Axiological Premises and Interpretative Challenges in Islamic Financial Law (Euro-Balkan Law and Economics Review)

Summary

• The article examines the value premises of Islamic financial law and how the Shari'a shapes the structuring of financial instruments.p.2
• Profit is lawful only when tied to bearing real risk, so interest on funds lent is excluded.p.10
• Depositors in Islamic banks are remunerated only through profit and loss sharing contracts such as mudaraba.p.10
• Islamic finance is described as a prohibition-driven industry in which efficiency stays subordinate to ethical-religious conformity.p.16
• A key weakness is the difficulty of developing a unified regulatory framework.p.18
• Fatwas are not binding, and Sunni Islam has no ultimate authority to decide what is Shari'a compliant.p.19
• In 2017 the Grand Mufti of Egypt declared bitcoin non-compliant with the Shari'a.p.20

Key insights

1. Risk sharing is the distinctive principle of Islamic financial intermediation, aiming at a more equitable distribution of wealth.p.11
2. The concept of tawhid limits property rights, which are conceived as functional means to the objectives of the Shari'a.p.13
3. Resource scarcity is seen as a result of inequality and inefficient distribution, not as a foundation of economic theory.p.15
4. A Shari'a-compliant fund cannot invest in shares of a conventional bank because of its interest-based activity.p.16
5. Many states are reluctant to regulate Islamic finance because it would place secular authority in the interpretation of divine law.p.18
6. Non-binding fatwas conflict with the markets' need for stability, transparency and predictability.p.19
7. The Egyptian fatwa on bitcoin had a significant effect on the early development of the Islamic fintech market.p.21
8. Fragmentation across jurisdictions prevents Islamic financial law from working as a unified supranational system.p.23