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Hājah in Islamic Finance Decision Making

IM Insights
By IM Insights
1 year ago
Hājah in Islamic Finance Decision Making

Fatwa, Fiqh, Gharar, Islam, Islamic banking, Sahih, Salam, Shariah, Takaful, Tawarruq

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  1. OKT 2021 | VOL. 26 | NO. 1 ISSN: 2232-1047 eISSN: 0127-8886 www.jfatwa.usim.edu.my HĀJAH IN ISLAMIC FINANCE: MASTERING THE DOCTRINE OF NEED IN SHARĪʿAH DECISION MAKING Muhammad Abdul Mubeeni, Ehsanullah Aghaii, Zurina Shafiiiii Ph.D. student at the Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia Islamic banker, Institute of Islamic Banking and Finance, International Islamic University Malaysia Email: ehsanaagha@gmail.com iiiProfessor, Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia Email: zurina.shafii@usim.edu.my i ii Abstract Islamic financial institutions (IFIs) are compelled to operate in a highly regulated environment without jeopardizing the Sharīʿah governance framework. To deal with arising challenges, Sharīʿah decision-makers sometimes rely on the doctrine of ḥājah (need) as a device to enact a concessionary ruling. However, critiques argue that ḥājah has been used as a pretext to circumvent Islamic commercial law. This paper is an attempt to develop a possible criterion for making a legitimate need based Sharīʿah solution for IFIs. The study is based on qualitative research. Using content analysis, the classical literature of Islamic jurisprudence was reviewed to analyze the concept of ḥājah, its legitimacy, and its Sharīʿah rulings in the perspective of Islamic banking. The research concluded that a Sharīʿah vetted ḥājah can be leveraged by Sharīʿah decisionmakers as a tool to address a legitimate challenge faced by individuals or corporations keeping in view the proposed parameters. To substantiate the parameters in the context of Sharīʿah decision-making in Islamic finance, practical examples have been analyzed from the Sharīʿah Standards issued by the Bahrain-based Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). Keywords: Islamic Finance, Sharīʿah, ḥājah, need, Sharīʿah decision-making INTRODUCTION Financial affairs have become an integral part of modern life, which essentially involves dealing with banks, financial institutions, and money markets. However, the financial services sector as a highly regulated industry by local and international authorities often requires exceptional treatment to be compatible with the Sharīʿah principles and rules. To accommodate such pressing challenges, classical jurists have outlined several parameters under the doctrine of ḥājah. It is a legal tool whereby a concession is justified by the dire need of preserving something of greater utilitarian value than that lost, neglected or sacrificed. The scholars of Islamic finance at a time rely on the doctrine of ḥājah in Sharīʿah decision-making (SDM). Sharīʿah decision-making is defined as a process to identify a Sharīʿah-compliant and economically 37
  2. Journal of Fatwa Management and Research | Jurnal Pengurusan dan Penyelidikan Fatwa | ‫ﻣﺠﻠﺔ إدارة وﺑﺤﻮث اﻟﻔﺘﺎوى‬ Oktober 2021 |Vol. 26| ISSN: 2232-1047 | eISSN: 0127-8886 viable solution to a problem faced by an Islamic financial institution (IFI), with a systematic course of action that is also in line with the Sharīʿah (Agha, 2020). However, some critics consider over-reliance on the maxim of need in SDM as a pretext for violation of Islamic commercial law (Zakariyah, 2012). They also argue that ḥājah in SDM is used extensively as a legal device without appreciating its historical and contextual framework since the classical jurists inclusively used it for individuals, not corporations and legal entities. A review of the Islamic finance literature also reveals that some writers have mixed up the concept of ḍarūrah (necessity) with ḥājah. While some others have confused ḥājah as an uṣūlī term (Islamic jurisprudence) with its feqhī (Islamic law) concept. Against these backdrops, this article attempts to define ḥājah in the context of financial services and products along with a guiding framework for the right usage of the doctrine of need in SDM. RESEARCH METHOD This study is based on qualitative research. Using content analysis, the classical literature of Islamic jurisprudence was reviewed to analyze the concept of ḥājah, its legitimacy, and its Sharīʿah rulings. The ḥājah parameters are developed by deploying inductive analysis of the juristic scholarship on the doctrine of need. To substantiate the parameters in the context of SDM in Islamic finance, practical examples have been analyzed from the Sharīʿah Standards issued by the Bahrain-based Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). The Doctrine of Ḥājah in Islamic law Ḥājah literally means ‘need’. Technically, in the literature of Islamic jurisprudence, the term has two meanings. 1. In the context of maqāṣd (the objectives of Sharīʿah) and Islamic jurisprudence(uṣūl), Imām Shāṭebī defined it as ‫أ�ﺎ ﻣﺎ ﻳﻔﺘﻘﺮ إﻟﻴﻪ اﳌﺮء ﻣﻦ ﺣﻴﺚ اﻟﺘﻮﺳﻌﺔ ورﻓﻊ اﻟﻀﻴﻖ اﳌﺆدي ﻏﺎﻟﺒﺎً إﱃ اﳊﺮج واﳌﺸﻘﺔ‬ “complementary interests (arrangement); people need them in terms of expansion and to remove the hurdle often leading to severity and hardship which cause the loss of Sharīʿah objective” (Al-Shāṭibī, 1997). The contemporary scholar Ibn ʿĀshūr described it more comprehensively, “ḥājah consists of what is required by the people for the realization of their interests and the proper execution of their affairs” (Ibn ʿĀshūr, 2006). Ḥājah is the second category in the hierarchy of maṣlaḥah as per Imām Shāṭebī’s classification. It stands between necessity (ḍarūrah) and 38
  3. Journal of Fatwa Management and Research | Jurnal Pengurusan dan Penyelidikan Fatwa | ‫ﻣﺠﻠﺔ إدارة وﺑﺤﻮث اﻟﻔﺘﺎوى‬ Oktober 2021 |Vol. 26| ISSN: 2232-1047 | eISSN: 0127-8886 embellishment (taḥsīniyah). Unlike ḍarūrah whose rejection results in total disruption and chaos, the neglect of ḥājah does not lead to such a collapse in social and personal life. However, as opposed to the accomplishment of taḥsīniyah, the avoidance of ḥājah causes difficulties and hardship (Laldin et al., 2013). In this context, hājah is sometimes translated as ‘complementary’ since it is a category of maṣlaḥah that complement the interest at the level of ḍarūrah. ‫ﻫﻮ اﻓﺘﻘﺎر ﻓﺮد أو أﻓﺮاد‬ ‫ ﳑﺎ ﳜﺎﻟﻒ اﻷدﻟﺔ او اﻟﻘﻮاﻋﺪ‬،‫ﳏﺼﻮرﻳﻦ إﱃ ﺷﻴﺊ ﻷﺟﻞ اﻟﺘﻮﺳﻌﺔ ورﻓﻊ اﻟﻀﻴﻖ واﳌﺸﻘﺔ‬ .‫اﻟﺸﺮﻋﻴﺔ‬ 2. In fiqh literature, Fuzī (2018) defined ḥājah as: “ḥājah is the need of an individual or a group of particular individuals to something in order to expand and relieve distress, and to remove hardship in a way that contradicts with the Sharīʿah evidence or rules”. Hence, it can be summarized that ḥājah in fiqh refers to a state of compelling situation below necessity that requires relaxation in the original ruling on the grounds of human need, while ḍarūrah (necessity) is a state of emergency and survival that demands a departure from a standard Sharīʿah ruling such as eating pork and drinking alcohol, etc. In this paper, ḥājah is discussed from the fiqh perspective, which in the context of contemporary banking and financial transactions indicates a situation where —without resorting to a specific approach—either (1) contracting parties cannot fulfill their commercial/ financial needs, or (2) a transaction cannot be performed. Examples of the first type of ḥājah are adhesion contracts, syndicate financing, raising corporate funds and investment accounts, etc. While examples of the second type could be import and export trading that requires a specific business procedure as per the applicable internal and local regulations such as Letter of Credit (LC) and goods insurance etc. The Legitimacy Of Ḥājah-Based Ruling The universe is evolving continuously, and change is the only constant. The dynamics of life affect individuals, societies, corporations, and businesses alike. Sharīʿah as a comprehensive legal framework has the capacity to address the challenges and new normal situations arising from such changes either by enabling a new rule or modifying the existing legal structure. Therefore, Muslim jurists have provided a set of concessional rules under the doctrine of ḥājah to support the social vehicle keeps moving. It enables the affected individuals to actualize a legitimate 39
  4. Journal of Fatwa Management and Research | Jurnal Pengurusan dan Penyelidikan Fatwa | ‫ﻣﺠﻠﺔ إدارة وﺑﺤﻮث اﻟﻔﺘﺎوى‬ Oktober 2021 |Vol. 26| ISSN: 2232-1047 | eISSN: 0127-8886 goal without jeopardizing the Sharīʿah rules (Al-Mutairi, 1995). In a business transaction, an example of the ḥājah-based ruling could be the famous Prophetic narration: ‫ﻻ ﺗﺒﻊ ﻣﺎ ﻟﻴﺲ ﻋﻨﺪك‬ “do not sell what you do not possess” (Al-Tabrizi, 2000). This is a general principle in sale transactions. Ibn ʿAbbās narrated that when the Prophet (PBUH) migrated to Medina, he observed that people are conducting forward sale of dates where the price is paid upfront with delayed delivery for a certain period keeping in view the harvesting session. This practice explicitly violates the above-mentioned narration since the seller sells dates before possession. However, considering the need of farmers for cash as working capital, the Prophet (PBUH) allowed this practice as a concession from the general sale rules with certain parameters stating: ‫ﻣﻦ أﺳﻠﻢ ﻓﻠﻴﺴﻠﻢ ﰲ ﻛﻴﻞ ﻣﻌﻠﻮم ووزن ﻣﻌﻠﻮم إﱃ أﺟﻞ ﻣﻌﻠﻮم‬ “whoever is paid in advance (for a commodity, it should be) for a specific volume or a specific weight (to be delivered) on a specific date” (AlNishapori, 2007). Another example is the concession manifested in the permissibility of bayʿ al-ʿarāyā (sale of fresh dates on trees for dried dates on the ground). The Prophet (PBUH) stipulated that if a date is exchanged for a date, it is allowed provided that the counter values must be exchanged on spot with equal quantity (Al-Tabrizi, 2000). In the sale of dates on trees against dried ones, the exact quantity cannot be ascertained, which eventually leads to a type of Ribā known as Ribā al-faḍl (interest of excess commodity in rebawī items). Nevertheless, the Prophet (PBUH) exempted this sale from the general ruling due to poor people’s need for fresh dates. This is also an exemption from the Prophetic narration prohibiting a sale where a known item is sold for an unknown one from the same genus (bayʿ ul muzābanah) (Al-Bukhari, 2010). This type of exemption establishes a legal doctrine that Islamic law takes accounts of human needs in an ever-changing social and economic environment, substantiating the Qurānic statement: ‫ﻳﺮﻳﺪ ﷲ ﺑﻜﻢ اﻟﻴﺴﺮ وﻻ ﻳﺮﻳﺪ ﺑﻜﻢ اﻟﻌﺴﺮ‬ “Allah intends every facility for you; he does not want to put you in difficulty” (2:185). Based on similar textual evidences, jurists have developed the maxims of (1) ‫( رﻓﻊ اﳊﺮج‬removing hardship), (2) ‫اﳌﺸﻘﺔ ﲡﻠﺐ‬ ‫(اﻟﺘﻴﺴﲑ‬adversity brings ease), (3) the principle of maṣlahah (public interest) and (4) rukhṣah (concession). These maxims entail that in certain cases, the original law—if causes unfeasible and unusual hardship—is relaxed. Similarly, the principle of istiḥsān (juristic preference), as described by alṢarakhsī, justifies leaving an obvious analogy to provide comparatively 40
  5. Journal of Fatwa Management and Research | Jurnal Pengurusan dan Penyelidikan Fatwa | ‫ﻣﺠﻠﺔ إدارة وﺑﺤﻮث اﻟﻔﺘﺎوى‬ Oktober 2021 |Vol. 26| ISSN: 2232-1047 | eISSN: 0127-8886 an easier option to the people(Al-Sarakhsi, 1986). Hence, the doctrine of ḥājah (need) denotes Islam’s concern for relieving hardship by providing relaxation in default rules, throughout the full range of human life. Types of Ḥājah Ḥājah is classified into ‘public need’ and ‘private need’. The public need is a pressing need that involves society, such as the need for istisnāʿ (manufacturing contract), Salam (advance payment sale with deferred delivery), istijrār, and other industrial, agricultural, business or transportation needs. On the other hand, a private need refers to a need faced by individuals or a certain group of people and professions such as the need for insurance/takaful for traders (AAOIFI Standard No. 41). The Difference between Ḥājah and Ḍarurah based Sharīʿah Ruling It should be taken into consideration that sometimes jurists use ḥājah and ḍarurah interchangeably as a matter of tolerance in the language (Niyazee, 2013).. For example, if a person is starving without the risk of death or injury, he is not allowed to eat prohibited things. However, if his starvation creates the risk of death or injury, he is legally obliged to consume prohibited food. Scholars may use the term ḥājah or ḍarūrah for both cases, but technically, the former is ḥājah and the latter is ḍarūrah (Zaidan, 2000). However, from a legal standpoint there are a number of differences between their rulings (Al-Sarakhsi, 1986): 1. Ḍarūrah provides a departure in case of necessity from a standard Sharīʿah ruling (based on direct Sharīʿah text and definitive evidence) such as eating pork or drinking alcohol which is primary prohibitions. 2. Unlike ḍarūrah, ḥājah, principally, does not render a primary prohibited action as permissible; rather it permits to override only secondary prohibitions i.e., permissible acts that are prohibited for the sake of blocking the means —‫ﻟﻠﺬرﻳﻌﺔ‬ ‫( —ﺳﺪا‬as a safety feature to avoid indulging into direct prohibited actions) (Ibn-Qayyem, 2002). For example, excessive gharar is prohibited since it leads to a dispute. However, a Sharīʿah vetted ḥājah supersedes the prohibition of gharar in a commutative transaction when no alternative is available and there is a regulation or social need such as commercial insurance in the absence of takaful (AAOIFI Standard No. 31, 4/4). 41
  6. Journal of Fatwa Management and Research | Jurnal Pengurusan dan Penyelidikan Fatwa | ‫ﻣﺠﻠﺔ إدارة وﺑﺤﻮث اﻟﻔﺘﺎوى‬ Oktober 2021 |Vol. 26| ISSN: 2232-1047 | eISSN: 0127-8886 3. Similarly, ḥājah also justifies a departure from a general fiqh ruling (derived from analogy/qiyās or exertion/ijtehād) to a concessionary one in order to accommodate the human need when the original law results in an unusual hardship. For example, OIC Fiqh Council (2000) passed resolution no. 50/1/6 that considers owning a house as a basic human need (ḥājah). However, the council categorically prohibited interest-based home financing on the ground that “this method is based on ribā (interest) transaction, and it cannot be allowed based on ḥājah, because ḥājah cannot make ḥarām bi al-dhāt (primarily prohibited) things permissible”. However, the concession depends on the nature of the ḥājah. A public ḥājah grants more leeway to avail a concession than a private ḥājah. This is due to the fact that the concession in the case of public hājah is granted by Sharīʿah with an open-ended statement. Such as the permissibility of ijārah and salam contracts on the basis of public need is an exemption from the general rule – “do not sell what you do not have”. Whereas the text that has given flexibility based on private hājah is subject to the hardship faced by an individual. For example, wearing silk is prohibited for men. However, the Prophet (PBUH) granted a concession to some of his companions to wear silk when they suffered from scabies and itches. Therefore, in contrast to a public hājah, a concession in private hājah can be used only in proportion to the person’s actual need (Laldin et al., 2013). 4. Ḍarūrah and specific ḥājah driven concession are time-bound and applicable only to the individual/s dealing with the situation, while in the case of public ḥājah, the ruling is universal and perpetual (Al-Shāṭibī, 1997). 5. Ḥājah also provides exceptional concessions in a subsidiary sale (alʿaqd al-dhemnī) such as waiving of the requirement of offer and acceptance and tolerance of ambiguity of the subject matter in a subsidiary sale (AAOIFI Standard No. 25 2/5). DISCUSSION The foregoing discussion indicates that Sharīʿah as a legal framework takes into account the evolving social environment and business landscape. Ibn-Qayyem (2002)rightly articulated that justice is not served by the formal application of Islamic law regardless of circumstances that may present pressing situations of necessity and need. Therefore, jurists 42
  7. Journal of Fatwa Management and Research | Jurnal Pengurusan dan Penyelidikan Fatwa | ‫ﻣﺠﻠﺔ إدارة وﺑﺤﻮث اﻟﻔﺘﺎوى‬ Oktober 2021 |Vol. 26| ISSN: 2232-1047 | eISSN: 0127-8886 formulated several legal maxims and principles to facilitate Sharīʿah decision-makers in assessing a pressing need in society. Nevertheless, it shall be noted that the doctrine of ḥājah in Islamic law is primarily discussed by scholars in the context of individuals. For this reason, some scholars believe that need based Sharīʿah rulings do not apply to legal entities such as modern corporations and financial institutions. They argue that Sharīʿah sources have provided concession (rukhsah) against hardship and impediment faced physically by individuals (nafs). As far as the challenges of legal entities such as financial institutions are concerned, they are principally related to wealth (māl) and Sharīʿah concessions are not applicable to wealth accumulation (Islamic Economic Forum, 2020). However, there are several examples where the AAOIFI Sharīʿah Standards (2017) assigned ḥājah based rulings to financial institutions to enable them to navigate through a difficult situation with the support of exceptional concessions. From this perspective, it can be argued that the doctrine of need may constitute a base for SDM in legal entities and financial institutions in case of a pressing need. Nevertheless, a legal entity will not enjoy concession resulted from ḥājah as an independent beneficiary, rather as a tool to serve a legitimate interest of the individuals, the society as a whole or to ensure the higher objectives. For example: 1. Serving the interest of the individuals: a trading company may be given relaxation for a certain period to avail conventional transit insurance in the absence of a takaful facility or takaful facility that is not commercially viable. This serves the interest of shareholders and owners of the firm to manage their risk exposure. 2. Serving the interest of the society: it is a well-established maxim in fiqh that ‫اﳊﺎﺟﺔ ﺗﻨﺰل ﻣﻨﺰﻟﺔ اﻟﻀﺮورة ﻋﺎﻣﺔ ﻛﺎﻧﺖ أو ﺧﺎﺻﺔ‬ “a legitimate public need is treated like a necessity” (Laldin et al., 2013). A legal entity may become a means to fulfill that need. For example, providing a Sharīʿah compliant insurance coverage is a public need, for which establishment of takaful institutions is required. To sustain the operation of a takaful company, it also requires reinsurance coverage. In the absence of a re-takaful company, AAOIFI (Standard No. 41, 3/2) allowed to reinsure with traditional reinsurance company as a transitional arrangement on the ground of “practical necessity arising from the lack of Islamic reinsurance coverage and dire 43
  8. Journal of Fatwa Management and Research | Jurnal Pengurusan dan Penyelidikan Fatwa | ‫ﻣﺠﻠﺔ إدارة وﺑﺤﻮث اﻟﻔﺘﺎوى‬ Oktober 2021 |Vol. 26| ISSN: 2232-1047 | eISSN: 0127-8886 public need which ranks up as necessity”. Hence, this concession supports takaful firms to fulfill the public need effectively. 3. Ensuring the higher objectives: for deploying a ḥīlah (legal stratagem) in the context of legal entities, often, jurists prescribe controls that are influenced by the conditions prescribed for enacting a ḥājah based ruling for individuals. For example, tawarruq (monetization) is a permissible mechanism to achieve liquidity through the purchase and subsequent sale of a lawful asset. liquidity management is a serious challenge for the majority of IFIs due to the limited Sharīʿah compliant investment avenues. AAOIFI (Standard No. 30) allowed IFIs to manage their liquidity through tawarruq provided that it shall be treated as the last resort. Clause No. 5/1 states: “Monetization is not a mode of investment or financing. It has been permitted when there is a need for it, subject to specific terms and conditions”. Hence, tawarruq despite being a permissible mechanism is governed by the above conditions to ensure —as the Sharīʿah basis of the standard states— “Islamic financial institutions fulfill the core objective of their establishment” and to “curb any tendency for expending tawarruq to the extent that jeopardizes the extensive use of the original modes of investment and financing (such as muḍārabah and mushārakah, etc.)”. The above discussion leads to an important question, what are the criteria (ḍawābit) for making a need based Sharīʿah decision in IFIs? Imām Shāṭibī categorically stated that not every human need begets facility, nor every hardship forms a basis for a concession in Sharīʿah rulings. Thus, both shall be subject to certain rules and conditions in order to become a means for a concession (Al-Shāṭibī, 1997). Ḥājah is a subjective judgment that can neither be quantified nor predicted in advance as the underlying assumptions vary according to time and circumstances. A concession given due to ḥājah may be beneficial at a certain time and conditions, and useless at another. Therefore, for a hājah to qualify in Islamic law as a cause for facilitation, jurists laid down several conditions. The following section attempts to summarize the controls suggested by classical Islamic jurists in dealing with hājah and to assess their relevance in the context of need based 44
  9. Journal of Fatwa Management and Research | Jurnal Pengurusan dan Penyelidikan Fatwa | ‫ﻣﺠﻠﺔ إدارة وﺑﺤﻮث اﻟﻔﺘﺎوى‬ Oktober 2021 |Vol. 26| ISSN: 2232-1047 | eISSN: 0127-8886 Sharīʿah decision-making in IFIs. These parameters are designed to ensure that ḥājah does not become an instrument of arbitrary desire or individual bias in Sharīʿah decision making. Hājah Parameters 1. The Ḥājah Must Be Real, Not Imaginative For a ḥājah to be a justification for a departure from a general fiqh ruling (derived from analogy/qiyās or exertion/ijtehād) to a concessionary one, firstly, the need must be factually correct either with absolute certainty or with reasonable probability, indicating that people will face hardship if a concession is not provided (Al-Musooah, 1998). In other words, ḥājah based Sharīʿah decision shall not be made based on assumptions, because a mere suspicion or plausibility (tawahhum) does not enact concessionary legislation(Al-Suyuti, 1973). For example, most scholars believe that a bilateral promise is not binding in Islamic law. However, an exemption may be given in line with AAOIFI in cases where a transaction cannot be proceeded without making a bilateral promise a binding one by virtue of local or international law, norms, customs, or otherwise. Such as in the case of the LC agreement, the bilateral promise is perceived binding according to the international trade norms. Secondly, the hardship shall be beyond a trivial discomfort causing difficulties in social and personal life as per customary practices(AlShāṭibī, 1997). The determination of the severity of the hardship is left to the discretion of the individual undergoing it. As far as the normal distress is concerned, it is not a proper ground to leverage a concessionary ruling. For example, AAOIFI (Standard No. 30) allowed tawarruq with a condition that “institution shall resort to monetization only when it faces the danger of a liquidity shortage that could interrupt the flow of its operations and cause losses for its clients”. For the consideration of this parameter in SDM, Sharīʿah decisionmakers should develop a very clear criterion to ascertain the actuality of the need, its significance, relevance, and magnitude of the resultant hardship. They may benefit from the relevant accessible statistical studies and empirical research which should be analyzed from a Sharīʿah perspective before granting a concession. It is the responsibility of the beneficiary of the concession to provide solid evidence of the need and its potential impacts to enable the Sharīʿah decision-makers to assess the situation objectively. 2. Non-availability of Alternatives Flexibility in the original ruling is given only when there is no other 45
  10. Journal of Fatwa Management and Research | Jurnal Pengurusan dan Penyelidikan Fatwa | ‫ﻣﺠﻠﺔ إدارة وﺑﺤﻮث اﻟﻔﺘﺎوى‬ Oktober 2021 |Vol. 26| ISSN: 2232-1047 | eISSN: 0127-8886 permissible way to accomplish the task(Al-Zuhaili, 1985). For example, AAOIFI allowed takaful companies with certain conditions to reinsure with traditional reinsurance companies as a transitional arrangement. One of the conditions is that the takaful companies should try their best to reinsure first with Islamic reinsurance companies (Standard No. 41, 6/1). Therefore, the concession is provided only in case of non-availability of Islamic reinsurance. In the same vein, AAOIFI (Standard No. 30) allowed the use of tawarruq as the last resort. Clause No. 5/1 states: “(the institutions) shall exert no effort for fund mobilization through other modes such as muḍārabah, investment agency, Sukuk, investments funds, and the like”. When a customer is beneficiary of tawarruq (such as in the case of personal financing, debt restructuring, hedging, or Islamic credit card structured on tawarruq mode), the Sharīʿah basis of the standard states “they (institutions) shall also restrict the use of monetization to the cases of clients whose transactions cannot be disposed of through other modes of financing and investment such as mushārakah, mudhārabah, ijārah, istiṣnāʿ and the like”. To incorporate this requirement in SDM, Sharīʿah decision-makers should ask the relevant team to present an exploratory report/ briefing on the feasibility of Sharīʿah compliant alternatives. This is to ensure that a concession will be provided only If either the alternative is not available, commercially not feasible, or does not serve the need. If the beneficiary is a customer of an IFI, he may provide an undertaking on the nonavailability of alternatives. The in-house Sharīʿah research function may support the Sharīʿah decision-makers in analyzing the best market practices and solutions provided by academicians and research firms. 3. The Intended Benefit (Maṣlaḥah) Shall Be in Harmony with Sharīʿah and Shall Be Weightier Than Any Harm Associated with It The purpose of a concessionary ruling in need cases is to serve an individual or public interest (maṣlaḥah ʿāmmah). To validate reliance on ḥājah, the intended benefit shall fulfill the following three conditions: 1) It shall not contradict with the absolute provision of Sharīʿah: The legal maxim states ‫ﻻ ﺗﻨﺎط ﺎﺑﳌﻌﺎﺻﻲ‬ ‫“ اﻟرﺧص‬Sharīʿah concessions cannot be granted for sins”(Ibn Nujaym, 1985). for example, Ribā (interest) which is explicitly prohibited in Qurān and Sunnah, cannot be legalized on the ground that it has become a base for the modern financial system. 2) the end result shall not constitute a prohibited talfīq(eclecticism): 46
  11. Journal of Fatwa Management and Research | Jurnal Pengurusan dan Penyelidikan Fatwa | ‫ﻣﺠﻠﺔ إدارة وﺑﺤﻮث اﻟﻔﺘﺎوى‬ Oktober 2021 |Vol. 26| ISSN: 2232-1047 | eISSN: 0127-8886 AAOIFI Standard No 29. 8/4 explicitly prohibited amalgamation of different fiqh opinions in SDM in a manner where no jurists permit it: “it has to be ensured that making use of the Sharīʿah exemption does not embody a related act that the Fuqahā (jurists) unanimously consider as prohibited, or lead to issuing different Fatwas for two identical incidences. Misuse of Sharīʿah exemptions in this manner is known in fiqh as ‘talfīq’ (eclecticism)”. 3) attainment of such interest shall not lead to the negation of greater interest: it implies firstly, that there must be a reasonable probability that the benefit of enacting a concessionary ruling in the pursuance of ḥājah outweigh a negative impact that might result from it(Al-Juwaini, 1980). Secondly, the public interest shall be prioritized over individual interest. This parameter requires the Sharīʿah decision-makers to assess, on one hand, compatibility of the concession with the absolute Sharīʿah provisions and juristic heritage and on the other hand, critically evaluate dynamics of the result and its consequential impacts on the society, public, and planet. A short-term individual or institutional benefit cannot be actualized at the expense of a greater long-term negative social or environmental impact. It also implies that when a seemingly beneficial interest contradicts with Sharīʿah, the solution is not to override the Sharīʿah, but to find a sweet spot at the intersection that accommodate both worlds. Figure 1: Identifying the Sweet Spot in SDM 47
  12. Journal of Fatwa Management and Research | Jurnal Pengurusan dan Penyelidikan Fatwa | ‫ﻣﺠﻠﺔ إدارة وﺑﺤﻮث اﻟﻔﺘﺎوى‬ Oktober 2021 |Vol. 26| ISSN: 2232-1047 | eISSN: 0127-8886 4. The Concession Is Time and Need Bound The concession provided due to a hardship in case of a private need is neither a total exemption nor perpetual, rather it is time-bound and confined to the ‫اﳊﺎﺟﺔ ﺗﻘ ّﺪر‬ ‫إذا ﺿﺎق اﻷﻣﺮ‬ extent of the need (Al-Zuhaili, 1985). As per the maxim of ḥājah, ‫“ ﺑﻘﺪرﻫﺎ‬need is to be assessed and treated proportionately”, and ‫ وإذا اﺗﺴﻊ ﺿﺎق‬،‫“ اﺗﺴﻊ‬when hardship causes constraint, (the law), becomes permissive, but as circumstances ease, (the law) becomes strict”. These two maxims constitute that ḥājah based ruling shall not be extended beyond its limit and a concession shall be measured according to the magnitude of the need. For this reason, AAOIFI Standard No. 29 8/4 states: “fatwa issuers shall not always pursue Sharīʿah exemptions (rukhaṣ) to make matters easier for institutions. A Sharīʿah exemption should be sought only when it results from a thorough examination of the issue and appropriate reasoning”. For example, when a conventional bank is being converted to an Islamic one, principally, the interest-bearing transactions shall also be ceased or disposed of immediately. However, a reasonable delay in clearing out the non-permissible transactions may be justified on the ground of ḥājah as per the AAOIFI Sharīʿah Standard No. 6, clause 2/1 as it states: “unless such delay becomes a necessity or a pressing need. Thus, the circumstances surrounding the conversion must be taken into the consideration to avoid the risk of failure or a breakdown of the bank’s operations”. Similarly, the newly converted bank shall also terminate its all interestbased relationships with conventional banks. Nevertheless, it may deal with them provided that the relationship is “limited to the magnitude of the need to do so” as per the AAOIFI Sharīʿah Standard No. 6, clause 3/6. This restriction can also be seen regarding reinsurance with conventional reinsurance companies: “Islamic insurance companies should stick to the minimum size of reinsurance with traditional reinsurance companies, and Sharīʿah Board should undertake to follow up in this connection” (Standard No. 41, 6/5). The confinement of concession to the actuality of the need implies that the beneficiary of the concession shall not capitalize it for purposes other than the initial need. For this reason, regarding tawarruq, AAOIFI Standard No. 30, 5/1, categorically stated: “the institutions shall not use monetization as a means of mobilizing liquidity for their operations”. To implement this control in a private-need case, the Sharīʿah decisionmakers should first, inquire the beneficiary (management or customer) to clearly describe the exact magnitude of the need so that the Sharīʿah concession would be commensurate with the actual extent of the need. Second, the Sharīʿah resolution should highlight a reasonable timeline for the effectiveness of the concession and a threshold for the total volume of the 48
  13. Journal of Fatwa Management and Research | Jurnal Pengurusan dan Penyelidikan Fatwa | ‫ﻣﺠﻠﺔ إدارة وﺑﺤﻮث اﻟﻔﺘﺎوى‬ Oktober 2021 |Vol. 26| ISSN: 2232-1047 | eISSN: 0127-8886 need-based transactions. So, when circumstances change and the justification remains no more valid, the product structured on the basis of ḥājah shall be returned to the original ruling. It is also a responsibility of the Sharīʿah control and audit functions to monitor the given timeline, validity of the ḥājah justification, and the threshold limit approved by the Sharīʿah board. CONCLUSION The doctrine of ḥājah as a juristic device may constitute a justification for concessionary ruling in Sharīʿah decision making in Islamic finance to navigate through challenges when the original law results in an unusual hardship. However, it shall not be taken as a free license for achieving arbitrary desires and self-seeking interests under the banner of need. The ḥājah must, therefore, be governed by the controls described in the above parameters to ensure that only genuine social, individual, and institutional needs which are in harmony with the Sharīʿah will qualify for relaxation in the formal application of the law. REFERENCES AAOIFI. (2017). AAOIFI Shariah standards. The Accounting and Auditing Organization for Islamic Financial Institutions. Agha, E. (2020). The Art of Making Smart Shariah Decisions in Islamic Banking amidst COVID 19. ISFIRE, 30–44. Al-Bukhari, I. (2010). Sahih al-Bukhari. Darul Fikr. Al-Juwaini, abadul M. (1980). al-Siyasah al-Shariyah wal Qaza. Maktabah Imamul Haramian. Al-Musooah. (1998). al-Musooah al-Fiqhiya al-Kuwaitiyah. kuwait ministry of awqaf and islamic affairs. Al-Mutairi, M. Z. (1995). Necessity in Islamic law. University of Edinburgh. Al-Nishapori, I. J. (2007). Sahih Muslim. In Dar al-Jail. Al-Sarakhsi, M. (1986). Al-Mabsoot. Darul Marifah. Al-Shāṭibī, A. I. (1997). Al-Muwāfaqāt fī Uṣūl al-Sharīʿah. Dār ibn ʿaffān. Al-Suyuti, J. (1973). al-Ashabah wa al-Nazair. Dar al-Kutub al-`Ilmiya. Al-Tabrizi, M. (2000). Mishkatul Masabih. Maktaba Darul uloom. Al-Zuhaili, W. (1985). Theory of Shariah necessity and its comparison with law. Muassasah al-Risalah. Fuzi, A. (2018). The Fiqh of Minority Muslims: An applied study. Darul Mamon. Ibn-Qayyem, M. (2002). Ilamul Muwaqiyeen. Dar Ibn Juzi. Ibn Nujaym, Z. I. (1985). Al-Ashbah wa al-Naza’ir. Darul Fikr. Ibn ʿĀshūr, M. al-Ṭāhir. (2006). Maqāṣid al-Sharīʿah al-Islāmiyyah. Dār alSaḥnūn li al-Nashr wa al-Tawzīʿ. Islamic Economic Forum. (2020). Statement of Islamic Economic Forum about Interest based Borrowing by Firms. Statement of Islamic Economic Forum. 49
  14. Journal of Fatwa Management and Research | Jurnal Pengurusan dan Penyelidikan Fatwa | ‫ﻣﺠﻠﺔ إدارة وﺑﺤﻮث اﻟﻔﺘﺎوى‬ Oktober 2021 |Vol. 26| ISSN: 2232-1047 | eISSN: 0127-8886 Islamic Fiqh Academy. (2000). Resolutions and Recommendations of the Council of the Islamic Fiqh Academy 1985- 2000. Islamic Development Bank, Islamic Research and Training Institute. Laldin, M. A., Bouheraoua, S., & Ansari, R. (2013). Islamic Legal Maxims & thier Application in Islamic Finance. ISRA. Niyazee, I. (2013). Islamic Legal Maxims, Federal Law House, Rawalpindi, Lahore, Pakistan. Federal Law House. Usmānī, M. T. (2009). Ghair Sodi Bankari. Quranic Studies Publication. Zaidan, A. K. (2000). ḥālatu ḍarūrah fi al-Sharīʿah al-Islāmiyah. Muassasah alRisalah. Zakariyah, L. (2012). Necessity as a pretext for violation of Islamic Commercial Law: A Scenario of Mortgage Contract in the UK. Journal of Islamic Economics, Banking, and Finance, 8(1). Penafian Pandangan yang dinyatakan dalam artikel ini adalah pandangan penulis. Jurnal Pengurusan dan Penyelidikan Fatwa tidak akan bertanggungjawab atas apa-apa kerugian, kerosakan atau lain-lain liabiliti yang disebabkan oleh / timbul daripada penggunaan kandungan artikel ini. 50