Maqasid Al-Shariah and Financial Transactions
These days everyone has heard of Maqasid Al-Shariah. So much has been written about it, and the term continues to appear in so many articles on Islamic Finance. And of course many people have also read the warnings by many scholars of the overuse, and misuse of the term. But this would have to wait another article.
I thought what might be helpful to students, as well as practitioners of Islamic Finance; was to provide some examples of the use of Maqasid in Financial Transactions in history and recently by scholars. I reviewed a large number of articles and books by scholars and chose a few of the more interesting examples of how rulings on financial contracts were derived using Maqasid by these scholars.
I hope you find this helpful.
Let me first start with an example of the usage of Maqasid within the Islamic Contract Law of Sales (Bai’), as described by Sheikh Saleh bin Abdulaziz Al Al-Sheikh, in his long article on Maqasid:
“Take for example Imam Ahmad bin Hanbal (died 855 A.D.), in an issue of sales. He said that a sale can take place by “Mu’atat” (exchange without a formal offer and acceptance, give/and take), but a group of scholars said that a sale can not take place unless the seller says “I sold you”, and the buyer says “I accept”, i.e. a formal spoken offer and acceptance, which makes it more difficult for people to transact since people already had the custom of giving the money and taking the goods without any spoken words on many occasions.
It was Imam Ahmad’s vision that the Maqsad Al-Sharia (the purpose of the Legislator) for the existence of sale is to facilitate life for people, and there is no purpose for the actual form itself. Since people consider this type of sale as consent, then it must be seen as consent, just as if people insert money into vending machines, and receive the purchased goods, then the objective has been met.”
So we have an example within the realm of financial affairs that clarifies the type of usage of Maqasid. Because of this, the most common type of sales, such as from supermarkets where no formal offer and acceptance are spoken, is clarified and approved. This opens the way to types of sales in our modern era such as vending machines and others that develop.
We read another example of the use of Maqasid to approve of a contract from the Dissertation “Maqasid Al-Shariah in Ibn Taymiyyah’s Financial Transactions” by Majid bin Abdullah Al-Askar. The great scholar Ibn Taymiyyah (died 1328 A.D.) also weighed in with the approval of a contract called “Suftaja”, which works basically as a money transfer to another city. A person lends money to another on the basis that he receives a note, which entitles him to receive back this loan in another town. This effectively protects the lender from the dangers of carrying the money during his travels. The borrower has money in the other town, but needs money in this first city. But as this “Protection”, if it’s stipulated, is deemed a benefit to the lender, some scholars had disapproved of the contract as they deemed it fell within the rule: “Every Loan that brings a Benefit to the Lender is Riba.”
Ibn Taymiyyah disagreed. In his “Majmou Al-Fatawa” he discussed the matter and reasoned that the correct rule is that it is permissible, since the lender needs protection of his money from the dangers of travel, and the borrower needs money in the first town and has money in the other, both borrower and lender benefit, and the Legislator does not forbid what is of benefit, but only that which is harmful.
The Suftaja of course is the predecessor to Letters of Credit and other types of Promissory Notes, used extensively in the Middle Ages and even today. The book goes on to detail further considerations of Maqasid by Ibn Taymiyyah such as approving of Cash Waqf, previously considered only for assets such as real estate and non-consumed assets. The issue was that Waqf was considered only for items that remain intact and cash would be used up. Ibn Taymiyyah reasoned that Cash could be loaned to help those in need as well as used in Mudaraba where the investment return could be used to benefit people.
It’s not just in transactions that Maqasid were considered, but also in framing major Fiqh Maxims. Dr. Riyadh Mansoor Al-Khelaifi, a Shariah Expert and Advisor, and author of “Maqasid Al-Shariah and its Influence on Understanding Financial Transactions” writes of a well known Fiqh Maxim “Hardship Begets Facilitation”. He states that one of the Maqasid in Transactions is the lifting of hardship and the obligation to ease that led to the above Maxim. He adds that the rules of contracts and financial transactions were built on Permissibility and not Prohibition, which is a fundamental rule. It is not simply Prohibition or Permissibility of contracts that can be derived from Maqasid, but also major Fiqh maxims that cover a large area and serve as important fundamental rules.
Dr. Riyadh also gives us another example that comes from of the understanding of Maqasid as it relates to commerce. It comes from Ibn Al-Qayyim (died 1350 A.D.) when discussing Riba Al-Buyou, or Riba of Sales in “A’alam Al-Muwaqq’in” stating: “They were forbidden to trade in Athman (values/prices) like Gold and Silver, since that corrupts the intention (Maqsud) of (values/prices), and they were forbidden to trade in Aqwat (Foods) such as Barley, Wheat, Dates, and Salt, since that corrupts the intention (Maqsud) of foods.” Notice the usage of the word Maqsud (Intended) in understanding the prohibition.
Ibn Al-Qayyim of course was well known for his consideration of Maqasid, especially in the area of trickery (Hiyal), of which he lists dozens in his book above, including many financial tricks, he states: “We know absolutely that Allah has forbidden Riba because of the harm it incurs, and that His intention (Maqsudahu) was to remove this corruption. If it were permissible to utilize stratagems, it would be an attempt to nullify the purpose of the Legislator (Maqsud Al-Share’), and to achieve the purpose of the Usurer. This is the path of all the tricks used to legitimize the Haraam and to remove the obligation.”
Another example of the financial use of Maqasid Al-Shariah, is given to us by Dr. Yahya Saeedi, Professor in the College of Islamic Studies of the University of Algiers. In his paper: “The Importance of Maqasid Al-Shariah in Deriving Rulings.” Professor Saeedi mentions the mistake some writers made in clinging to what they believed are textual rules, and thus viewed Paper Money not as the type of Shariah money that would incur Riba and Zakat. Of course, both the OIC Fiqh Academy and the Senior Council of Scholars of Saudi Arabia ruled the permissibility of Paper Money as the equivalent of Gold and Silver, and that it incurs also Riba, and Zakat is obligatory on it.
Of course, both Committees were following in the footsteps of previous scholars in their discussion on the purpose and meaning of currency. It was Ibn Taymiyyah who made a very famous statement concerning currency in his “Fatawa”: “As for dirhams and dinars, there is no natural or Shariah definition for these; however, the matter returns to habit and terminology. This is because the basic principle is that the objective (Maqsud) is not these coins in themselves; rather, the objective is that they should be a standard for mutual transactions. Dirhams and dinars are not sought for themselves. Rather, they are means by which mutual transactions are carried out, and this is why they serve as money ... A pure means, the substance or form of which is not an objective in itself, achieves the objective (Maqsud), whatever it may be.”
A final example is Insurance. In 2001, the Permanent Committee for Research and Iftaa of the Senior Council of Scholars in Saudi Arabia debated the issue of Insurance Companies. This is a basic summary of what they stated: “It has been mentioned that the Insurance Contract is new with its own specifications, and therefore it is not among those contracts known to Islamic Fiqh. It is true that it may have some new details, but it is not true that it was unknown by Islamic Fiqh. It finds its place under the general foundations of Islamic Fiqh and its rulings would be known by applying such foundations and from Maqasid Al-Shariah that have been discussed by scholars before.”
They were probably referring to the underlying concept of modern co-operative or Takaful Insurance. This concept is called “Munahada”, “Nihd”, “Nahd”, and even “Tanahud”. It is mentioned in the first line of “Kitab Al-Sharikah” in Sahih Bukhari relating to the gathering of food by a group of people and then sharing it amongst themselves.
These were just a few examples that I could gather from multiple books, articles, and research. There are many, and many more will be documented as more books are written about Maqasid.
I hope this has been somewhat helpful in giving you a flavour of the consideration of Maqasid in commercial and financial contracts.