Ijtihad in Islamic Banking

NB: We do not resell your papers. Upon ordering, we do an original paper exclusively for you.

NB: All your data is kept safe from the public.

Abstract

Ijtihad has various definitions and meanings particularly drawn from the views of highly respected Muslim scholars and legal practitioners. However, the optimal individual effort in an action becomes distinct. The most important definition of Ijtihad is the optimal effort individual can put in an action.

With respect to the definition, Ijtihad is where the jurists spent optimal efforts to find a solution to rising issues that need immediate interpretation. Besides, Ijtihad majorly draws from the legal, religious and ethical values of Islam. In addition, Ijtihad must be based on the Shariah laws and principles. Moreover, Ijtihad has been practiced overtime and continuously being applied in various aspects within the Muslim society.

Further, Ijtihad is considered the most dynamic source of Islamic laws. The attribute makes Ijtihad to be the appropriate source of jurisprudence through which dynamic industries such as Islamic banking are based.

Even though Shariah principles forms the main legal foundation in which most of Islamic banking products and services are based, Ijtihad enables the flexibility of the Shariah principles to suit the changing needs of the society. In other words, Ijtihad is the source of flexibility required in meeting the changing needs of the society. The paper will be examining Ijtihad, particularly the manner in which the concept is being applied in Islamic banking.

Derived Definitions

Ijtihad has various meanings within Islamic legal and practical spheres. The common applications of Ijtihad draw from the meaning of being independent reasoning. Within the Islamic legal spheres, Ijtihad means the maximum effort that an individual can put to achieve a particular result.

In other words, Ijtihad is the utmost individual effort exerted in an action. Though various definitions of the term exist, the most commonly applied is the optimum effort a person can apply in an action (Kamali, 2003). In principle, all the available meanings point to the maximum individual effort that can be applied in an action.

Besides, Ijtihad is considered as the personal effort in decision-making process within Islamic law or Shariah. Moreover, the decision-making process should be independent of any jurisprudence or school of thought. In order to have the capability of making independent decisions, Ijtihad majorly draws from the legal, religious and ethical values of Islam.

In other words, Ijtihad majorly relies from theological knowledge, legal theories and ethical values that have been upheld within the Islamic society. Moreover, the decisions involving Ijtihad require exceptional capability of legal reasoning. Legal reasoning abilities are gained through the application of Shariah principles and values of the society (Kamali, 2003).

Appropriate Definition

In simple meaning, Ijtihad is the self-exertion in any action. However, the attribute of hardship must exist in the action. In other words, Ijtihad is an effort exerted by an individual in any action. In addition, the effort put in place does not apply in physical activity rather in intellectual actions.

As such, Ijtihad is the entire outlay of endeavor of well-respected individual Islamic scholars to deduce with increased level of probability that the decision made or solution offered to the a given issues through the application of principles and rules of Shariah drawn from detailed evidence sources is accurate and can be practiced over time (Kamali, 2003). Essentially, the application of Ijtihad involves inferences from various sources, including Shariah.

In fact, Ijtihad consists of deductions that result from the probability. From this sense, Ijtihad cannot be said to be drawn from the clear texts. In addition, one cannot claim to be practicing Ijtihad by discovery of some important texts, consulting the experts of Quran or the relevant literature without exercising the individual judgment (Kamali, 2003). In other words, individual judgment is an important component of Ijtihad and remains critical in its application.

A jurist or mujtahid practices Ijtihad. In fact, one has to meet certain conditions in order to qualify as a jurist. For instance, one has to have vast knowledge and experience in Islamic laws and Shariah principles. Moreover, for one to qualify as a mujtahid, practical experience in the application of Ijtihad is highly required (Kamali, 2003). Therefore, individuals are not qualified to practice Ijtihad except the mujtahid. Further, mujtahids are highly respected Muslim scholars and legal practitioners.

Ijtihad involves the formulation of opinions, particularly drawn from personal judgments and practices. However, speculations are allowed in most of the Ijtihad practices. The occurrence of conjecture entails that the conclusion made is almost certainly accurate, while the likelihood of inaccuracy is done away with (Kamali, 2003).

Moreover, the crucial rules of Shariah are eradicated from the scope of Ijtihad. The reason why influential knowledge of Shariah is eliminated is that such knowledge is positive. In the context total expenditure of an effort, the implication is that there is deficiency of further findings besides the one the jurists have spent their efforts. In cases where the mujtahid is unsuccessful in determine what they ought to have revealed, then such substantiations are invalid (Kamali, 2003).

Ijtihad as Source of Islamic Laws

Even though Quran and Sunnah form the major sources of Islamic law, Ijtihad provides the third source that brings about the required fundamental unity. The main difference that exists between Ijtihad and other sources is that Ijtihad is dynamic and capable of changing depending on the circumstances, time and place (Kamali, 2003).

In other words, Ijtihad is continuously developing as opposed to other sources of Islamic laws that ended their legislation upon the death of the prophets. In this regard, Ijtihad remains to be the only framework through which the divine message can be construed. Moreover, the interpreted divine message is then related to the changing circumstances, time and place of the Muslim community (Kamali, 2003). In fact, Ijtihad is critical for the Muslim community, particularly in the ambitions to achieve increased truth, deliverance and impartiality.

Moreover, Ijtihad must be derived from the divine disclosure of Islamic laws and principles. Therefore, its validity is continuously measured according to the level in which it corresponds to other sources of Islamic laws (Kamali, 2003). Ijtihad is the main framework through which the level of synchronization between disclosure and explanation required in the Shariah is provided, attained and maintained.

In fact, besides Quran and Sunnah, other sources of Islamic laws are expressions of Ijtihad (Kamali, 2003). However, differences normally exist in the expressions, which are critical in the growth and development of Ijtihad.

The differences that exist in diverse expressions are the source of transformations required to suit different circumstances, times and places within the Muslim society. Moreover, the differences must be practical in disposition. Ijtihad always finds consensus on public opinion, juristic preferences and takes into consideration public interests as well as correspondence (Kamali, 2003).

The Scope of Ijtihad

Ijtihad must be practiced within the Shariah laws and principles (Kamali, 2003). The reason is that Ijtihad is concerned with the practical rules of Shariah, which control the demeanor of individuals to whom the set of laws pertain. In other words, the application of Ijtihad is not only restricted to purely rational and habitual issues but to issues that are discernible to sanity.

However, Ijtihad does not deduce from proofs with unswerving connotation, or that does not necessitate further explanation, particularly from the Quran (Kamali, 2003). In other words, issues that have one correct view cannot be deduced in Ijtihad. For instance, the creation of the universe, the God’s existence, the obligatory status of the pillars of Islam as well as the existence of the prophets cannot be applied concerning Ijtihad. The reason is that such issues are evident truths of Shariah, which are exercised as they are in the texts (Kamali, 2003).

Generally, Ijtihad surmise from substantiations that are genuine but tentative in implication (Kamali, 2003). Moreover, Ijtihad draws from confirmations that have unconvinced legitimacy but have unambiguous connotation. In addition, Ijtihad draws from proofs that are exploratory in both legitimacy and denotation. In all these issues, Ijtihad will normally take the form of analogical deduction, juristic inclinations as well as the consideration of the public interests.

The Value of Ijtihad

One of the critical aspects of Ijtihad is that it is a religious obligation. In addition, Ijtihad is a shared commitment of the qualified mujtahid in matters that need further analysis. However, mujtahid has individual responsibilities of providing guidance on issues that may arise and need further interpretation from the religious sources (Kamali, 2003).

Moreover, Ijtihad becomes critical in the event that the possibility of losing the cause of justice or truth is increased, particularly when the explanations is not provided. In most cases, Ijtihad has to be applied in issues that directly affect the society, particularly where ambiguity in meaning is present.

Moreover, Ijtihad is recommended in all cases that have no contradictions in meaning and need further elucidations of mujtahid (Kamali, 2003). However, Ijtihad is not often drawn on when contradictions in the explanation of critical set of laws of Quran exists. The conclusions that are reached under the tenets of Ijtihad have to be observed whether challenged or not since such decisions are practically the same as divine authority.

As such, any decision under Ijtihad is considered applicable irrespective of being challenged. The reason is that the challenge may arise from various periods or circumstances (Kamali, 2003). In other words, the decision reached or provided under Ijtihad is valid under prearranged circumstances.

The Practice of Ijtihad in the Modern Muslim Society

Ijtihad is also considered as one of the sources of Sunni law. In most cases, respected and qualified Muslim scholars and practitioners have the task of making Ijtihad decisions. Jurists charged with making Itjihad decisions commonly known as the mujtahid must have particular qualifications or meet certain conditions.

In fact, mujtahid is highly respected Islamic scholars. Most importantly, Quran and Hadith form the basis through which the knowledge of Ijtihad is majorly drawn (Kamali, 2003). In other words, the scholars apply the Islamic principles as well as analogical reasoning to provide solutions to the problems affecting the society. In most cases, majority argues that scholars have the religious duty of applying analogical reasoning to find legal solutions to the problems affecting the society.

Ijtihad has been practiced for centuries and has offered legal solutions besides the Shariah laws. However, the relationship between the legal decisions drawn from Shariah laws and Ijtihad is diminutive (Kamali, 2003). In fact, Muslim scholars are expected to be competent while interpreting Ijtihad through the application of Shariah principles. The application of Ijtihad in the current Muslim society has been questioned.

However, most Muslim scholars argue that without Ijtihad, various decisions regarding diverse aspects of society cannot be attained by the application of Shariah laws only (Kamali, 2003). The fact is that Shariah laws and principles are static. In other words, the Shariah laws and principles are definitely distinct and need no further interpretations. Such legal matters have to be applied as definite within the Shariah laws.

Without Ijtihad, dynamic industries such as banking and finance could have not been operational. Ijtihad is the source of Islamic laws that allows flexibility. In other words, Ijtihad is applied depending on circumstances, time and place. Therefore, an argument that Ijtihad cannot be applied in the contemporary society is invalid. Essentially Ijtihad has to be applied together with Shariah in order to gain some elasticity in various decisions that require interpretation of the Islamic laws (Kamali, 2003).

Ijtihad and the Islamic Banking

The majority of current legal decisions regarding financial products within the Islamic banking system borrow hugely from the principles of Ijtihad. The reason is that the principles of Ijtihad suit the changing circumstances at diverse periods and places (Kamali, 2003).

In fact, new laws governing Islamic banking processes are reached upon by acknowledging the rationale of the previous rulings as well as the significance of the derived benefits under the changing circumstances.

In the context of Islamic banking and finance, Ijtihad is used to derive governing rules drawn from the basic principles of Shariah to address the needs of the people at different times and places (Kamali, 2003). In principle, Ijtihad forms the legal basis that has increased capability of changing. In other words, Ijtihad rules are capable of changing depending on the circumstances, period and places.

Due to the adaptability, Ijtihad can be applied suitably in such areas as economics and finance that constantly change with time (Kamali, 2003). In definite context, the pecuniary set of laws derived from Ijtihad is liable to adjust in terms of the perspective of its usage.

In addition, novel financial set of laws should focus on the activities that increase the well-being of all the stakeholders. In other words, attaining the optimal benefits to the stakeholders should be the major goal of coming up with financial regulations through the application of Ijtihad within Islamic banking dealings.

The Development of Islamic Banking Products and Services

As indicated, all processes of Islamic banks are controlled by Shariah laws. In other words, Shariah principles are used to control all matters of Islam, including economic, social, political and cultural aspects of society (Kamali, 2003). Ijtihad, being reasoning from qualified scholars, is one of the significant sources of Islamic laws that control the processes of Islamic banking. In fact, the current Islamic banking processes, products and services offered are developed through the application of two important concepts.

The first approach is through the identification of existing up to standard predictable products and services. The conformist products and services are then custom-made through the removal of prohibited elements in order to be compliant with Shariah principles. Secondly, Islamic laws are drawn on to aid in coming up with innovative and novel banking products and services that are acceptable to the stakeholders (Kamali, 2003). The approaches also apply Ijtihad in order to come up with products and services that endure time. In other words, products and services that changes with adjustments in time and place.

In addition, the development of the Islamic banking products and services borrows hugely from the theoretical perspectives such as human relations. In fact, such assumptions are based on the practices of Islamic laws. Ijtihad is one of the sources of Islamic laws that form the fundamental reference to the application of the theoretical perspectives (Kamali, 2003). The theory of human relations is normally applied in the development of Islamic banking products and services.

Moreover, the principle of human relations forms the basis of all the Islamic commercial laws and regulations. The principle of human relations are founded within Ijtihad and is closely related to Shariah principles that are concerned with respect for universal emancipations, social justice, impartiality, economic freedom, transparency and responsibility in all pecuniary issues (Kamali, 2003).

Besides, the Shariah principles require that the Islamic banking system operate within the acceptable limits of Shariah laws. In other words, the financial transactions and agreements should not include elements that are prohibited by law such as wrongful gains, products as well as processes that are forbidden in Islamic practices.

Ijtihad rules govern the financial transactions, agreements, products and services of Islamic banking and are in agreement with the Shariah principles (Kamali, 2003). In fact, most Islamic scholars agree that Islamic banking processes and procedures should be anchored within the Shariah principles.

Moreover, the Islamic scholars agree that the Islamic banking regulations should integrate both the religious principles and ethical values. In other words, both the religious and ethical values should be applied in the transactions as well as product and services development.

In fact, Ijtihad in agreement with Shariah principles forms the basis in which most products and services offered by Islamic banking are developed (Kamali, 2003). The case in point is where the major product offered to the probable clients is asset funding. In fact, the stated asset funding is based on the concept of income distribution, which is always undertaken in the form of Murabahah.

Additionally, the model of sharing the proceeds is carried out in the form of profit and loss sharing principles commonly known as the Musharakah (Kamali, 2003).

According to the Islamic banking system, Murabahah contracts are constantly developed to form the basis in which the working capital through short-term financing can be achieved. Both Musharakah and Murabahah are Islamic banking products that originate from the Shariah principles (Kamali, 2003). In other words, the products are within the confines of Shariah laws and principles.

However, with changing circumstances, the financial products need to expand in order to take into consideration the changing needs of the people in different places in the world and at diverse times. The only source through which such changes can be taken into consideration is Ijtihad (Kamali, 2003).

Essentially, Ijtihad provides the framework through which changes that have occurred can be incorporated and harmonised with Shariah principles. Even though transformations have to be taken into consideration, the products have to remain within the confines of Shariah.

The evolution occuring in the financial market has also resulted into new products and services. Since other sources of Islamic laws terminated with the death of the divine prophet, Ijtihad remains to be the only way through which these new products can be defined within the Shariah principles (Kamali, 2003).

For instance, in the conventional Islamic banking system, the Shariah rules were utilised in the design of debt financing procedures. However, the changing needs of the market enabled increased capabilities to deal with the coming challenges. According to the Shariah rules, principal asset or assets must be backed by any transactions (Kamali, 2003). Ijtihad provides solution to the conflict existing in the current understanding of the asset and the conventional requirements of the Islamic laws.

Essentially, the current Islamic banking system applies the dynamic system of belief of Ijtihad in the development of the products and services. Besides, the dynamic tenets of Shariah to practical social, economic and institutional issues and problems of the society can only be explained through Ijtihad (Kamali, 2003).

As such, Ijtihad is commonly applied in the interpretation of Shariah principles to provide for changes needed in the social, economic and institutional developments. Moreover, Ijtihad takes into consideration the developments of Shariah regarding individual and social preferences as well as in relation to the institutional codes of belief for public purpose.

Besides, the application of preference theory in the development of new products in Islamic banking draws majorly from Ijtihad interpretations of Shariah principles. The preference theory is considered to be advocating for social well-being in the current Muslim society.

Ijtihad results into the changes that incorporate the social and economic welfare, which primarily form the basis of new products in the Islamic banking system. Ijtihad forms the framework through which Shariah principles can be developed to consider changes in the society (Kamali, 2003).

According to the preference theory scholars, the principles through which Shariah can be developed include the collective clearness as well as the alteration of Shariah to expected and regional demarcation of customs and practices (Kamali, 2003). In addition, Shariah must link the probability of action to the level of physical effort offered.

Combining these characteristics is critical in the development of new products that are in line with increasing the social interests of the Muslim community (Kamali, 2003). In other words, the principles are geared towards developing the social security of the Muslim society. Moreover, the principles eradicate inconsistencies that may arise due to changes in the circumstances, places and time. In reality, the combinations of the principles result in unity, which is essential Shariah requirement (Kamali, 2003).

Further, according to preference concepts, the relevance of the Shariah main beliefs do away with incongruity, divergences and discrepancies within the main source of law resulting in unanimity at the elemental stages.

The proponents of the theory also argue that the variations as well as differences that are found at the secondary level are not premeditated purpose of the decree (Kamali, 2003). In addition, the aspects of the theoretical perspective of Shariah augment the dynamic view to the ethical laws, which are greatly applied at the institutional levels.

The application of transformational nature of moral laws and principles based on the Shariah laws enables institutions such as Islamic banking find ways of developing products and services that suit the needs of society.

Moreover, the application of integrating principles of preference theory as well as interactive preferences of members of society forms the basis in which modern Islamic institutions develop. In fact, the consideration of necessities of life remains to be a significant elemental in the development of the life-fulfilling products and services. At the basis of preference conceptual framework, social needs for comfort and refinement of life remain critical components (Kamali, 2003).

Basic needs and comfort, as well as refinements, are considered critical life-fulfillments at the higher levels of socio-economic developments. Therefore, important and relevant institutions such as banking and finance have to consider such fundamental components while developing products and services.

Besides, the dynamic basic needs of socio-economic development are construed within the concepts of preference theory, which advocates for the public course. As such, all the institutions within Islamic society have to be established for public purpose. Essentially, the preference concepts are based on Ijtihad, which forms the basis for the interpretation of Shariah (Kamali, 2003).

Ijtihad and the Standardisation of Islamic Banking Procedures

Standardisation is one of the major emerging issues in current Islamic banking system. Islamic scholars are debating on whether standardisation is possible under the Islamic banking system. Majority of Islamic scholars have argued that standardisation is not possible under the tenets of Islamic laws governing the processes of Islamic banking system. According to the conventional scholars, Ijtihad makes consistency of Islamic banking practices impossible (Kamali, 2003).

However, the proponents of the standardisation argue that being deficient in homogeneous regulations impede innovation. The reason is that each jurisdiction will always advocate for what is best in their circumstances. In addition, most of the proponents of standardisation argue that in order to enhance development in the banking sector, a global framework is highly required.

Further, with the increased asset value and rapid expansion of Islamic banking system, there is need for a strong global and homogeneous regulatory framework. Moreover, deficiency in Islamic money markets, insufficient derived market for Sukuk as well as feeble liquidity infrastructure further deteriorates the Islamic banking system. In other words, standardisation will enable Islamic banking benefit from the developed global money market as well as infrastructure.

On the contrary, opponents of harmonisation of Islamic banking procedures argue that standardisation does not enable creativity in the development of new products. Moreover, standardisation of the Islamic banking procedures may lead to the move towards conventional banking system creating no differences and violates the Islamic principles upon which the Islamic banking system is created.

Even in the situation where Islamic rules are applied, standardisation enables the rules become more difficult to apply particularly with the introduction of new products and services. In addition, most of the bankers are unfamiliar with several Islamic financial concepts making it difficult to implement uniform regulations in some boarders (Kamali, 2003). Moreover, there is lack of unvarying documents available to the public on the Shariah resolutions upon which the standardised regulations can be referred.

Most importantly, the differences arising from diverse Islamic scholarly views on the issue of conformity with Shariah principles makes it difficult to standardise the operations of Islamic banking system (Kamali, 2003). As a result, most interpretations of various opinions are conducted within Ijtihad. In the current Islamic banking system, Ijtihad is applied in the clarification of concepts, principles as well as conditions of Shariah particularly in contractual agreements.

Moreover, Ijtihad provides the basis in which certain decisions are made regarding matters relating to Shariah conditions, mechanisms and implementation of contractual agreements. As indicated, Ijtihad remains a critical element in which the design and development of new Islamic banking products and systems are based (Kamali, 2003).

Moreover, standardisation would mean synchronising some of the Shariah principles, which is against the religious practices. In order to avoid such contradictions, the functioning of various institutions, including the Islamic banking should be given wider interpretations of the law, including Ijtihad. However, such interpretations should be drawn from the Shariah principles.

Besides, the need to change with the changing circumstances explains the reason why banking procedures cannot be standardised. Harmonisation of rules and procedures is not applicable in highly dynamic industries such as banking and finance. In fact, the standardisation of rules and procedures under the Shariah laws is against the fundamental assumptions of Ijtihad.

Actually, Ijtihad has existed for many centuries and has been applied in Islamic banking and finance industry to establish changes required depending on the circumstances. Under the situations where the regulatory framework is highly considered, Ijtihad is not applicable. The application of consistent rules is also against the principle that Shariah law can be applied at all the time and places. Essentially, Ijtihad is what makes Shariah dynamic and capable of being applied in diverse circumstances.

Reference

Kamali, M. H. (2003). Principles of Islamic jurisprudence. Cambridge, UK: Islamic Texts Society.

Click Here To Order Now!