Islamic Financial Product Development in the Context of Education and Health

Abstract

Ignoring Maqasid Al Shariah in product development is expected to emerge as an issue in Shariah compliance and/or risk management in financing schemes. For financing services, unlike merchandise trade finance, the very existence of the conflict with Maqasid Al Shariah, precipitates the Shariah-compliance issue. Health and education services should be provided through Waqf, and the financing of such services should be avoided. Murabaha contracts, unlike in merchandise trade, do not pave the way, neither does non-Shariah compliant organized Tawarruq, aka commodity Murabaha. Murabaha is the most commonly used tool of Islamic finance. Since Islamic finance should mimic the real economy, prevalence of Murabaha is expected and it is commendable. However, there are still misunderstandings related to different functions of Islamic tools such as Murabaha versus Waqf.