Before we elaborate on Islamic financial products, let’s talk about the basis of Islamic finance, its essence, its sine qua non. Like all aspects of Islam, finance also takes its fundamental structure from Sharia (or the divine law). Sharia is derived directly from the Quran, the holy book and the Sunna, the teachings and practices of the holy prophet, Mohammad (peace and blessings upon him). Together these two form a basis of all aspects of human life.
The purpose of Sharia, like the purpose of any law in the world, is the promotion of human welfare. Usually, the classic definition of the purpose of conventional law explores the obligations and purposes of law and government to protect public health, safety, and morals, and to advance general welfare including protection of people’s fundamental rights and basic liberties. In this regard, Sharia law is not at all different from conventional law.
Many jurists have expounded on the purpose and objectives of Sharia, called Maqasid-e-Sharia. Two popular and widely accepted viewpoints are by Ghazali, the 12th-century Persian philosopher, jurist and mystic and by Shatibi, the 14th-century jurist, and theologian from Andalusia, Spain. According to Ghazali, the ultimate objective of Sharia is to promote human welfare which encompasses safeguarding of
- intellect, and
Shatibi, on the other hand, elucidates the purpose of Sharia in elaborate detail. For him, the Maqasid-e-Sharia (or the purpose of Sharia) comprise of those benefits for which God revealed Sharia in the first place. Like Ghazali, Shatibi also believes that the aim of Sharia is to bring welfare to the people in this life and the afterlife. He classifies the objectives of Sharia as encompassing
- Daruriyat (vital necessities)
- Hajiyat (needs or requirements), and
- Tahsiniyat (embellishment or enrichment)
The Daruriyat are those necessities which are essential for the establishment of welfare in this world. If they are ignored, order and coherence cannot be established resulting in Fasaad (chaos and disorder). Shatibi classifies all five of Ghazali’s objectives regarding safeguarding human welfare under Daruriyat (or necessities).
Hajiyat are those goods and services which facilitate life or remove hardship. Tahsiniyat are enrichment or beautification of life. While having enough food to subsist living falls under necessities (Daruriyat), having ample nutritious food falls under needs (Hajiyat) and having delicious, gourmet food falls under enrichment (Tahsiniyat). According to scholars, Sharia not only puts comfort into human life but also beautifies it.
Interestingly, scholars classify Islamic Finance under Daruriyat or necessities. Interestingly, in modern times, Maslow’s Hierarchy of Needs which he proposed in 1943 has a somewhat similar structure in which he discusses the four basic deficiency needs (physical, security, love & friendship, and esteem) followed by self-actualization needs. While Maslow discusses how these needs affect motivation, both Ghazali & Shatibi talk about how human needs are met through the application of law (Sharia).
The next few posts will be about permissibility and prohibition under Sharia law as applicable to Islamic Finance followed by a discussion on Islamic finance from an economic viewpoint.