Application of ḥiyal (legal devices (ld)‎)‎ in Murabaha transaction and Its Shari’ah perspective

Abstract EN

At present, Murābaḥāh is the most widely used mode for investments among financial institutions worldwide.

Similarly, this mode has been generally applied in Islamic Financial Institutions (IFIs) in Sri Lanka.

However, some scholars said that the contemporary Murābaḥāh practices are not Islamic because it relies heavily on the element of Ḥiyal (legal devices).

Thus, this investigation explores the doctrine of legal devices (LD) in classical Islamic jurisprudence and its application in modern Islamic finance.

Legal devices (LD) are normally used for some modifications which led to the reasons for the criticism.

Hence, the validity of these LDs is analyzed through classical and modern literature.

This study found that using LD alone does not invalidate a contract.

In addition, there are conditions and restrictions that should be applied on the use of LD.

This research utilizes a doctrinal analysis, which involves both primary and secondary sources of information, such as statutes, practices, and reports.

This study recommends the spheres of acceptable LD and suggests that the innovations should only be attempted within these spheres.

Also, it suggests that in emerging financial products, Maṣlaḥah should be given major consideration; otherwise, the adoption of Islamic finance in non-Muslim countries such as Sri Lanka will be a challenge.