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The (mis)use of al-Hilah (legal trick) and al-Makhraj (legal exit) in Islamic finance


  • Edib Smolo
  • Abubakar Muhammad Musa


Purpose - The purpose of this paper is to discuss the concepts ofhilah(legal stratagem or legal trick) andmakhraj(legal exit) and to examine their relevance and application in the contemporary Islamic financial services and products. Design/methodology/approach - This paper uses the qualitative research approach to provide a theoretical overview ofhilahandmakhrajliterally and technically and to examine their practical applications in Islamic financial products and services. In particular, this paper evaluates several Islamic financial contracts and examines its practices in light of the implications ofhilahormakhraj. Findings - The paper finds that there is a glaring difference in perception and application ofhilahandmakhraj, as argued by some scholars. It has been found that the principle ofhilahhas been extensively used in the Islamic finance industry as a way to circumvent theribaprohibition. For example, Islamic financial instruments such asbay’ bithaman al-ajil, bay’ al-‘inah, tawarruq, commoditymurabahah,musharakah mutanaqisahand, in some cases, the sale and lease backsukukare found to be tainted byhilah. Research limitations/implications - Because this is a theoretical paper, it should be explored in more detail, and critical analysis of Islamic financial services and products should be reviewed in line with these two principles to ascertain if the products and services are in line with Shariah requirements and devoid ofhilahpractices or not and to align the industry with themaqasid al-Shariah. Practical implications - This paper identifies a serious challenge that Islamic finance practitioners face in product development in their effort to provide more competitive services to their customers. As a result, it demonstrates the need to proactively usemakhrajin innovating Islamic financial products and proffering more sustainable and competitive solutions. Originality/value - This paper discusses a topic that attempts to dispel the suspicious perceptions of some analysts as to the genuineness of Islamic financial practices.

Suggested Citation

  • Edib Smolo & Abubakar Muhammad Musa, 2020. "The (mis)use of al-Hilah (legal trick) and al-Makhraj (legal exit) in Islamic finance," Journal of Islamic Accounting and Business Research, Emerald Group Publishing Limited, vol. 11(10), pages 2169-2182, November.
  • Handle: RePEc:eme:jiabrp:jiabr-01-2020-0009
    DOI: 10.1108/JIABR-01-2020-0009

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    Cited by:

    1. Muhammad Ridzuan Abdul Aziz & Suraya Ika Tamrin & Abidah Saad & Mohammad Zulfakhairi Mokhtar & Nor Shahrul Nizam Muhamad Nor, 2023. "Musyarakah Mutanaqisah: A Systematic Literature Review," Information Management and Business Review, AMH International, vol. 15(3), pages 163-171.


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