What is it about?
This paper aims to develop a Sharīʿah framework for using hiyal in Islamic finance. It is an Islamic juristic term which refers to the application of acumen and ingenuity to avoid hardship in one’s commitment to Islamic rulings. It has been used as a legal device in Islamic jurisprudence to actualize a legitimate objective. Particularly, it plays a significant role in financial engineering, as it alleviates financial predicaments with remedies. The paper found that a hīlah would be considered permissible in Islamic finance if it meets the prescribed criteria of (1) Sharīʿah objectives, (2) user’s motivation, (3) means, (4) benefit and(5) concessionary rules. This proposed framework may serve as an ‘objective measure’ that will determine whether a hīlah based financial engineering aims to actualize a genuine economic need or to circumvent the prohibition of ribā.
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Why is it important?
The proposed standard of hiyal will enable Sharīʿah advisors, economists, financial engineer, legal experts and policymakers to develop comprehensive guidelines for using hiyal in Islamic financial engineering.
Perspectives
Islamic financial institutions rely heavily on hiyal to operate in a predominant conventional financial system. The application of these legal stratagems in Islamic finance has been the center of an intense debate between Islamic economists and jurists. The former argues that over-reliance on only divorces morality from technicality but also defeats the noble purposes of Islamic economics. This paper provides a synthesis of the diverse views on the subject to facilitate a minimum level of convergence among scholars on the permissibility of hiyal.
Dr. Syed Ehsanullah Agha
International Islamic University Malaysia
Read the Original
This page is a summary of: Hiyal in Islamic finance: a recognition of genuine economic need or circumvention of Riba?, Qualitative Research in Financial Markets, November 2017, Emerald,
DOI: 10.1108/qrfm-05-2017-0041.
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