The role ofmaqasid al-Shariʿahin applyingfiqh muamalatinto modern Islamic banking in Malaysia

Purpose - This paper aims to explore the practical role ofmaqasid al-Shari’ahin applyingfiqh muamalatto the reality of modern banking practices. As the modern financial environment is complicated and not too conducive for Islamic banking operations, a special approach based onmaqasid al-Shari’ahis needed to harmonize between revelation and reality. Design/methodology/approach - The data of this study are obtained through literature and empirical data. As for the empirical, the exploratory qualitative approach is applied in which three members of the Shari’ah Advisory Council (SAC) of Bank Negara Malaysia (BNM) as well as three Shari’ah committees (SC) of Islamic Finance Institutions are selected as interviewees. As a result, several themes are defined from the interview data before they are analyzed based on the concept ofmaqasid al-Shari’ah. Findings - The findings reveal that several practices are prevalent in developing Islamic banking products, including replicating conventional products to be Islamic ones, imposingwa’ad(unilateral promise) to strengthen the combination of different contracts into one product, and adopting floating rate withibra’(rebate) for financing price, which are needed to sustain this industry in modern financial system. In this regard,maqasid al-Shari’ahis applied to reconcile between rulings infiqh muamalatand banking environments, so that these rulings can be adopted pragmatically without compromising Shari’ah principles. Research limitations/implications - This study has its limitations, as it focuses on the extent of the role of themaqasid al-Shari’ahin Islamic banking operations, excluding other segments of Islamic finance such as Islamic capital markets and Islamic insurance. Moreover, as data are collected from only six interviewees from SAC and SC of Malaysia, the results cannot be represented for the whole Islamic banking practices of this country. Practical implications - This study provides several policy recommendations regarding the practice of themaqasid al-Shari’ahin Islamic banking. These may be useful for all Islamic finance players, including regulators and bankers in introducing policies and products in this area. Social implications - This study has the potential to enhance the confidence of the Muslim community, particularly in Islamic banking to support its existence and practices. The impact of such optimism will lead to an increase in demand for Islamic banking products, hence encouraging Islamic banking to sustain and update its activities in line withmaqasid al-Shari’ah. Originality/value - This paper offers a practical approach as regards to how themaqasid al-Shari’ahcan play a significant role in sustaining the Islamic banking industry, particularly in circumstances that are not favorable to its progress. It is indispensable to prevent the Islamic rulings from being diverted in the name of human well-being and to avoid basing them on a literal textual approach. Moreover, as it provides empirical studies on the issue of replication,wa’ad, floating rate andibra’, the discussion on this subject becomes more practical.