Towards genuine Shariah products with lessons of the financial crisis

The paper represents an unprecedented approach towards examining the compatibility of the current debatable Islamic banking and finance products with Shariah. This approach is rooted out from the lessons of the current financial crisis with all its causes and effects. Although the paper subjects only some of the existing financing products to this new methodology of Shariah scrutiny, it lays down the principles on the basis of which all financing products, whose legality has not been free from doubt, can be scrutinized. It is perceived that this new proposed methodology for judging Islamic banking products is indispensable especially nowadays as the current approach to Ijtihad, which is based on quoting and interpreting some juristic opinions from Fiqh schools as well as the individual assessment of Maslaha, has led to having conflicting stands on many Islamic banking products; something which definitely impedes growth and damages the image of Islamic banking. Thus, practical evidences and lessons of experience, when available, must be made the reference in this regard and be given the final say. The proposed approach is predicated on the well established Shariah principle of “Lawful is what is good and beneficial, and forbidden is what is bad and harmful”. Therefore, if upon analysis a particular debatable Islamic banking product is found to be resulting in the same harms of conventional products, and potentially contributing to creation of financial crises, then it must be undoubtedly ruled as unlawful. For treating the subject, the paper starts with highlighting the conventional transactions that are deemed to be responsible for the occurrence of the financial crisis, it then examines the debatable Islamic banking products to locate any similarities to the conventional ones that led to the crisis, and it briefly discusses the various justifications provided in their support. The paper then analyzes from both Shariah as well as economic perspective these products and determines their Shariah value considering their economic substance and potential implications. The paper concludes with formulating the benchmark that against which all current and future Islamic banking and finance products should be measured.