Chapter 3

The Major Risk Elements of Sharī`ah Non-Compliance Risk and Its Causes in Islamic Finance Operations

3.0. INTRODUCTION

If we look at the risk from the point of view of Sharī`ah, we can identify a few elements or components of risk: riba, gharar, deception, inequality, duress, and others as explained briefly next.

3.1. THE MAJOR RISK ELEMENTS OF SHARĪ`AH NON-COMPLIANCE RISK

3.1.1. Riba

Riba literally means increase, addition, expansion, or growth. However, not every increase or growth is prohibited by Islam. The increase in good deeds is encouraged by Sharī`ah. Riba technically refers to the “premium” that must be paid by the borrower to the lender along with the principal amount as a condition for the loan or for an extension in its maturity. Based on this connotation, riba has the meaning of “interest” in banking.

3.1.1.1. Types of Riba

Riba is divided into two types: riba al duyun/al-nasi`ah and riba al buyu/al-fadl.

3.1.1.2. Riba al Duyun/al-Nasī`ah

The term nasi`ah comes from the root nasa`a, which means to postpone, defer, or wait. It refers to the time that is allowed to the borrower to repay the loan in return for the “addition” or the “premium.”1 In riba al-nasi`ah there is a fixing rate or return in advance paid as precondition to grant the loan whereby the lender will get a reward against his waiting, which is not permitted by Shari`ah. From a Sharī`ah perspective, the reward generated from the loan is not allowed, whether the rate obtained is small or big, fixed or variable. The prohibition also extends to the non-tangible reward generated as gift or service. This type of riba is also known as riba al duyun, which means interest related to debt.

3.1.1.3. Riba al Buyu/al-fadl

Riba al-fadl is related to the barter trade in specific commodities: gold, silver, wheat, barley, dates, and salt. There are some Sharī`ah rules that should be observed in the exchange of specific commodities, as determined by the following provisions.

From Abu Sa‘id al-Khudri:

The Prophet, peace be on him, said: “Do not sell gold for gold except when it is like for like, and do not increase one over the other; do not sell silver for silver except when it is like for like, and do not increase one over the other; and do not sell what is away [from among these] for what is ready.” (Bukhari and Muslim)

From Ubadaibn al-Samit:

The Prophet, peace be on him, said: “Gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates, and salt for salt—like for like, equal for equal, and hand-to-hand; if the commodities differ, then you may sell as you wish, provided that the exchange is hand-to-hand.” (Muslim and Tirmidhi)

The preceding ahhadith govern the transactions of the mentioned commodities. There are six rabawi items derived from such provisions, namely: gold, silver, wheat, barley, dates, and salt. When there is an exchange between these items, such as gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates, and salt for salt, Sharī`ah rules should be observed.

Sharī`ah rules in these commodities are as follows:

  • Equality in the quantity in the exchange of the rabawi commodity if the subject matter is identical.
  • If the six commodities are not identical, equality is not required.
  • However, spot transaction is required in the exchange of the six commodities, whether the subject matter is identical or not.
  • Therefore, the delay in their exchange is not permissible.

3.1.2. Gharar (Uncertainty)

Gharar in the financial transaction may render the financial contract totally null and void, or it may lead in some cases to compensation. Therefore, it is important to highlight the concept of gharar in the financial transaction. The term gharar literally means danger or fraud, and the source term al-taghrir refers to exposure to danger. The linguistic origin of the term gharar refers to items with a likeable appearance and disliked reality2 or it refers to something that cannot be defined or specified.3 The word gharar has been used to mean risk, uncertainty, and hazard.4 In the technical meaning, the Muslim jurists provide various definitions that are related to the uncertainty and ignorance of one or both parties about the substance or attributes of the subject of sale, or doubt of subject matter’s existence at the time of contract.

The Maliki define gharar as: “what is not known to exist in the future, e.g. birds in the air and fish in the water.”5 Shafiis defines it as: “gharar is that which admits two possibilities, with the worse consequence being the more likely.”6 Shairazi said: “Gharar is that whose nature and consequences are hidden.”7 In this context, the sale of gharar is any sale that incorporates a risk that affects one or more of the parties to the contract and may result in loss of its property.8 The gharar is risk in the sense of lack of certainty regarding the existence of an object. The gharar sale is consequently the sale of that which is not known to exist or whose measure in not known to be large or small, or that which is undeliverable.9 The Muslim jurists agree that the gharar sale is not valid, and may easily render the transaction totally null and void. However, it is important to record that gharar in Islamic law is classified into three categories:

1. The substantial gharar (gharar kathir): This type of gharar is unanimously prohibited and not accepted in Sharī`ah, such as selling a bird in the sky. This is considering an excessive gharar, which renders the financial transaction invalid.
2. The minor gharar (gharar yasir): This type of gharar is unanimously allowed by Sharī`ah, such as gharar about the foundation of a house to be bought/sold. The jurists are in agreement that this minor gharar is tolerable and permitted.10
3. The intermediate gharar: This is moderated gharar, which falls between the two previous categories. However, there are a few legal opinions from the Muslim jurists about this category, whether this gharar belongs to the first category or to the second one, depending on the nature of the gharar.

As for the minor gharar, the Maliki and Hanbali schools of law and other Muslim jurists are of the opinion that the minor gharar in sale is permitted and accepted in Sharī`ah, and it does not affect the business transaction. This legal Sharī`ah approach will facilitate and smoothen the business transaction and trade in the market.

According to Imam al Nawawi, the minor accepted gharar can be observed in two major areas:

1. Items that are included as part of sale and that may not be sold separately (e.g., foundation of a house).
2. Items that are customarily tolerated, either due to its insignificance or the difficulty of identifying (e.g., the fees for using a bathroom when the amount of water used in the bath may vary).11

The wisdom behind allowing the minor uncertainty in business transaction is to facilitate the flow of cash/wealth in the market. Besides, it is very difficult to achieve zero gharar in business operation within the existing complex market. However, the major uncertainty is not accepted and it is strictly forbidden by Sharī`ah in all kind of trade and business activities and is considered as one of the major components of risk.

In this regard, if a major defect is found in asset or commodity, the sale will be invalid based on the option of detecting a defect in the object sold. From the Sharī`ah point of view, some business transactions are not allowed because of the substantial risk of uncertainty. One of the objectives of Sharī`ah is to remove all kind of conflicts and arguments between the contractual parties. Furthermore, the substantial risk of uncertainty might result in harm or loss to one of the contractual parties. Hence, honesty and transparency with reasonable risk taking in business activities is very important to be considered in order to secure benefit for both parties through justice and fairness.

3.1.3. Conditions for the Legal Consequences of Gharar

In order for the gharar to take its legal consequences it should fulfill the following conditions:

1. The gharar must be excessive. However, if it is trivial and ordinary, such gharar is negligible.
2. Gharar must occur in the financial transaction. However, it should be negligible if it occurs in donation transactions (Uqud al tabarru`at), meaning that gharar is observed only in uqudmuawadat/exchange contracts.
3. Gharar must affect the subject matter of the contract itself directly.12

3.1.4. Taghrir (Deception, Fraud)

Taghrir (deception) is one of the major components of risk. It stands for inducing a contracting party to think that it is in his interest to take the subject matter whereas, in fact, it is not so.13 According to Majalla, taghrir is to cheat.14 The risk of deception is divided into two types: deception related to statements (taghrir qawli) and deception related to deeds (taghrir fi`li). Taghrir is alternatively called tadlis. Taghrir qawli occurs because of the deception of one of the two contracting parties or his representative in order to induce the other party to conclude a contract even if it happens with inequality. However, taghrir fi`li is deception that occurs through doing something on the subject matter to show it in a condition that contradicts its reality, such as selling a second-hand mobile phone represented by the seller as brand new with a new cover. The buyer will think that this is a new phone, whereas, in fact, it is not. Both deceptions are forbidden in Sharī`ah.15

3.1.4.1. Conditions of the Taghrir

There are some conditions required in taghrir in order for it to take its legal consequences. These include:

1. The products or services are misrepresented to the client in the form of statement or in form of deed.
2. The decision made and the consent expressed is based on the misrepresentation of the counter party, whereby, upon concluding the contract, one party realizes that he has been cheated.
3. The contract results in financial damage and suffering.

3.1.5. Ghubn (Inequality)

Ghubn is also one of the major components of risk. In the literal sense, it is decrease or reduction.16 Technically, it is inequality of price and subject matter of a contract of exchange—that is, one of them becomes less or more than the other, which was not known at the time of contract.17Ghubn is divided into two types: insignificant inequality (ghubn yasir) and excessive inequality (ghubn fahish). According to Majalla, ghubn fahish means to be deceived with respect to goods.18

Jurists have different opinions about the standard of measuring what is insignificant inequality and what is excessive inequality; some jurists maintain that if this inequality falls within the jurisdiction of evaluators, it is considered insignificant inequality.19 Other jurists have determined a fixed amount for measuring what constitutes an insignificant or excessive inequality. All jurists unanimously agree that insignificant inequality does not affect most contracts. This is because it frequently occurs in financial transactions and people tend to forgive each other for this small amount of inequality. However, some contracts with even a small amount of inequality are deemed to be invalid because of the existence of accusation.20

3.1.6. Ikrah (Duress)

Ikrah (duress) in Islamic law is to force someone to do something that he dislikes, but in order to remove the more harmful aspect, he does so against his consent.21 Or it is a situation in which one is forced to do something against his will.22 However, in order for the duress to be accepted by Sharī`ah and take its legal effect, three conditions must be fulfilled:

1. It should be from a person who is able to implement what he has threatened.
2. The compeller (mukrih) must be serious in his threat.
3. The consequences of the threat must be very difficult for the compelled to bear.23

Duress is divided into two types: complete duress (ikrah mulji`) and incomplete duress (ikrah ghayr mulji`):

1. Complete duress/serious duress: This is the type in which a threat occurs for homicide, or destruction of an organ of the body, or serious beating that causes fear of destruction of life or an organ, or the threat for destruction of the whole property of a person.
2. Incomplete duress/less serious duress: This type is a threat is for matters other than those already mentioned. It is difficult to bear but not devastating, such as a beating that does not cause fear of destruction, or destruction of part of the wealth of a person.24 Furthermore, duress is divided into justified coercion and unjustified coercion. Regarding the justified coercion, it is like the order of a qadi/judge directing a debtor to pay his creditors, or his command to a man to divorce his wife after the passage of the period of ila. This kind of ikrah does not wrongfully affect the free will of a person, as this duty is imposed by the lawgiver.25 On the other hand, the unjustified coercion is coercion without justification.26

According to Islamic law, the person who conducts a business transaction under duress or sells or buys under compulsion, his sale is nugatory and illegal.27 However, jurists have three different opinions on whether these contracts are valid under duress or otherwise:

1. The majority of jurists maintain that duress causes nullification of these contracts if consent to the contract is withdrawn after the removal of duress.
2. Most Hanafi jurists maintain that duress causes nullification of these contracts, but if consent is given after the removal of duress, this contract is considered valid.
3. Zufar, a Hanafi jurist, opines that duress makes these contracts dependent on permission of the compelled contracting party. If he gives permission, it becomes a valid contract. In fact, the second and third opinions are almost the same.28

3.1.7. Ghalat (Mistake)

Mistake (ghalat) in Islamic law is an assumption about anything that comes into the mind of a person, but proves to be inaccurate.29 In other words, it is something that contradicts reality without intention. Mistake in a contract is that, following its formation, it becomes clear to a contracting party that the subject matter of the contract contradicts what has been contracted for. This mistake could either be in the very essence of a subject or in its attribute. In the case of a mistake in the very essence of a subject, a contract is considered invalid because the difference in genus makes the subject matter non-existent and a contract for a non-existing thing is not valid. On the other hand, if a mistake occurs in the attribute, a distinction should be made between whether the subject matter was present in the session of the contract. If it was absent from the session of the contract, the purchaser will have the right to choose between retaining this contract as valid or canceling it. This is because he has purchased what he has not seen. This is called the option of seeing (khiyar al-ru`yah). But if the subject matter was present in the meeting of the contract, a distinction should be made between whether its attribute was possible to be observed due to its clear appearance, or it was not possible to be observed due to it being obscure and unclear.30

3.1.8. Combination of Contracts

Combination of contracts is a process that takes place between two parties or more and entails the simultaneous conclusion of more than one contract.

3.1.8.1. The Various Forms of Combinations of Contracts

According to the Accounting and Auditing Organization for Islamic Financial Institutions, a combination of contracts may take any of the following forms:31

  • Combining more than one contract without imposing any of them as a condition for the other and without prior agreement to do so.
  • Combining more than one contract while imposing some of them as conditions for the others without prior agreement to do so.
  • Combining more than one contract subject to prior agreement but without imposing any of them as a condition for the others.
  • Agreement to conclude the deal through any of different contractual forms as will be finally decided in the future.

3.1.8.2. The Forms of Combined Contracts

According to AAOIFI, combined contracts are as follows:

  • Combined contracts may have a single lump-sum countervalue. For instance, a party may sell his piece of land to the other and simultaneously rent his car to the same party for one month, both against 1,000 dinars.
  • Combined contracts may be concluded for separate values. For instance, one party may sell his house to the other for 1,000 dinars, and rent his car to the same party for 100 dinars per month.
  • Some of the combined contracts may be stipulated as conditions in the other contracts. One party, for instance, may say to the other party that “I will sell you my house for 10,000 dinars, on condition that you undertake to rent the house to me for two years for 1,000 dinars per year.” The sale of the house in this manner could also be concluded on the condition that the buyer of the house undertakes in return to sell his car to the seller for 2,000 dinars.
  • Combined contracts may take the form of an exhaustive contractual statement comprising a number of successive parts and stages that finally lead to the realization of the desire of the two parties to conclude the deal in contract. A good example in this regard may be seen in a number of present-day financial transactions like ijarah ending with ownership, murabahah to the purchase order, and diminishing musharakah.32

3.1.8.3. The Shari’ah Position in Combined Contracts

It is permissible in Shari’ah to combine more than one contract in one set, without imposing one contract as a condition for the other and provided that each contract is permissible on its own.

3.1.8.4. The Shari’ah Requirements in Combined Contracts

Combined contracts should not include the cases that are prohibited by Shari’ah, such as combining sale and lending in one contract.

  • It should not be used as a trick for committing riba, such as an agreement between two parties to conclude a transaction that is usurious in nature.
  • It should not be used as an excuse for practicing riba. The two parties could misuse for instance, by combining contracts, where they conclude a lending contract that, at the same time, facilitates some other compensatory gains to them. For example, they could stipulate in the contract that the borrower should offer accommodation in his house to the lender, or should grant him a present.
  • Combined contracts should not reveal disparity or contradiction with regards to their underlying rulings and ultimate goals. Examples of contradictory contracts include granting an asset to somebody as a gift and selling/leasing it to him simultaneously, or combining mudarabah with lending the mudarabah capital to the mudarib, or currency exchange with ju`alah, or salam with ju`alah for the same contract value.33

3.1.9. Sequence in the Execution of the Contract

The Islamic financial transactions are based on some logical processes and procedures determined by Sharī`ah where the sequence of the financial transaction executed by the IFI should follow some specific steps and order. Sequence in the execution of the contract is very crucial, which may trigger Sharī`ah non-compliance risk in the banking operation. On the other hand, the ignorance of the sequence of the contract may render the financial transaction invalid and make the return generated by the IFI not legitimate.

We conclude that:

  • The preceding elements represent the major risk factors that trigger Sharī`ah non-compliance risk in Islamic finance.
  • A careful consideration should be given to these risk elements to ensure that the Islamic financial transaction is concluded according to Sharī`ah principles without any discrepancy.
  • The major elements of risk in Sharī`ah non-compliance are: uncertainty (gharar), deception (taggrir), inequality (ghubn), duress (ikrah), mistake (ghalat), and others as mentioned.
  • These elements are very important to be considered in order to identify incongruence in Sharī`ah compliance.
  • The risk of non-Sharī`ah compliance can be identified by some tools such as: account instruments, legal instrument, Islamic ruling that includes fatwa and resolutions, through a specific methodology of Sharī`ah review and auditing process.

3.1.9.1. Consideration of the Sequence in the Legal Documents

The objectives of the sequence details provided in the legal documents are to provide guidelines in the correct sequence of documents to ensure the validity of the contract. Table 3.1 is a brief explanation of the documents involved in each type of products offered in Islamic banking.

TABLE 3.1 All Business Segmentation

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We can conclude that Islamic law in its financial contracts and financial transactions always observes the element of risk in the business, finance, and trade, and that risk must be avoided or monitored at all time. This shows how Sharī`ah is very concerned about risk, whether these elements of risk are observed in credit, market, liquidity, investment, and operation, or other aspects of business and finance that can expose one of the contracting parties to risk. However, some of the financial transaction can be concluded based on free risk.

3.2. THE CAUSES OF SHARĪ`AH NON-COMPLIANCE RISK IN ISLAMIC FINANCE OPERATIONS

The Sharī`ah non-compliance risk is a result of some causes that represent the main factors behind the failure of Sharī`ah compliance in practice. They are as follows:

3.2.1. Lack of Knowledge, Skills, and Competency

Lack of knowledge and competency in the area of Islamic finance is a major cause of non-Sharī`ah-compliance risk. If the officer in the Islamic financial institution who is responsible for the execution of the Islamic financial transactions is not equipped with the necessary knowledge in Sharī`ah and related skills according to his job description, the risk of committing a Sharī`ah non-compliance transaction is very high. Hence, proper knowledge according to some specific qualification in needed to perform Islamic banking activities according to Sharī`ah rules and principles to ensure that the contract is valid and sound.

3.2.2. Lack of Training

Only knowledge is not a sufficient measurement to ensure Sharī`ah compliance status. Proper training is needed to enhance the knowledge and uplift the competency level of the employee. The training and guidelines provided by senior officers who have more experience and knowledge is required on regular basis to ensure that the skills and competency of the officer are adequate.

3.2.3. Lack of Close Monitoring and Proper Supervision

The knowledge and the training may help to improve the Sharī`ah compliance status, but it is not sufficient, especially if the officer in charge of the execution is still junior. Hence, a proper and close monitoring from a senior staff is needed to mitigate the Sharī`ah non-compliance risk at the operation level.

3.2.4. Weakness of the Internal Control System

In 1992, the Committee of Sponsoring Organizations of the Treadway Commission (COSO) issued the Internal Control Integrated Framework. COSO defines internal control as “a process, effected by an entity’s board of directors, management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following categories: effectiveness and efficiency of operations, reliability of financial reporting [and] compliance with applicable laws and regulations.”

According to COSO, internal control consists of five interrelated components:

1. Control environment: The tone of the organization influences the control consciousness of its people. Examples include the integrity, ethical values, and competence of employees; management’s philosophy; and input provided by the board of directors.
2. Risk assessment: Identification and analysis of risks relevant to achieving corporate goals, determination, and implementation of how such risks should be managed.
3. Control activities: Policies, procedures, and processes that help ensure a company carries out management directives. Examples include approvals, verifications, reconciliations, and reviews of operating performance.
4. Information and communication: Communication within the company and with external parties such as customers, regulators, and shareholders. For example, reports that contain operational, compliance, or financial data.
5. Monitoring: Assessing the quality of a company’s internal control systems. As a result of this framework, internal audit approaches shift from compliance to risk-management approach.

If the preceding criteria are missing, we assume that the internal control system in the financial institution is not sound.

3.2.5. Weakness in the Information Technology and Infrastructure of the Banking System

The Islamic financial institution is riding on the infrastructure of the system of the information technology; hence the IT system should have a Sharī`ah compliance status to ensure that it reflects the Sharī`ah rules and principles features and criteria pertaining to the contracts used by the bank. The Sharī`ah non-compliance risk sometimes emerges from the IT system in cases where the software and IT infrastructure are not compatible with the Sharī`ah features. Sometimes the rectification of the potential non-Sharī`ah compliance feature is done manually, but sometimes they are overlooked which trigger the non-Sharī`ah compliance risk. The Islamic financial institution should put in place proper risk management tools to mitigate the non-Sharī`ah compliance in case the IT system and its infrastructure is not fully complied with Sharī`ah features. It is known that the full migration to fully IT infrastructure system is very costly; however, extra care should be taken of when using the IT system. At the same time, a proper planning should be in place for full migration to a fully IT system that entirely removes the Sharī`ah non-compliance risk from the system.

3.2.6. Human Error and Moral Hazard

The Islamic financial activities are carried out by people who are human beings by nature. Even the information and data are key in a system done manually by people. As human beings, error and mistakes are very possible that can happen anytime, anywhere. Work stress; sickness; physiological problems; family problems; financial needs; feeling rushed, angry, hungry, happy, sad; overloaded with work; disatisfaction; disappointment; and so on are some of the significant factors that cause human error in the function of the officer in the Islamic financial institution; hence the Islamic financial institution should provide a good environment convenient to perform work and duties at required standards of perfection. The human resource section should also take care of the different problems faced by the officers in the Islamic financial institution, including personal problems. Human resources can also provide motivation programmes to the staff to address these issues to mitigate the human error in performing works and duties. Unfortunately, sometimes errors are committed internally as a result of moral hazard due to revenge or some unknown reasons. To address this issue, a code of ethics should be provided by the Islamic financial institutions and circulated to the staff to provide guidelines for responsibility, accountability, reward, and punishment in committing such actions.

3.2.7. Dual Banking Business Activities

The structure of the Islamic financial institution can be a significant factor that causes Sharī`ah non-compliance risk. If the Islamic financial institution is subsidiary to a parent conventional bank, there will be a potential Sharī`ah non-compliance risk in the business activities and operations. The Islamic financial institution will leverage on the infrastructure of the parent conventional institution. This includes but is not limited to the IT system, human capital, premises, shared services, marketing, accounting, auditing, training, risk management, and so on.

If the hybrid structure of the IFI is not carefully observed and monitored, a non-Sharī`ah-compliance risk will emerge very frequently. The most significant issues concerning the hybrid structures are as follows:

  • The officer hired by the Islamic financial institution will perform conventional business activities of the conventional financial institution.
  • The premises are owned by the Islamic financial institution but used or leased by the parent conventional institution.
  • The infrastructure IT system is owned by the Islamic financial institution but used or leased by the parent conventional institution.
  • The business event, function, or celebration is not Sharī`ah compliant, but the cost is shared according to a specific ratio, in which specific charges will be borne by the Islamic financial institution.
  • Due to the integrated structure, marketing and compliance will be carried out together, and the team of the Islamic financial institution will participate directly or indirectly in selling, promoting, and executing the conventional products.

3.2.8. Miscommunication

When there is miscommunication between the officer in charge of the Islamic financial transaction executed and the different departments when passing information or exchanging communication, Sharī`ah non-compliance risk can occur.

3.2.9. Logistics

Poor logistics can cause Sharī`ah non-compliance risk. The concept of logistics is very broad, and it can heighten any gap that may exist in the entire system, mostly those related to communication, transportation, and the ability for business activities and operation to flow smoothly in Islamic financial institutions.

NOTES

1. See: Rafiq al Masri, al Jami fiusul al riba, 2nd ed. (Damascus, Syria: Dar al Qalam, 2001), 10.

2. See: Wahbah Al-Zuhayli, Financial Transactions in Islamic Jurisprudence, vol. 1 (Damascus, Syria: Dar al-Fikr al-Mouaser, 2003 [English ed.]), 82; Ali Al Kafif, Ahkam Al Muamalat Al Sharī`ah (Cairo, Egypt: Dar Al Fikr Al Arabi, 1996), 6.

3. Ala’ Eddin Kharofa, Transactions in Islamic Law (Kuala Lumpur, Malaysia: A.S. Noordeen, 1997), 80.

4. Mohammad Hasim Kamali, Islamic Commercial Law (Kuala Lumpur, Malaysia: Ilmiah Publishers, 2002), 84.

5. Al Qarafi, al furuq (Dar us Salam, Cairo 2001), vol. 3, 265.

6. Al Isnawi, Al sulsharhminhaj al usul, vol. 2, 89.

7. Al Shairazi, Al muhadab, vol. 1, 262.

8. Al-Zuhayli, Financial Transactions in Islamic Jurisprudence, vol. 1, 83.

9. Ibid., 84.

10. See: Al Kafif, AhkamAl Muamalat Al Sharī`ah, 356.

11. Al Nawawi, al Majmou’, (n.d. Jidda), vol. 9, 280.

12. See: Kamali, Islamic Commercial Law, 85.

13. Al Kafif, AhkamAl Muamalat Al Sharī`ah, 356.

14. Majalla el-Ahkam-I-Adliyah, Article 164 (Kuala Lumpur, Malaysia: The Other Press, 2003), 20.

15. For further reading on gharar, see: Inbn Rushd, bidayat al-mujtahidwanihawat al-muqtasid, (Dar us Salam, Cairo: 1995), vol. 4, 534.

16. Al Kafif, AhkamAl Muamalat Al Sharī`ah, 356.

17. See: Wahbah Al-Zuhayli, Financial Transactions in Islamic Jurisprudence, 3rd ed., vol. 1 (Damascus, Syria: Dar al-Fikr al-Mouaser, 1989[Arabic ed.]), 221; Al Kafif, Ahkam Al Muamalat Al Sharī`ah, 356.

18. Majalla, Article 165, 20.

19. See: Al-Zuhayli, Financial Transactions in Islamic Jurisprudence (Arabic ed.), 221; Al Kafif, Ahkam Al Muamalat Al Sharī`ah, 356.

20. For further reading on ghubn, see: InbRushd, bidayat al-mujtahidwanihawat al-muqtasid, vol. 4, 534; Al Kafif, AhkamAl Muamalat Al Sharī`ah, 358.

21. Al-Zuhayli, Financial Transactions in Islamic Jurisprudence (English ed.), 18.

22. Imran Ahsan Khan Nyazee, Islamic Jurisprudence (Kuala Lumpur, Malaysia: The Other Press, 2001), 134.

23. See: Ahmad Ibrahim Biq, The Sharī`ah Financial Transaction (Dar al Ansar, Cairo: 1936), 87.

24. Ibid., 86.

25. Nyazee, Islamic Jurisprudence, 136.

26. Ibid.

27. See: Kharofa, Transactions in Islamic Law, 78.

28. Al-Zuhayli, Financial Transactions in Islamic Jurisprudence (Arabic ed.), 360.

29. Ibid., 216.

30. Biq, The Sharī`ah Financial Transactions, 88.

31. AAOIFI, Sharī`ah standards No. 25, English ed. (Bahrain: Accounting and Auditing Organization for Islamic Financial Institutions, 2004), 445.

32. Ibid.

33. Ibid., 446.

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