PROHIBITING RIBA IN ISLAMIC FINANCE
Ethical and Legal Dimensions and the Role of Malaysia's Shariah Advisory Council
Keywords:
riba (usury), Shariah Advisory Council (SAC), islamic finance, Sharia compliance, ethical financial transactionsAbstract
One of the most critical issues in Islamic finance is the elimination of riba (usury), as Shariah prohibits it. Riba, defined as an unjust excess in financial transactions, is explicitly forbidden in the Quran and Hadith due to its exploitative nature. This study examines riba based on the fatwas issued by the Shariah Advisory Council (SAC) of Bank Negara Malaysia, the highest Shariah authority whose decisions are binding on financial institutions, courts, and arbitrators under the Central Bank Act 2009. Using a literature review methodology, this article highlights the strategic role of the SAC in prohibiting Riba and ensuring compliance with Shariah principles. The findings reveal that the prohibition of riba has profound ethical and legal implications, promoting fair and Sharia-compliant financial transactions. The implications of this research are significant for strengthening Islamic law and Islamic banking in Malaysia and Asia. By emphasizing the need for transparency and accountability in SAC decisions, this study offers valuable insights for policymakers, practitioners, and academics to integrate Shariah principles with modern financial needs to ensure justice and societal welfare.
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References
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