THE CONCEPT OF

ISTIHSAN AND ITS

APPLICATION IN ISLAMIC

FINANCE A presentation by:

Nabil Bello

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Definition

• The term istihsan is derived from the root word hasuna. Literally it means considering something good and beautiful.

• It has been loosely translated into English as Jusritic Preference (or Equity as according to Hashim Kamali).

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Definition

• There are many technical meanings to Istihsan, some of them are:–Avoiding Qiyas for a stronger

evidence from the Qur’an, Sunnah or Ijma’–Leaving Qiyas to a higher Qiyas

which is more evident–Specifying (Takhsis) Qiyas for a

stronger evidence

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Definition• A more general definition given by

Al-Ashqar (2009) states that:

“A methodology whereby in some specific cases the Mujtahid declines to use Nass, Qiyas or a general rule

but instead he uses another ruling to achieve public interest, due to necessity, custom, hidden Qiyas

(Qiyas Khafiy) or other reasons that may warrant that preference”

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Tankertanker DesignBasis for Istihsan

• Istihsan must be based on an authority, if not it will not be accepted. The basis are three:–Nass: This refers to Qur’an and

authentic Hadith of the Prophet (SAWS).– Ijma’–Sound Maslaha (Maslahah

mu’tabarah): A public interest that is genuine and generally accepted–Hidden Qiyas (Al-Qiyas al-Khafiy)

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Tankertanker DesignExample: – Based on Nass• Bai Salam: It is a sale of what is

not in existence. This falls under the category of Bai al-Ma’adum, which is a form of Gharar that is prohibited in sale. But salam has been allowed based on the Hadith of the Prophet that

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Example: - Based on Ijma’

• Istisna’: This is a sale on what is not in existence, it also falls under the category of bai’ al-Ma’adum like in salam. It is considered allowed due to the consensus of its permissibility since from the period of the Companions.

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Example: - Based on Maslahah

• Imposing a guarantee on losses and damages caused by an trustee (amin). The general rule in these types of contracts is that they are based on trust, hence they are not supposed to pay for losses or damages. As the Companions observed that this causes a lot of damages they preferred a guarantee to be imposed in such cases.

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Example: - Based on Qiyas Khafi

• In the case of waqf, only clearly stated rights in the contract are considered like in sale. Other silent rights are not included. In this case it is better to perform a Qiyas on Ijarah, which allows the inclusion of unidentified rights even if they are not clearly stated, like right to use water, passage and right to flow water.

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Controversies on Istihsan

• Abu Hanifa, Malik and Hambali scholars permit the application of Istihsan but Shafi’i did not allow. Shafi’i said: “Whoever performs istihsan has enacted a new rule in Islam.”

• Commentators say that he denies istihsan based on pleasure seeking without any evidence (dalil).

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Istihsan in Islamic finance

• In Islamic finance, it has been a very important tool in many rulings.

• The concept of corporate business under limited liability has been allowed under the concept of istihsan.

• Also, the degree of tolerance of some forbidden elements in mixed companies has also been allowed based on istihsan.

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Conclusion

• Istihsan is a very important source of shariah that treats the Islamic rulings with consideration of inner and hidden social and ethical issues. The methodology should be made as a final resort. For instance, when we mistakenly cut the left hand of a thief, we should not cut the right hand again. This is to bring ease to the people.

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• There is no istihsan where it clearly contradicts an authority (dalil). That is why the Malikiyya consider istihsan as a systematic way of selecting a ruling were there are many contradicting authorities (adilla) from either the primary and secondary sources.

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