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Shari’ah-compliant benchmark and Shari’ah-based “raf’ al-haraj” benchmark on prohibition of riba

Yasushi Suzuki (College of International Management, Ritsumeikan Asia Pacific University, Beppu, Japan)
Mohammad Dulal Miah (Department of Economics, University of Nizwa, Nizwa, Oman)

International Journal of Islamic and Middle Eastern Finance and Management

ISSN: 1753-8394

Article publication date: 10 August 2020

Issue publication date: 8 February 2021

374

Abstract

Purpose

This paper aims to propose two benchmarks “Shari’ah-compliant” benchmark and “Shari’ah-based” “raf’ al-haraj” (the removal of hardship) benchmark. The former benchmark can be applied to ensure that a transaction brings “profits on sales” and not “profits on loan”, and the latter benchmark should be addressed to ensure that a transaction does not exploit the customers of Islamic banks.

Design/methodology/approach

The authors draw upon the theory of institutional economics, in particular, instrumental and procedural rationality, to argue that the believers can pay their best effort as an exercise of ijtihad to understand and incarnate the logic and rationales implicit in the Qur’anic text.

Findings

Currently, there is no benchmark that determines the profit ceiling on murabaha. The authors suggest two types of “gray-zones” – the “Shari’ah-compliant but less contributing to the removal of hardship” and the “controversial on compliance but contributing to the removal of hardship in borrowers” to use as a benchmark in endorsing less shariah-compliant Islamic products.

Practical implications

There is no benchmark or a clear-cut demarcation that can be used to endorse less Shari’ah-compliant Islamic finance. Thus, Shari’ah-compliant’ benchmark and “Shari’ah-based” “raf’ al- haraj” benchmarks can be used to guide whether a financial transaction is acceptable or not. This guideline can be of huge practical relevance for Islamic finance.

Originality/value

There is no sensible study that offers such guidelines that can be used to demarcate whether a particular financial transaction, which has no clear-cut fatwa, is acceptable or not. Hence, the current research is novel and contributes to the existing literature of Islamic finance.

Keywords

Acknowledgements

This paper is expanded from Yasushi Suzuki (2019) “Riba, Usury and Keynes”, Islam Civilisational and Renewal, 10(2), pp. 175-188.

Citation

Suzuki, Y. and Miah, M.D. (2021), "Shari’ah-compliant benchmark and Shari’ah-based “raf’ al-haraj” benchmark on prohibition of riba", International Journal of Islamic and Middle Eastern Finance and Management, Vol. 14 No. 1, pp. 151-163. https://doi.org/10.1108/IMEFM-11-2019-0490

Publisher

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Emerald Publishing Limited

Copyright © 2020, Emerald Publishing Limited

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