Maqas¯ . id Realisation in Islamic Finance: Components of Framework for Measurement Index

Abstract

Keeping the above discussion in view, it is quite natural to think about developing the framework, factors and tools of the framework, scales and indices for measuring the performance of Islamic banks and financial institutions that have successfully drawn the attention of the global finance as one of the change agents in the current global economic and finance scenario. Below, first we briefly discuss the maqās. id al-Sharī'ah. The Status of Maqās. id in Islamic Worldview Maqās. id al-Sharī'ah that lead to a standard worldview within the context of Qur'ān and Sunnah are the basis of all human activities that refer to the purposes of human beings, while without purpose and direction life would be meaningless 1. Purposefulness is the basic norm of Sharī'ah which aims at five objectives for people; that is to protect their religion (faith), life (nafs), intellect ('aql), progeny (nasl) and property (māl). Being comprehensive in nature, maqās. id pertain both to the social as also economic aspects of human life. However, the relative importance of various Maqās. id might be different for different groups in a society. While h. if z. al-dīn is relevant for both rich as well as poor, h. if z. al-māl is more relevant for rich and affluent people. Again, justice in distribution of income and resources, the disclosure requirements in exchange contracts, and the right of information and knowledge are relevant to all human beings. The classical jurists who made the most significant contributions to the maqās. id theory, between the fifth and eighth Islamic centuries are Abu al Maali al-Juwayni (D. 478 AH/1085 CE), Abu Hamid al-Ghazali (D.505 AH/1111 CE), al-Izz ibn Abd al-Salam (D 660 AH/ 1209 CE), Shihab al-Din al-Qarafi (D.684 AH/1285 CE), Shamsuddin ibn al-Qayyim (D. 748 AH/1347 CE) and, most significantly, Abu Ishaq al-Shatibi (d.790 AH/1388 CE). Al-Shatbi started his volume on maqās. id in Al-Mawafiqat by quoting the Qur'ān to connote that Allah Almighty has purposes in his creation, sending his messengers, and ordaining laws. Hence, he considered almaqās. id to be the 'fundamentals of religion, basic rules of the law, and universals of belief' (Auda, 2008; p. 22) 2. Ibn-al-Qayyim (D. 748 AH/1347 CE) summarized his juridical methodology in the words, "Islamic law is all about wisdom and achieving people's welfare in this life and the afterlife. It is all about justice, mercy, wisdom, and good. Thus, any ruling that replaces justice with injustice, mercy with its opposite, common good with mischief, or wisdom with nonsense, is a ruling that does not belong to the Islamic law, even if it is claimed to be so according to some interpretation" (Auda, 2008). Starting from the classical jurists, as indicated above, to the contemporary jurist, Auda (2008) doing widely accredited work on maqās. id, Sharī'ah is considered to be aiming at welfare of the people in this life and in the life hereafter, and for this purpose it has advised

7th Century Madina Economics: The First Economic System of the Mankind by Muhammad Munir Ahmed

“…na' should also be included in such assessment as they can also be validated through Qur'ān and Sunnah and play certain roles in realizing maqās . id (Ayub, 2018).…”

“…Although these modes of financing are ideal as they lead to participatory society; nevertheless, other modes of Islamic financing are also Sharī'ah compliant and play an important role in realizing maqās . id (Ayub, 2018); hence should not be ignored. Likewise, to assess protection of intellect oriented performance of Islamic banks Ascarya, Rahmawati, and Sukmana (2016) suggested 'freedom' and 'permissible activities as dimension and related element respectively; and measured it using data from depositors funds, total financing and fee based income.…”

“…id oriented performance of Islamic banks they suggest indicators on the basis of financial performance, financial stability, Sharī'ah compliance, service quality, funding structure, interest free lending capacity, interest free financing, research, product development, training, equity financing, Qard financing, SME financing and charitable activities. However, as pointed out by Ayub (2018), the index had a fundamental flaw that protection of wealth was given more weight (50%) than protection of faith (35%). Additionally, the index had a limited scope as it ignored protection of family and suggested such indicators for protection of intellect which might not be computed due to unavailability of data.…”

Islamic Banks’ Role in Serving the Poor Unbanked Population in Pakistan

“…The IMF Directors in their meeting held in May 2018 accepted that growth of Islamic finance, with its unique features, presents good opportunities to enhance financial inclusion, deepen financial markets, and mobilize funding for development by offering new modes of finance and attracting "unbanked" population that have not participated in the financial system. Therefore, the IFIs can certainly facilitate to improve financial inclusion of the poor, who are excluded (i.e., unbanked) from the mainstream financial system (Ayub, 2018).…”

Islamic Banks’ Financing and Employment Generation: The Case of Punjab, Pakistan

“…Based on the above features, Islamic banking and finance system has the capacity of promoting investments in real production and business sectors in any economy. Thereby, Islamic financial institutions can be instrumental in socioeconomic development by providing finance to micro businesses (Ayub, 2018).…”