Fintech for Islamic finance must observe Shariah guidelines. In general, technology is neutral from Shariah perspective. But, how do we determine which fintech application that requires sensitivity to Shariah requirements?
Prof Akram Laldin, the Executive Director of International Shariah Research Academy (ISRA), who used to be my lecturer for the subject of Introduction to Islamic Jurisprudence during my Post Graduate Diploma in Islamic Banking and Finance, has provided some guidelines as published in Islamic Finance News (IFN) Correspondence Report on 07/02/17.
“In order to address these concerns, it is important to note that, in general, Shariah principle with regards to a business transaction (Muamalat) is govern by the notion that every transaction is permissible (Ibādah), except when there is a clear text which prohibits it. The permissible principle provides flexibility in innovation and new practices in business and financial transactions. All innovations in Muamalat, are considered as permissible and welcomed. In this regard, innovations in fintech become impermissible only if there is clear evidence that they are in conflict (against) the
basic rules of the Shariah.
Therefore, fintech application and practices, as in traditional Islamic finance, should follow the principles of the Shariah by avoiding the prohibited elements in the transactions such as interest (Riba), gambling (Maysir), uncertainty (Gharar), harms (Darar), cheating (Tadlis), etc. It must be transparent with no hidden cost, irresponsible or unethical financing.
Likewise, the practice of transactions in fintech application should follow the rules of contract (Aqd) used in the transaction by observing the pillars (Rukn) and conditions (Shart) in the contract. In addition, fintech application should aim at achieving the objectives of the Shariah (Maqāsid Al Shariah), namely to realize the benefits (Maslahah) and to avoid the harms and difficulties (Mafsadah and Mashaqqah). “