Chapter 4: Ethical Business Tools for Responsible Finance – Jurisprudential and Practice-oriented Perspective

This chapter explores the ethical foundations and juristic frameworks of Islamic finance, contrasting them with conventional financial systems that rely on interest (ribā) and contractual uncertainty (gharar). Islamic finance emphasises risk-sharing, equitable returns, and a direct linkage to real economic activity. The chapter categorises Islamic financial contracts into debt-creating techniques (e.g., murābahah and salam) and profit-and-loss-sharing modes (e.g., mushārakah and mudārabah), highlighting their roles, ethical implications, and macroeconomic impacts. It also examines contemporary challenges, such as the misuse of juristic tools to replicate conventional products, and underscores the need for systemic reforms to align practice with Islamic principles. The discussion extends to the use of ḥājah (need) and ḍarūrah (necessity) in Islamic commercial law, as well as the development of sharīʿah-compliant benchmarks to replace interest-based benchmarks like London Interbank Offer Rate. The chapter concludes by advocating for transparency, governance, and ethical benchmarking to ensure that Islamic finance fulfils its promise of shared prosperity and sustainable growth.