Fragmentation of Islamic Financial Products – An Exploratory Study of Islamic Schools of Thought

Rafay, A., Sadiq, R. & Ajmal, M. M. (2016). Fragmentation of Islamic Financial Products – An Exploratory Study of Islamic Schools of Thought. Abasyn Journal of Social Sciences, Special Issue, 48-61.

16 Pages Posted: 8 Jun 2016 Last revised: 4 Mar 2021

See all articles by Abdul Rafay

Abdul Rafay

University of Management & Technology (UMT), Pakistan

Ramla Sadiq

University of Management and Technology (UMT), Pakistan - School of Business and Economics

Muhammad Ajmal

University of Management and Technology (UMT), Pakistan

Date Written: June 5, 2016

Abstract

The international emergence and expansion of Islamic finance is an undeniable fact. Significant efforts from all stakeholders including regulatory bodies are currently under way to formulate universal framework, standards and codes of conduct for Islamic finance. This is necessary because of the heterogeneity of the Muslim community in the presence of different “Schools of thought” (hanafi, hanbali, maliki and shafi). “Schools of thought” has a great impact on development of Islamic jurisprudence and analytical thinking. Sources of Shari’ah law are clearly defined through Quran, Sunnah, Ijtihad, Ijma and Qiyas. However, multiple interpretations by various “Schools of thought” regarding Islamic jurisprudence including Islamic Finance result in minor and major disparities. Keeping in view this fact, it is logical that without a universal Shari’ah code, the acceptability of products introduced in Islamic finance shall remain fragmented. Moreover, the permissibility of certain Islamic financial products varies by region, depending on the “Schools of thought” prevalent in that geographical area. This paper explores the necessity of convergence of various “Schools of thought” to formulate a single Shari’ah code that will be universally applicable. We also intend to look at similarities between “Schools of thought” with special reference to Islamic finance. This effort may lead to development of instruments that have broader markets, multiple customer segments, enhanced liquidity and reduced liquidity premium.

Keywords: Fragmentation, Islamic banking and finance, Jurisprudence, Madhahib, Schools of thought, Framework

JEL Classification: G18, G28, G21, K12, M48, N45, O53

Suggested Citation

Rafay, Abdul and Sadiq, Ramla and Ajmal, Muhammad, Fragmentation of Islamic Financial Products – An Exploratory Study of Islamic Schools of Thought (June 5, 2016). Rafay, A., Sadiq, R. & Ajmal, M. M. (2016). Fragmentation of Islamic Financial Products – An Exploratory Study of Islamic Schools of Thought. Abasyn Journal of Social Sciences, Special Issue, 48-61., Available at SSRN: https://ssrn.com/abstract=2790458

Abdul Rafay (Contact Author)

University of Management & Technology (UMT), Pakistan ( email )

C-II
Johar Town
Lahore, Punjab 54770
Pakistan
924235212801-10 (Phone)

HOME PAGE: http://www.umt.edu.pk

Ramla Sadiq

University of Management and Technology (UMT), Pakistan - School of Business and Economics ( email )

Johar Town - Phase 1
Lahore, 54000
Pakistan

Muhammad Ajmal

University of Management and Technology (UMT), Pakistan ( email )

C-II
Lahore, Punjab 54770
Pakistan

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