Fiqh al-Mu'amalat
Fiqh al-mu'amalat is the branch of Islamic jurisprudence that governs transactions between people: sales, leases, partnerships, loans, agency, guarantees, property and the other contracts on which Islamic finance is built.
Also called: Islamic commercial jurisprudence · fiqh al-muamalat · muamalat
Islamic jurisprudence is conventionally divided into acts of worship and mu'amalat, dealings between people. The commercial half is where the nominate contracts live: sale (including murabaha, salam and istisna'), lease (ijarah), partnership (musharakah and mudarabah), loan (qard), agency (wakalah) and debt transfer (hawalah).
A modern Islamic financial product is almost always one of these contracts, or a sequence of them, adapted to a bank's balance sheet. That is why product approval at an Islamic bank looks like contract analysis: the question is which classical contract the product really is, and whether each of that contract's conditions is met in substance as well as on paper.
The general rule in commercial dealings is usually stated as permissibility unless a prohibition applies, which is why the prohibitions on riba, gharar and maysir carry so much weight.
In practice
It is a body of jurisprudence with several schools and many points of disagreement, not a statute. A product can be accepted under one school's reasoning and rejected under another's.
See also
- ShariaSharia is the broad body of Islamic norms and law derived from the Qur'an and the Sunnah; in finance it supplies the principles that jurists turn into concrete rules for contracts, ownership, debt and exchange.
- RibaRiba is the prohibited increase at the centre of Islamic finance: an unjustified excess in a loan or in certain exchanges. It is broader than the English word "interest" and is not limited to excessive rates.
- GhararGharar is excessive uncertainty or ambiguity in the essential terms of a contract — the subject matter, the price, the delivery — of a kind that can make one party's gain depend on the other's ignorance.
- MurabahaMurabaha is a sale in which the seller discloses its cost and the agreed profit to the buyer. Islamic banks use it to finance purchases by buying an asset and reselling it to the customer on deferred terms.