Islamic finance, sometimes called shariah compliant finance or halal finance, is composed of two key words which are Islam and finance. To understand the concept of Islamic finance is required to comprehend both words separately.Islam means etymologically submission meaning the total submission to Allah (SWT) and the best definition of Islam is what the prophet (peace be upon him) said: To testify that there is no God worthy of worship except Allah and Muhammad (peace be upon him) is the messenger of Allah, to perform the prayer, to give zakat, fast the month of Ramadan, and perform hajj whenever you can.
Finance has many definitions based on different context but it is simply meant here the process of acquiring the fund needed to achieve an aim. Islamic finance is the process of getting the fund needed while satisfying Islamic principles. In other words, to acquire funds based on Islamic law.
Is there such a thing as Islamic Finance?The short answer is yes. How many times have you heard this word “ there is no such a thing as Islamic finance”?
This statement might indicate two things, either there is nothing in the religion of Allah (SWT) which deals with finance or the way Islamic financial institutions operate is not Islamic. Now let’s consider how these two claims can be debunked.
Regarding the first claim, firstly, it is well known that Islam is the religion of Allah, the All Wise and the All Knowing which implies that nothing has been forgotten as mentioned in the Holy Quran.
Secondly, Islam regulates human relationships vertically, with Allah, and horizontally, with other creatures and part of the human relationship is financial transactions.
Thirdly, it is hard to believe that money matters is not part of Islam if it is known that one of the big five aims of Islam is the protection of wealth and also one of the stations of questioning on the day of reckoning is how wealth was acquired and spent.
Fourthly, Islam cannot contradict itself. To illustrate that, money is mentioned in the Quran as the backbone of life and Muslims have financial obligations to fulfil and it is hard to sustain that Islam ignored this topic without giving any instructions about how money should be acquired and spent.
Lastly, one of the big topics in the Islamic jurisprudence is transactions which details every transaction and its implications. So based on the above arguments, it is clear that Islam has dealt with the topic of finance regardless of how it might be called.
Regarding the second claim, which is that all the Islamic financial institutions in the world are not Islamic. Firstly, generalisation is not Islamic. There are more than 1500 Islamic financial institutions in the world and claiming that all are not Islamic is unbelievably hard to sustain. Secondly, this claim implies that the Ummah, Muslims as a whole, are not able to invent a financial structure or institution which can satisfy Islamic principles. Thirdly, the claim might imply that all the Muslim scholars in the Islamic Finance industry are not trustworthy.
Based on the above, it can be said with confidence that the above claim cannot be proved, although some Islamic financial institutions have some doubtful or questionable practices in the best case, which should be addressed, even though they are very minimal but we cannot throw the baby with the bathwater.
Based on the above, it can be said that: “there is such a thing as Islamic Finance” or “there is such a thing as finance in Islam”.