The word Shari’ah literally translates to “the way,” and implies “the correct path”,

The Shari’ah essentially embodies the rules and principles sourced from the Qur’an, the Holy Book of Islam, and the Hadith, the sayings and actions of Prophet Muhammad, that defines how Muslims should conduct themselves in various aspects of their lives. This includes their personal lives, their responsibilities to society, their religious beliefs, as well as their commercial dealings that include banking, finance, insurance and investment.

The Shari’ah also includes rulings known as fatwas given by Shari’ah scholars to address new situations that have been raised or arise from time to time. A fatwa must provide progressive reasoning from the Quran and Hadith in simple words in order to be understood easily by the public.

Commercial Transactions

Generally, the Shari’ah principles in the context of commercial dealings based on the Hadith provides specific guidance on transactions that are permissible In Islam (Halal) and those that are prohibited (Haram). On transaction where the Shari’ah is silent these are considered permissible, and where there is uncertainty the ruling of a Shari’ah scholar should be taken.

The Shari’ah principles that apply to commercial dealings may be grouped in six broad areas:

1. Prohibition of Riba, meaning any excess and specifically refers to charging or paying of interest which is considered a form of exploitation by the lenders. Hence, direct lending providing interest income is replaced by investment using sale contracts providing income for investors (the lenders) through profit mark-up or profit margin and profit sharing.
2. Prohibitions of Gharar, meaning excessive uncertainly, Maysir, meaning speculation, and Qimar, meaning gambling. They all involve higher risks and the are the source of harm to individuals, businesses and society.
3. Prohibition of transactions including business activities and investments that are considered against the public good. For example, the production and sale of alcohol where consumptions can cause long-term damage to health, problems at work and family problems and even death; producers of tobacco and tobacco-related products where consumptions can lead to long-term dependence and addictions, heath issues, family problems and even death; casinos and other gambling-related activities where gambling can become an addiction, just like alcohol and drugs, and also harms in other ways including financial difficulty, mental health issues, relationship problems, trouble at work and suicide.
4. Prohibition of transactions involving pork and pork products. It is a common belief among Muslims that this prohibition is because pigs (or swine) are considered impure and unclean eating virtually anything. In the Bible, God forbids Moses and his followers to eat swine, as in Leviticus (11:27). The Bible also associates pork with death, idolatry, and sin as mentioned in the Book of Isaiah (65:4; 66:3). However, the latest reasoning that has emerged is that the major structures of pigs are very similar to humans, the genetic DNA similarity between pigs and human beings is reported to be 98%. Their organs can be transplanted into the human body with less immune reaction.
5. Shared responsibility and mutual assistance to provide risk protection, known as takaful, as an alternative to conventional insurance
6. Fairness and equity in dealings, especially in commercial transactions. The issues raised here are related to Islamic banking, sale transactions, charitable endowments, pensions funds and other long-term saving accounts.

Exception to a Ruling – The Principle of Darura

Darura is a principle in Islamic jurisprudence that permits the prohibited or to delay it in case of necessity, for example a Muslim is prohibited from eating pork but is permitted to eat it when the person’s life is in danger of death because of starvation and there is no other option of saving the life.

According to this concept, if fulfilling an obligation or requirement leads to extreme hardship the person will be exempted temporarily from such obligation until such time the person is able to fulfil it.

This exception is consistent with the objectives of Shari’ah which aim to preserve basic human necessities defined as religion, life, intellect, lineage and wealth.

Islamic banking and finance

The principle of darura is also used in commercial transactions but there is the concern is that this principle may have been used or rather abused by Islamic financial institutions to justify prohibited practices in financing and investing. For example, these may be transactions or investments that may not be in the public interest or backed by real assets.