Rapid Growth of Islamic Financial Industry

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Legal documentation in Islamic Financial Transactions. Introduction The rapid growth of Islamic finance industry of the Islamic banking industry has been complemented and supported by an equally parallel comprehensive development in the legal infrastructure, integrating Shari, ah principles, legislation, and complex legal documentation matters. Thus, understanding these issues is very crucial for bankers and legal professional practicing in Islamic finance as a profession. As the Islamic finance industry keep expanding further, and become more innovative, keeping yourself updated on impending legal issues is of paramount importance. The Islamic finance industry has been focusing more on contract forms practiced in various financial transaction. Contract is a very essence of various transactions which without it may lead to void of legal significance. Islamic commercial law laid down comprehensive rules in leading to the creation of contract. We could see that Islamic commercial law is inspiring with many kinds of contracts that are beneficial to meet people’s need in different situations. The basic of transactions in Islam stresses in ethical, social and dimensions of financial transactions to improve equity and fairness for the general good of society. This perfect environment can be illuminate through the important verses in the Quran which stressed out the significance and how it enjoins believers to "keep faith contracts" (Awfu bi al-'Uqud), the formation of contract. According Nabil (1990) and Mohd (2008), there is no exact definition of a contract as such is to be found in the treatises of Islamic law until the 19th centuries. This is due to Islamic law never established a general theory of contract, thus ... ... middle of paper ... ...ion using legal terms may confuse even both parties. Hence, it is the customer rights to ask for financier help to understand the whole agreement before signing it, this is essential to avoid any possibility of dispute in the future between both contracting parties. The client should be given enough time to understand the legal documentation first before making any decisions. All these need to be taken into consideration to ensure the legal documentation is align with Shariah principles. It is also our hope that a holistic application of the Shariah, shall affirm Islamic banks to ensure the use of propety is Shariah-compliant particularly in view of the inherent reputational risk in Islamic transactions and governance. Besides, the Islamic legal documentation should reflect the Islamic commercial law and potrays its maqasid al-Shariah or objective of Shariah.

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