Ethics and Finance: Perspective of the Shariah and Its Higher Objectives (Maqasid)

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Mohammad Hashim Kamali

Abstract

This article begins with the ethical foundations of Islam that are relevant to commercial transactions – much of which strikes a common chord of objectives and values with other major traditions. This is followed by an exposition of the ethical substance of Islam in the applied fiqh provisions pertaining to contracts, and the relevance also of the higher goals and purposes of the shariah (maqasid al-shariah) to the ethical integrity of contracts. This is followed by a discussion of the shariah prohibition and damaging effects of riba. The three remaining sections address the salient characteristics of Islamic commercial law and finance: 1) Islamic finance is characteristically asset-based; 2) it is averse to reliance on debt; and 3) it is also risk-averse. This last segment explains the shariah prohibition of gharar, uncertainty and risk-taking in financial transactions. The author concludes with reflections by prominent commentators on the urgency of taking new measures to contain graft and greed and minimise the yawning gap that has developed between ethics and finance. Many have supported the view that the prevailing financial architecture no longer serves the interests even of only the privileged classes but of all strata of society.

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