity
  2. Justice and Benevolence
  3. Clarity and Transparency
  4. Flexibility and Innovation
  5. Fiduciary and Accountability
  6. Accessibility and Inclusivity
The Guidance does not stop there, it goes on to impressively list a total of 15 principles under these 6 Maqasid of financial transactions. The SC refers to these principles as the ‘objectives of ICM’. Furthermore, the SC establishes Shariah compliance as the base upon which the ‘house’ of Maqasid is built upon.
A snapshot of the entire Guidance would see the Shariah’s ultimate objective of offering human welfare sitting at the top, followed by the five necessities of the Shariah, followed by the 6 aspirations or Maqasid of financial transactions, followed by the 15 principles or Maqasid of the Islamic Capital Market. And all these different layers have Shariah compliance as the underlying base or foundation of this ‘house of Maqasid’.

SC Malaysia’s Maqasid Guidance: Redundant or Different??
Upon further investigating the SC’s Guidance, one would come to understand that the SC’s team did not simply ‘Ctrl C’ the transactions-related Maqasid of Imam Ibn Ashur, Sheikh Ibn Baiyyah, and others, and ‘Ctrl P’ it into the Guidance. In fact, it seems to have introduced major and innovative enhancements and developments. For instance, with regards to Imam Ibn Ashur and Sheikh Koutoub’s ‘Growth and Circulation of Wealth’ Maqsad, the Guidance has expanded the parameters to include building an ecosystem that is supportive of constrained businesses. It then packaged these principles under the Maqsad of ‘Accessibility and Inclusivity’.

In a like manner, it captured Sheikh Koutoub’s Maqsad of ‘societal and environmental sustainability’ (Maqsad of ISTIDAMAH) in its principle of ‘Undertaking Initiatives in Preserving the Well-Being of Future Generations’ under its Maqsad of ‘Humanity’ just as it captured its principles of ‘Promoting Efficiency and Avoiding Wastage’ (#5) and ‘Upholding Best Practices, and Codes of Conduct and Ethical Values’ (#6) under its Maqsad of ‘Justice and Benevolence’. These are just some instances of the in-depth developments made by the SC’s Guidance to the Maqasid discourse.

Proposed Realignments (to effectively reconstructing the Maqasid framework)
We garner from the this that there are serious ongoing efforts to reconstruct the Maqasid discussion within the IF industry and that experts have been consistently searching for ways to revamp the industry’s Maqasid-based moral framework in hopes to steer its original spirit back on the right path. They have challenged the status quo by setting the standards higher and increasing expectations.

It is worth adding that even though no consensus has been arrived at over what constitutes the Maqasid of IF activities, each added layer contributes to its completion. In fact, at times, advancements come in the form of realigning existing layers rather as opposed to adding new ones. As such, here are a number of proposed realignments that architects and engineers of the IF industry should take into consideration:

Realignment 1: Tailoring a Tayyib Plan
It was advised earlier that ‘halal tayyib’ should replace mere halal as the standard for what is considered acceptable/permissible within the IF industry. The issue comes about when putting such standard into practice. This brings about the distinction between an Islamic jurists’ legal reasoning of the primary text (ijtihad) on the abstract/theoretical level (ijtihad nazari) vs on the ground level (ijtihad tatbiqi).

This is due to the differences in capacity levels and superstructures of jurisdictions within the IF industry. As such, the tayyib standard cannot and should not apply in a standardized manner; rather, it must be tailor-made to correspond to unique factors, such as financial, economic and legal infrastructures, and cultural sensitivities, within and surrounding the jurisdiction it is applying to.

Accordingly, like in the case of diets, such jurisdictions be assisted in developing a personalized tayyib plan. And while it is true that such internal and external factors have an impact on the speed by which the intended outcomes are materialized, dedication and commitment to the cause in question stand as the defining elements for how well progress is made and – more importantly – sustained!

Realignment 2: Terminology Matters
This second realignment is aimed specifically at the SC’s Guidance, and it is to do with the term ‘objectives’, which has been overused!

The issue is to do with the SC using the said term to describe Maqasid on three different levels: 1) ultimate objectives, 2) objectives of financial transactions, and 3) objectives of ICM. The reason behind so is presumably owing to the fact that the word ‘objective’ is translated from the Arabic word ‘Maqasid’ which technically could be translated as aims, purposes, goals, intentions and objectives.

The repeated usage may be seen as problematic not only because it projects and image of redundancy onto the SC’s Guidance, but it also presents a sense of discontinuous or non-stage-based approach in supporting the roof of the Maqasid house i.e. achieving the ultimate Maqasid al-Shariah.

To counter this issue, it is proposed that the SC uses distinct terminologies at each level. Terms like ‘purpose’ and ‘aim’ would replace the objectives positioned closer to the roof of the ‘Maqasid house’ as they constitute the more general statements, while other terms like ‘goals’, ‘strategies’, ‘KPIs’ and ‘impact reporting’ that are used in BNM’s VBI Guidance framework, would replace the ‘objectives’ closer to the base as they are more specific and measurable.

And yes, there is a need for the Guidance to develop items that call upon ICM players to act (i.e. action-based items) as well as items that measure or quantify the extent to which the Maqasid or impact has been realized. Also, with there being a lack of scholarly consensus on the definition of such alternative terminologies, regulators would be tasked with defining each of them as a way to clarify their intended usage to readers. Here’s a sample of how such realignment in terminologies would look like:

The Objective of ‘Enhancing Disclosure and Documentation’ would contribute to achieving the Goal of ‘Clarity and Transparency’ in ICM transactions, which would contribute to the Aim of ‘Serving Benefit and Preventing Harm’ amongst contracting parties, and ultimately serve the Shariah’s Purpose of realizing ‘Human Welfare’!

Concluding Remarks
Let’s try and recap everything. Maqasid al-Shariah has been the centre discourse within the IF industry in recent times. Since Ibn Ashur’s call for discussions on it to be more focused and narrowed down to chapters of Islamic jurisprudence, various innovative contributions have been made to it, most notably SC Malaysia’s Maqasid Guidance for Islamic Capital Market.

Notwithstanding the great efforts of industry experts thus far, a number of realignments are proposed here, particularly in relation to tailoring the tayyib standard in lieu of the reality within which it would apply, using distinct terminologies to describe ‘Maqasid’ at each level, and incorporating more quantifiable action-based items.

Finally, as much as developing the appropriate guidance/guidelines is crucial, it is underlined that the collective willingness of the stakeholders to make the necessary sacrifices plays a central role in achieving and sustaining the ultimate objective of the Shariah within the IF industry and beyond.
So, let’s reconstruct accordingly, bismillah!

References and acknowledgements
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Aghnides, N. (1981). An Introduction to Mohammedan Law. Lahore: Sang-e-Meel.
Khan, M. F., and Ghifari, N. M. (1992). Shatibi‘s Objectives of Shariah and Some Implications for Consumer Theory. In A. M. (Ed.) Readings in Islamic Economic Thought 176-202. Selangor: Longman Malaysia.
Al-Ghazali. (1983). Al-Mustasfa’ min Ilm al-Usul. I. Beirut: Dar al-Kutub al-Ilmiyyah.
Securities Commission Malaysia. (2023). Maqasid Al-Shariah Guidance Islamic Capital Market Malaysia. Securities Commission. https://www.sc.com.my/api/documentms/download.ashx?id=3e10c1d3-823e-4dc3-b7ae-c3652104d2cf
Rifai, S. L. (2021). Maqāsid al-Sharī‘ah: Origins and Definitions of the General Philosophy of Islamic Law. Elsevier. https://ssrn.com/abstract=3786041
Central Bank of Malaysia. (2018). Implementation Guide for Value-based Intermediation. AIBIM. https://aibim.com/contents/upload/VBI-Implementation-Guide.pdf
Islamic Finance Singapore. (2024). Notes from Fiqh & Finance: Empowering Muslims in Navigating a New Economic Paradigm with Emerging Financial Tools Islamic Finance ESG. https://islamicfinancesg.com/notes2/
Mohamed Al Amine Sano

Mohamed Al Amine Sano

Islamic Finance and Education Spcialist, Adl Advisory.

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