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Islamic Finance, Risk-Sharing and Macroeconomic Stability pp 41–59Cite as

Palgrave Macmillan

The Theological Foundations of Islamic Banking: A Critical Review

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Abstract

The most important characteristic of Islamic banking is to maintain its operations and products according to the principles of Shari’ah. Islamic banking is growing rapidly in the modern economic world as an alternative to the conventional banking. It is expected that Islamic banking operations will comply with the Shari’ah law and will contribute towards achieving the Maqasid al-Shari’ah (objectives of Shari’ah), which is ultimate attainment of total welfare of the Muslim Ummah and the human being at large. The findings of the several studies show that Shari’ah compliance is the single most important factor for choosing Islamic banking. Hence, understanding the Shari’ah as the foundation of Islamic banking deemed important. This chapter aims at reviewing the Shari’ah and its concerned components with a view to have a clear understanding about the Shari’ah and its principles to govern economic activities in the society.

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Notes

  1. 1.

    World Bank, Islamic Finance, 31 March 2015, Retrieved July 24, 2018 from http://www.worldbank.org/en/topic/financialsector/brief/islamic-finance.

  2. 2.

    Ummah is an Arabic word meaning “community” or “nation”. It is commonly used to mean either the collective nation of states. In the context of Islam, the word ummah is used to mean the diasporas or “Community of the Believers” (ummat al-mu’minin) and thus the whole Muslim world. For details, see Peter G. Mandaville, Reimagining the Ummah, Ali Mohammadi (ed.), Islam Encountering Globalization, New York, 2005, p. 62.

  3. 3.

    See verse 59 of Surah 7 of the Qur’an.

  4. 4.

    “And know that your possessions and your children are but a trial” (see verse 28 of Surah 8 of the Qur’an). “Seek the other world by means of what Allah has bestowed upon you” (see verse 77 of Surah 28 of the Qur’an).

  5. 5.

    “We have distributed their livelihood among them in worldly life, and have raised some above others in the matter of social degrees, so that some of them may utilize the services of others in their work” (see verse 43 of Surah 32 of the Qur’an).

  6. 6.

    See verse 275 of Surah 2 of the Qur’an.

  7. 7.

    See verse 90–91 of Surah 5 of the Qur’an.

  8. 8.

    Al-Nawawi, Y. I. S. (1991). Forty Hadith of Al-Nawawi, Al-Basheer Publications and Translations, USA, p. 7.

  9. 9.

    Abu-Dawood, S. I. A. (1999). Sunan Abu-Dawood, Darus Salam Publications, Riyad, KSA, Hadith No. 3383.

  10. 10.

    Al-Hajjaj, M. I. (1999). Sahih Al-Muslim, Darussalaam Publishers, Riyad, KSA, Hadith No. 1605.

  11. 11.

    See verse 8 of Surah 5 of the Qur’an.

  12. 12.

    See verse 35 of Surah 17 of the Qur’an.

  13. 13.

    Ibn-Majah, A. A. M. (1999). Sunan Ibn-Majah, Darussalaam Publishers, Riyad, KSA, Hadith No. 2247.

  14. 14.

    See verses 1–4 of Surah 83 of the Qur’an.

  15. 15.

    See verse 35 of Surah 17, verse 1–6 of Surah 86 of the Qur’an.

  16. 16.

    Ibn Hajar (1981) (Bab al-Najash). Ayub, M. (2007). Understanding Islamic Finance, Wiley, p. 66.

  17. 17.

    Ayub, M. (2007), Understanding Islamic Finance, Wiley, p. 66.

  18. 18.

    Suyuti, al-Jami‘al-Saghir, under the word ghabn; Kanz al-‘Ummal, Kitab al-Buyu’, 2, p. 205.

  19. 19.

    Ayub, M. (2007), Understanding Islamic Finance, Wiley, p. 68.

  20. 20.

    See verse 34 of Surah 17 of the Qur’an.

  21. 21.

    See verse 282 of Surah 2 of the Qur’an.

  22. 22.

    Malik-ibn-Anas (1999). Al-Muwatta, Darussalaam Publishers,  Riyad, KSA, Hadith No. 1494.

  23. 23.

    See verse 5 of Surah 2 of the Qur’an.

  24. 24.

    Ibn-Majah, A. A. M. (1999). Sunan Ibn-Majah, Darussalaam Publishers, Riyad, KSA, Hadith No. 4303.

  25. 25.

    Al-Hajjaj, M. I. (1999). Sahih Al-Muslim, Darussalaam Publishers, Riyad, KSA, Hadith No. 1563.

  26. 26.

    Al-Bukhari, M. (1999), Sahih Al-Bukhari, Darussalaam Publishers, Riyad, KSA, Hadith No. 2076.

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Author information

Authors and Affiliations

  1. International Islamic University Chittagong, Chittagong, Bangladesh

    Md. Thowhidul Islam

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  1. Md. Thowhidul Islam
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Editors and Affiliations

  1. Islamic Research and Training Institute, Islamic Development Bank, Jeddah, Saudi Arabia

    Muhamed Zulkhibri

  2. Islamic Research and Training Institute, Islamic Development Bank, Jeddah, Saudi Arabia

    Turkhan Ali Abdul Manap

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Islam, M.T. (2019). The Theological Foundations of Islamic Banking: A Critical Review. In: Zulkhibri, M., Abdul Manap, T. (eds) Islamic Finance, Risk-Sharing and Macroeconomic Stability. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-05225-6_3

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  • DOI: https://doi.org/10.1007/978-3-030-05225-6_3

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  • Publisher Name: Palgrave Macmillan, Cham

  • Print ISBN: 978-3-030-05224-9

  • Online ISBN: 978-3-030-05225-6

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