Examining U.S. approvals of Islamic financing products and the Islamic theory of lawful profit

Purpose: This paper seeks to analyze the legal interpretation of three Islamic financing products considered for approval by United States authorities, from the United Bank of Kuwait and Guidance Residential, even though the U.S. has not enacted any Shari’ah legislation in relation to the Islamic la...

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Main Author:	Abdullah, Adam
Format:	Article
Language:	English English
Published:	Emerald Group Publishing 2016
Subjects:	HG Finance HG1501 Banking
Online Access:	http://irep.iium.edu.my/51402/ http://irep.iium.edu.my/51402/ http://irep.iium.edu.my/51402/ http://irep.iium.edu.my/51402/1/51402_Examining%20U.S.%20approvals.pdf http://irep.iium.edu.my/51402/7/51402_Examining%20U.S.%20approvals_Scopus.pdf

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recordtype	eprints
spelling	iium-514022017-05-31T02:31:49Z http://irep.iium.edu.my/51402/ Examining U.S. approvals of Islamic financing products and the Islamic theory of lawful profit Abdullah, Adam HG Finance HG1501 Banking Purpose: This paper seeks to analyze the legal interpretation of three Islamic financing products considered for approval by United States authorities, from the United Bank of Kuwait and Guidance Residential, even though the U.S. has not enacted any Shari’ah legislation in relation to the Islamic law of transactions (fiqh mu’amalat). Design/methodology/approach: This paper primarily adopted qualitative document and content analysis, supported by quantitative numerical analysis, in reviewing legal interpretive letters from the U.S. Office of the Comptroller of Currency and National Administrator of Banks (OCC) and the U.S. Department of Revenue. Findings: The research found that in assessing economic substance over legal form, each of the three products involved risk-free transactions and interest. Research limitations/implications: The research had access to published OCC, Department of Revenue and U.S. Patent Office material that fully disclosed the mechanics of each of the selected products. Practical implications: The implication for the Islamic financial institutions involves Shari’ah compliance risk. When tested against the Islamic normative theory of lawful profit, it confirms that the products are non-compliant. Social implications: The social implication is customer awareness of Shari’ah non-compliance in the U.S., and the impact for other jurisdictions carrying the same products. Originality/value: The significance of this research for Islamic banking product design and development, is that it enhances the ability to block the legal means to an unlawful outcome (sadd al-dhara’i), thereby avoiding harm (al-darar) attributed to usury (riba), and upholding what is in the public interest (maslahah), in order to fulfil one of the objectives of the Shari’ah (maqasid al-Shari’ah), which is to protect wealth (hafiz al-mal). Emerald Group Publishing 2016 Article PeerReviewed application/pdf en http://irep.iium.edu.my/51402/1/51402_Examining%20U.S.%20approvals.pdf application/pdf en http://irep.iium.edu.my/51402/7/51402_Examining%20U.S.%20approvals_Scopus.pdf Abdullah, Adam (2016) Examining U.S. approvals of Islamic financing products and the Islamic theory of lawful profit. International Journal of Islamic and Middle Eastern Finance and Management, 9 (4). pp. 532-550. ISSN 1753-8394 http://www.emeraldinsight.com/toc/imefm/9/4 10.1108/IMEFM-09-2015-0107
repository_type	Digital Repository
institution_category	Local University
institution	International Islamic University Malaysia
building	IIUM Repository
collection	Online Access
language	English English
topic	HG Finance HG1501 Banking
spellingShingle	HG Finance HG1501 Banking Abdullah, Adam Examining U.S. approvals of Islamic financing products and the Islamic theory of lawful profit
description	Purpose: This paper seeks to analyze the legal interpretation of three Islamic financing products considered for approval by United States authorities, from the United Bank of Kuwait and Guidance Residential, even though the U.S. has not enacted any Shari’ah legislation in relation to the Islamic law of transactions (fiqh mu’amalat). Design/methodology/approach: This paper primarily adopted qualitative document and content analysis, supported by quantitative numerical analysis, in reviewing legal interpretive letters from the U.S. Office of the Comptroller of Currency and National Administrator of Banks (OCC) and the U.S. Department of Revenue. Findings: The research found that in assessing economic substance over legal form, each of the three products involved risk-free transactions and interest. Research limitations/implications: The research had access to published OCC, Department of Revenue and U.S. Patent Office material that fully disclosed the mechanics of each of the selected products. Practical implications: The implication for the Islamic financial institutions involves Shari’ah compliance risk. When tested against the Islamic normative theory of lawful profit, it confirms that the products are non-compliant. Social implications: The social implication is customer awareness of Shari’ah non-compliance in the U.S., and the impact for other jurisdictions carrying the same products. Originality/value: The significance of this research for Islamic banking product design and development, is that it enhances the ability to block the legal means to an unlawful outcome (sadd al-dhara’i), thereby avoiding harm (al-darar) attributed to usury (riba), and upholding what is in the public interest (maslahah), in order to fulfil one of the objectives of the Shari’ah (maqasid al-Shari’ah), which is to protect wealth (hafiz al-mal).
format	Article
author	Abdullah, Adam
author_facet	Abdullah, Adam
author_sort	Abdullah, Adam
title	Examining U.S. approvals of Islamic financing products and the Islamic theory of lawful profit
title_short	Examining U.S. approvals of Islamic financing products and the Islamic theory of lawful profit
title_full	Examining U.S. approvals of Islamic financing products and the Islamic theory of lawful profit
title_fullStr	Examining U.S. approvals of Islamic financing products and the Islamic theory of lawful profit
title_full_unstemmed	Examining U.S. approvals of Islamic financing products and the Islamic theory of lawful profit
title_sort	examining u.s. approvals of islamic financing products and the islamic theory of lawful profit
publisher	Emerald Group Publishing
publishDate	2016
url	http://irep.iium.edu.my/51402/ http://irep.iium.edu.my/51402/ http://irep.iium.edu.my/51402/ http://irep.iium.edu.my/51402/1/51402_Examining%20U.S.%20approvals.pdf http://irep.iium.edu.my/51402/7/51402_Examining%20U.S.%20approvals_Scopus.pdf
first_indexed	2023-09-18T21:12:46Z
last_indexed	2023-09-18T21:12:46Z
_version_	1777411362830417920

Examining U.S. approvals of Islamic financing products and the Islamic theory of lawful profit

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