perspective on islamic finance
A Critical Perspective on the Principles of Islamic
Finance Focusing on Sharia Compliance and
Arbitrage
James M Garner*
Abstract
This essay is a comprehensive discussion of the crucial Islamic finance principles written within Sharia law that govern the sector. Riba (prohibition of interest) being the major and most widely known is central to the discussion. However, this essay deals with many other of the major financial principles, for instance Gharar (avoidance of excessive risk), Maisir (avoidance of transactions based on luck or chance) and unjust enrichment.
The essay then analyses and evaluates how many popular and intrinsic Islamic financial products used today remain commercially competitive whilst still abiding by these strict
Sharia principles. This essay also highlights a contemporary issue and idea within Islamic finance, namely that of so-called
Sharia Arbitrage. The theory posits that many of the Sharia complaint products available today are not so different from their Western counterparts. Despite the fact that methods that will be highlighted and used to ensure compliance, they do not go far enough to alter the nature of the products themselves.
Keywords: Islamic finance, Sharia law, Sharia Arbitrage, Riba,
Gharar, Maisir, unjust enrichment
*
LLM in International Banking and Finance Law (University of Leeds), LLB
(University of Nottingham) jamesgarner2280@gmail.com I would like to thank the editors of this journal, notably Rosalee Dorfman and
Christopher Ferguson, as well as Professor Andrew Campbell for inspiring an interest in this topic and his continued support.
69
Leeds Journal of Law & Criminology • Vol. 1 No. 1
I.
Introduction
Allah has allowed trading and forbidden Riba1
This principle is crucial to the development of Islamic finance in the modern world. It emphasises that by no means does the Qur’an or Islamic teachings prohibit trade or profit within finance; rather there are certain
Finance Focusing on Sharia Compliance and
Arbitrage
James M Garner*
Abstract
This essay is a comprehensive discussion of the crucial Islamic finance principles written within Sharia law that govern the sector. Riba (prohibition of interest) being the major and most widely known is central to the discussion. However, this essay deals with many other of the major financial principles, for instance Gharar (avoidance of excessive risk), Maisir (avoidance of transactions based on luck or chance) and unjust enrichment.
The essay then analyses and evaluates how many popular and intrinsic Islamic financial products used today remain commercially competitive whilst still abiding by these strict
Sharia principles. This essay also highlights a contemporary issue and idea within Islamic finance, namely that of so-called
Sharia Arbitrage. The theory posits that many of the Sharia complaint products available today are not so different from their Western counterparts. Despite the fact that methods that will be highlighted and used to ensure compliance, they do not go far enough to alter the nature of the products themselves.
Keywords: Islamic finance, Sharia law, Sharia Arbitrage, Riba,
Gharar, Maisir, unjust enrichment
*
LLM in International Banking and Finance Law (University of Leeds), LLB
(University of Nottingham) jamesgarner2280@gmail.com I would like to thank the editors of this journal, notably Rosalee Dorfman and
Christopher Ferguson, as well as Professor Andrew Campbell for inspiring an interest in this topic and his continued support.
69
Leeds Journal of Law & Criminology • Vol. 1 No. 1
I.
Introduction
Allah has allowed trading and forbidden Riba1
This principle is crucial to the development of Islamic finance in the modern world. It emphasises that by no means does the Qur’an or Islamic teachings prohibit trade or profit within finance; rather there are certain