The Classical Islamic Law of Guarantee and its Application in Modern Islamic Banking and Legal Practice

Abstract

The guarantee has been regarded as an important method of securing the performance of future obligations. In modern banking lending transactions the practical use of the guarantee has been accepted with full recognition. This is also true in the Islamic banking sector. However, due to its constant reliance upon classical formulations, the business of Islamic banking that relates to the guarantee seems inconsistent with modern developments. This thesis examines classical interpretations on the guarantee and the extent to which it has influenced the modern decisions of Islamic banking and legal practices. A wide range of Islamic legal sources has been consulted and this includes both classical and modern legal literature. The classical legal source represents legal formulations and legal explanations (fatwas) that have been constructed during the 8th century A. D. The modern legal source represents modern legal writings and some of the Arab civil codes. In order to understand the legal position of the classical Islamic guarantee in common law jurisdictions a reference has been made to the English and Malaysian common laws. The thesis demonstrates that there are more similarities than differences between classical Islamic law and modern common laws with regard to the function and objective of the guarantee. The thesis also argues that classical Islamic law of guarantees has a profound influence in both modern Islamic banking and Muslim legal practices. The factors that contribute to this are perceived to be the movement of the reassertion of Islamic Shari'a and the belief that classical texts, which were formulated upon calculated deductions, offer great information about rules that reflect the will of the Islamic Shari'a. This, however, does not mean that classical interpretations on the guarantee are perfect; it has its own strengths and weaknesses. Hence, adaptation and modification in the classical Islamic law of guarantee are still possible for the betterment of legal practice.