Loopholes and their Controls in Islamic Finance: An Empirical and Applied Study
Dr. Rashid bin Hamoud Al-Naziri
Assistant Professor – College of Law
Sultan Qaboos University – Oman
The study deals with the legal loopholes in Islamic financial institutions, on the basis of originality and application, showing their concept and legitimacy by extrapolating the original sources of Islamic legislation, represented in the Holy Book, and the Sunnah of the Prophet. It showed the differences between permissible loopholes and forbidden tricks. The study then examined the legitimate purposes of prohibiting usury in all its forms and obscene deception, and the impact of this on the security, stability, and prosperity of the society. The study also mentioned the controls that distinguish Sharia loopholes from others, in light of textual evidence, general intentions, and the overall rules of Islamic law.
The importance of the study is due to its contemporary nature, as it is related to the economy of countries and the livelihood of individuals. Legitimate provisions are dictated according to principles in order to improve profits, and to maximize the economy and lead to the flourishing of the country. The researcher used the analytical, comparative and the inductive approach, in order for the topic to be covered in all its aspects, for agreements and disagreements to emerge, and for the results to be valid and consistent.
The study focused on the practical applications of Islamic finance, which is applied in Islamic financial institutions, and on which these controls and assets were applied to show the extent of their applicability, whether there a defect in performance or conditioning, whether it is possible to correct and rectify it, so that Islamic finance is free from the impurities of usury, vanity, and gambling, and abusing people’s money without right and consent?
The study concluded with a set of results, the most important of which is the impermissibility of committing a forbidden act through complex mock contracts or fabricated statements, and that Islamic financial institutions must be fully independent from usurious banking work, and not to simulate it in its functions through suspicious tricks, because the goals and objectives are different. The research also concluded with the obligation of the Sharia Supervisory Board to perform its functions without prestige or favoritism, as the right deserves to be followed, and falsehood will negatively affect the dishonest. The study also concluded that with the importance of what theorists have done for Islamic banks and non-interest financing, however, these blessed efforts need evaluation and constructive processes in order to reach a pure and integrated Islamic system of banking activity.
In the light of the foregoing, the study presented a set of recommendations, the most important of which is the necessity of seeking the competencies and specialized expertise in Islamic banking and the continuous training of its employees, in addition to the importance of setting total rules related to bank financing, according to which the performance of Islamic financial institutions is assessed. The study also recommends the necessity of educating society about the various aspects of usury risks, and the necessity of devising investment formulas that suit global economic progress and achieve the interests of society and individuals alike.
Keywords: islamic financial transactions, banking scams, islamic financial institutions, sample sale, deception.