Introduction

• Importance of Introduction
 Introduction

• Teacher's Introduction
 Introduction
Students’ Introduction
 Course Introduction
• Overview of Course Outlines
• It has two parts: Theory and Practical

• Recommended books:
1) Meezan Bank’s guide to Islamic Banking
2) An Introduction to Islamic Finance
3) Understanding of Islamic Finance
 Course Introduction

Purpose of the course and Targets to be achieved:

• To create awareness and understanding of the course
• It’s need
• It’s theory and practical application
 Course Introduction

Importance of Course
– It consists of Ma’amlaat
– Importance of Ma’amlaat
 Class Rules and Regulation

Attendance Policy:
 Obtained Marks Policy

Grading Policy and General Guidelines:

Hourly/Mid Term: 25
Final term: 40
Quizzes: 10
Assignments: 05
Final presentation: 20
Total: 100
 Lecture # 01

Concept of Banking and Sources

of Shari’ah
Muhammad Aslam
m.aslamkhalil@gmail.com
IQRA University
 Outlines

• Definition of Bank
• Structure of conventional bank
• Definition of Islam
• Definition of Shari’ah
• Sources of Shari’ah
• Ijtihad
Structure of Conventional Bank

Definition of Bank

?
?
?
 Structure of Conventional Bank

STRUCTURE OF CONVENTIONAL BANK

DEPOSITORS BANK CUSTOMERS

 Interest Based System
Financial activities of a conventional bank

Lending Lending
DEPOSITORS BANK CUSTOMERS

Interest Interest
Core Business of conventional Banks

Lending
And
Borrowing
.
.
.
.
And receiving INTEREST
Core Business of conventional Banks

Prohibition of INTEREST
.
.
in
Ahadees
and
Quran
 Islamic Bank

Is there any way to convert the existing conventional

banks into Islamic Banks?

Wait..
 Islamic Bank

We have three options regarding Banking sector:

1. Adopt it as it is
(not permissible)

2. Leave it completely
(not possible)

3. Convert it into Islamic

(possible and desirable)
 Islamic Bank

What will be the structure???

See in next slide…...

 Possibility of Islamization of Islamic Bank

STRUCTURE OF ISLAMIC BANK

DEPOSITORS ISLAMIC BANK CUSTOMERS

1.Trade based;
Participate in business 2.Rental based;
3.Participation
• Mudarabah; based;
4.Agency etc.

1.Profit in trade
Share in profit and lose 2.Rent in rental;
3.Share in profit in participation;
4. Fee in agency
 Islamic Bank

Why not Islamic Wine???

Sources of Shariah
 Outlines
Introduction to Sources of Shariah
01

02 Types of Sources of Shariah

03 Qura’an & Sunnah

04 Ijma’a, Qiyas & Ijtihaad

Meanings of Islam

Islam is a religion that provides a set of rules for life and

we therefore call it a 'code of life’ which means a code or
system that covers all aspects of life of a human being.
Meanings of Islam ISLAM

(‫)عقائد‬ ‫ت‬D
( ‫ادا‬DDD‫)عب‬ ‫امالت‬D‫)مع‬
( ‫خالقیات‬D
( ‫)ا‬
Faiths & Beliefs Worshipping (Dealings) Moralities & Ethics

‫امالت‬D‫مع‬
( ‫اشرتی‬D‫)مع‬ ‫امالت‬D‫مع‬
( ‫یاسی‬DD‫) س‬ ‫امالت‬D‫مع‬
( ‫لتی‬DD‫دا‬D‫) ع‬ ‫امالت‬D‫مع‬
( ‫اشی‬D‫)مع‬
Social Activities Political Activities Judiciary Activities Economical Activities

Other Economic Activi- Banking and Financial

ties Activities
Meanings of Shariah
1. Lexical meaning: Plain Way

2. Technical meaning:The Divine Law

Then We have put you (O prophet) on a plain way of (our) commandment.

So follow it and do not follow the desires of those who do not know. (45:18)
Sources of Shariah
Implications Rulings
(Dalail) (Ahkam)

Fardh
Primary Secondary
Previous Hukm-e-Wadh’i Wajib
Qur'an shara’i
Qaul-e- Sunnat
Sahabi
Sunnah
Istihsan Mustahab

Ijama’a Urf
Mubah

Qiyas Maslaha
Mursalah Makrooh
Sadd-e-
Zara’i Haram
Istis’hab
 Islamic Banking and Finance

Sources of Shariah
In this course we have to discuss

 The Holy Qur’an

 The Sunnah of the Holy Prophet (SAW)
 Ijma’ (consensus of the Ummah)
 Qiyas (Anology)
Sources of Shariah
 The Holy Qur’an
 Definition from al-Bazdawi:
 ‫ املنقول الینا عنہ نقال‬،‫ ھو الکتاب املنزل علی رسول ہللا محمد ﷺ املکتوب فی املصاحف‬:‫القرٓان‬
‫متواترا بال شبھۃ۔‬
 Which means: The the Holy Quran is the book revealed to
the Messenger of ALLAH, Muhammad‫ ﷺ‬as written in the
masahif and transmitted to us from him through an authentic
continuous narration (tawatur) without doubt.
Sources of Shariah
 The Holy Qur’an
 Express Injunctions have no room for different interpretations

 Implied injunctions may be interpreted in different ways by

way of inference
Sources of Shariah
 Contents of the Holy Qur’an

 Beliefs

 Jurisprudence

 Incidents and Events

 Examples
 Islamic Banking and Finance

Sources of Shariah
 The Sunnah

 A word spoken or an act done or ratified by the Holy Prophet

(peace be upon him)

 It is a source of law because the Holy Quran itself has made

it obligatory for every believer that he obeys and follows the
Holy Prophet:
﴿)1 ‫وٴم ِنیْ َن ﴾(سورہٴ االنفال‬ ِ ‫َوا َ ِطیْ ُعوا اللّٰہ َو َر ُس ْول َُہ اِ ْن کُنْتُ ْم ُم‬
َ
‫ن‬ َ َ َ ْ ‫ْ ی َّ ْ َ ف ق‬
  ﴿)80 ‫مَن ُّ ِطِع الرسُول َ َد اطَاع ﴾ (سورہٴ ال ساء‬
‫ہّٰللا‬
‫ع ِن ال َْہ ٰوی اِ ْن ُہ َو اِلَّا َو ْح ٌی ی ُّ ْو ٰحی‬َ ‫﴿و َما یَن ْ ِط ُق‬
َ ‫﴾سورہٴ النجم‬
 Islamic Banking and Finance

Sources of Shariah
 Ijma’a

 Ijma’ means consensus of the earliest scholars of the ummah

on a particular issue
 The Holy Prophet (SAW) has said:

)‫لن تجتمع امتی علی الضاللۃ (البخاری‬ 

 My Ummah shall never be combined on an error.
Sources of Shariah
 Qiyaas

 Literally, the word Qiyas means measuring or estimating one thing in

terms of another.
 Technically, it means to apply a recognized rule of Shariah expressly
mentioned in the Holy Quran and Sunnah to a similar thing or situation
by way of analogy.
 Ijtihad is the part of Qiyas (Analogy)
Sources of Shariah
 Ijtihad

 Literal meanings:
- To exert one’s utmost effort
 Technical Meaning:
- To exert utmost effort to discover a ruling of Shariah in a
particular matter
Sources of Shariah
 Ijtihad

When the Holy Prophet (SAW) intended to send his companion

Mu’adh, may Allah be pleased with him, to Yaman as a ruler and
as a judge, he asked him: How will you adjudicate a matter when
it will come to you?
He Said, “I shall decide on the basis of Allah’s Book (the Holy
Quran)”
Sources of Shariah
 Ijtihad

The Holy Prophet asked, “if you do not find it in Allah’s Book
(what will you do)?
He said: “ then, on the basis of the Sunnah of Allah’s Messenger”.
Sources of Shariah
 Ijtihad

“If you do not find it even in the Sunnah of Allah’s Messenger (what will you
do)? The Holy Prophet asked.
He replied: “I shall make ijtihad on the basis of my understanding and will
not spare any effort (to reach the truth).
On this the Holy Prophet (SAW) said, “ Praise be to Allah, who has let the
messenger of the messenger of Allah to do what pleases Allah’s messenger”
(Abu Dawood, Hadith No3592)
Sources of Shariah
Misconception
• Ijtihad can be exercised even
against the explicit provisions
of the Holy Quran and Sunnah.
• Ijtihad is to follow one’s own
opinion based on purely ratio-
nal assessment.
• 
Ijtihad is meant only provide
concessions and ease.
Correct Position
 Ijtihad may be exercised only where
no explicit provision is found in the
Quran or Sunnah
 Ijtihad is to discover the Divine rule
in the light of the principles laid down
by the Holy Quran & Sunnah
Ijtihad is an impartial way to discover
the Divine law, irrespective of it leads
to a concession or to a strict ruling.
Sources of Shariah
 Requirement of Ijtihad
Extensive knowledge of :
– The Arabic language and literature
– The Holy Quran
– The back ground of the verses of the Holy Quran called” As-
bab-un-nuzool”
– Critical studies of the traditions relevant to the exegesis of the
Quran
– Sunnah
– Critical studies of “ahadith” and their authenticity
– Islamic jurisprudence (Fiqh)
 Class CR and Group
• Nomination of CR for Class

• Creation of groups for reports and presentations

Q&A