TOWARDS ACHIEVING A MAQASID SHARI’AH ORIENTED ISLAMIC BANKING

Despite achieving phenomenal asset and deposit growth and extending geographical reach almost globally, Islamic Finance has failed to make a dent in achieving the objectives of its earliest proponents; equitable distribution of wealth, poverty reduction or eradication, financial inclusion and achievement of socio-economic justice. This is due to many reasons including the entrenched riba-based financial system together with its champions, the erstwhile conventional bankers and conventional lawyers spearheading its growth. There is also the lack of government and fiscal support in many Muslim jurisdictions, the continuous effort to replicate and compete with conventional product offerings to prevent deposit outflows and lack of innovation as opposed to financial re-engineering of stale products. Although Islamic Finance is a success story of technical compliance to the Shari'ah in letter, it is a failure in terms of its spirit and intended outcomes. Islamic Finance has great potential in achieving social justice by ‘risk sharing' financing the growth of innovation through SMEs, financing infrastructure and waqf properties, reduction in public debt, as well as financing social and charitable causes by managing Qard Hasan professionally. In this paper we review the failures and success of Islamic finance in relation to the Maqasid al- Shari'ah, operationalize it for Islamic banking and finance, suggest some initial steps to achieve these objectives and finally propose mechanisms to monitor the performance of Islamic financial institutions towards achieving the socio-economic objectives of the Shari'ah in Islamic finance.