The effects of contract modifications on Shari'ah compliant products in the United States
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Authors
Wali-Uddin, Abdullah Mahdi
Issue Date
2019-04
Type
Thesis
Language
en
Keywords
Islamic banking , Islamic contracts , Contract modifications , Shari'ah compliant finance , Islamic products , Islamic fiqh transactions , Islamic law , Shari'ah finance , Financial engineering , Islamic finance
Alternative Title
Abstract
Islamic banking in the United States of America, became recognized as an
alternative to expand into the market of traditional Muslim consumers, living in
the United States. Because of strict regulatory guidelines, no Islamic banks
exist in the United States. Instead, conventional banks, Islāmic banking
windows (IBW) and other financial institutions offer Shari‘ah compliant products
by modifying classical Islamic contracts or attaching a rider to define contract
verbiage. This study reviewed techniques of adapting contracts used for
Shari‘ah compliant products in the United States to determine if the contracts
maintain the true characteristics of the original classical Islamic contracts.
Contracts in Islamic sacred law provide protections by ensuring wealth is not
wasted, and no injustice is performed by either of the contracting parties.
Wealth protection and justice are the inherit characteristics of contracts in the
Islāmic law. Any changes or modifications may void or decrease the protections
provided in Islamic law. This research reviewed the theoretical aspects of
contract modifications, by analyzing the procedures used for the derivative
Shari‘ah compliant product contracts used in the Islamic finance industry in
the United States. Data was evaluated and compared with the requirements of
classical Islamic contract equivalents, to determine the effects of these
changes.