ISLAMIC LAW

Islamic Law

[Name of the Institute]

Islamic Law

Introduction

With the recent troubles in the global economy, some have proposed that a financial system based on shariah, or Islamic law is a better approach than traditional finance. This paper explores the basics of Islamic finance, and while agreeing that Islamic finance has a crucial role to play in the global financial system, concludes that it is not a viable substitute for traditional financial management.

Islam is the complete code of conduct for the followers of Islam. However, in today's world, the researchers and scholars are taking great interest in the Islamic financial institutions because there is a huge difference between the Islamic and Conventional financial institution. The Islamic banking and other financial institutions are based on the Islamic economics according to which state has an enormous role in the taxation, managing public assets, policing and ensuring the circulation of wealth. Moreover, in the Islamic finances, there is redistribution of resources so that the essential requirements of the people can be fulfilled efficiently. However, to apply such system is not an easy task for any government authority. The main difference that remains between the Islamic and Conventional banking is the interest based system (Yasin, 1995, pp. 78).

Islamic banking system and Islamic finance activities are carried out on the basis of profit and loss sharing (PLS). The main objective of Islamic banking system is the prevention of riba and to avoid receipt and payment of interest. Islamic banking did improvement so promptly and has developed into full-fledged Islamic institutions over the last three decades. The successful growth and expansion of Islamic banking and finance system in various countries reflects the tremendous performance of Islamic banks accomplished in a very short time period. The Islamic banking system is not only confined to Muslims countries but also there is a realization of wide spread of Islamic banking in western countries. In the Islamic for interest free banking, encouraging efforts were taken from the period of 1990 to 2000. In 1991 federal shariah court (FSC) announced his judgment against the financial system used by banks that was based on riba and encouraged to change the interest based banking into shariah based financial system. In 2000 CTFS organized a team for the development of financial instruments for an Islamic banking system (Siddiqi, 2000, pp. 36-43).

Sharia & Fiqh

The term refers to the Sharia Islamic law, it contains all of the laws to be observed in an Islamic society and are fulfilling. Here, the Sharia is no fixed collection of laws (such as German legal texts in the Civil Code or the Penal Code), but a method and methodology behind the creation of law. Islamic law regulates both the cultic and ritual rules, acts of worship 'of man and his relations with his fellow mutual relations'. The law ensures that the religious practices of individuals are met with respect to God and all the relations of the individual to his fellow man - property law, family and inheritance law, criminal law ...