Value Intent Of Islamic Finance

Liza Mydin



The Islamic form of financial intermediation derived as it is from the Qur’an and Sunnah involves striving for collective prosperity and development. It is a system that enables avenues for individuals to flourish and communities to thrive. To this end, one of its hallmark components would be its role in promoting the overall welfare of society where individual self-interest is second to the interest of the many. The Qur’an also unambiguously proclaims that resources are provided in abundance. Therefore poverty or wealth inequality arises not as a result of scarcity of resources but instead through lack of coordination and in the more extreme spectrum through unfair or distorted distribution practices.

In contrast to its conventional counterpart, providing access to Islamic Finance requires Islamic Financial Institutions to act as trustees or partners through diverse forms of transparent contractual agreements. The relationship also implies that Financial Institutions and contracting parties are encouraged to have oversight in both the profitability and management of risks in the financial arrangement. Earnings are therefore qualified by an emphasis on the assumption of responsibilities to potential loss consequences, an event more commonly known as risk sharing. 


Risk Sharing

Shariah emphasizes risk sharing as a salient characteristic of Islamic Financial transactions, in which risk is shared by virtue of possession. A salient feature that triggered the 2008 financial crisis in the conventional financial system is the rapid risk transfer activities from financial institutions onto customers, governmental bodies and the public at large.

Consequently one of the values intended from the Islamic risk sharing paradigm is to achieve improved income and wealth distribution. Achieving surpluses and ensuring unhindered access to capital so that income and wealth may circulate are essential to generate productive economic activities. It also aims to provide economic growth with financial stability through strong prohibitions against speculative activities that commonly lead to the creation of opaque or toxic financial instruments seen so rampant in the financial crisis. Herein lies another distinguishing attribute; the requirement of Islamic morality in all forms of economic participation.


Collective Wellbeing

Because the Islamic worldview emphasizes the placement of collective well-being as a spiritual goal, in this temporary plane of existence the scope of Islamic Finance is more far-reaching and include postulations to address social and environmental issues. It is centered on eradicating poverty and affording all members of society avenues to achieve dignified living conditions; through establishments that promote equal and fair opportunities. Preserving the rights of future generations entails protecting the environment as a matter of holding its care in trust by ensuring resources are not depleted or destroyed.

To this end, one of the most important distinguishing characteristics of this system is that it involves social solidarity by way of enabling mutual support and service to others and all creation. It is a form of Finance that is inclusive and firmly grounded on the notion that cooperation will bring about a better response to individual and collective difficulties and that any breakdown in distribution across all members of society illustrates a failure in the strength of belief.


One Comment

  • Rustam

    Please, briefly describe Islamic banking and financial system. How an individual and a state at large can operate Islamic financial system? Also, mention its practicability and benefits

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