Islamic Finance and Law

The book tackles a startling subject which has brought the world’s financial market to its knees: the issue of the commodization of debt. As debt is the backbone of modern day finance, at least in banking, the author researches this issue from an Islamic perspective by using analogies from English common law so as to open a new horizon for Islamic finance. She engages with this topic by focusing on the emergence of the sukuk (Islamic bonds) market which engulfs the much controversial murabatiah sukuk. The latter is a debt-backed rather than asset-backed transaction which caused an upheaval in the Islamic financial world in 2007–2008.

Chapter 1 deals with the issue of the flexibility of interpretation in Islam and also covers the debate of form over substance in Islamic jurisprudence which is a dominating theme in Islamic product development and contractual engineering. The chapter also compares how this debate is dealt with under the English common law.

In chapter 2 the methodology and objective of the book are discussed. The methodological approach of the author is comparative in nature. The author explains the reasons for adopting the English common law as a benchmark for comparison with Islamic commercial law. She also argues that Islamic law is inclusive of other legal systems and is not exclusive. It is pointed out that in most jurisdictions where sukuk are issued, the draft of the legal documents are mainly in accordance with the English common law. According to the author there are many commonalities between Islamic commercial law and English common law. Consequently, this will facilitate the development of Islamic finance law at a global level because the common law has already been admitted in various legal systems for drafting documents for the issuance of sukuk. The analytical tool adopted is that of ‘principles’ rather than rules. This issue will be addressed shortly.