1. Dr. Azeemuddin Subhani

2. Structural Foundations Ethical Foundations: = Normative Basis of Finance Conventional Finance: Distinct from Juridical Foundations Islamic Finance: Embedded in Theological/Juridical Foundations Sharp Ethical Focus Since the Global Financial Crisis: Ethical Flaws of Conventional Financial System Ethical Strengths/Compliance of Islamic Financial System

3. Structural Foundations Unique Feature of Islamic Shariah: Blending of : Theological Foundations Juridical Foundations Ethical Foundations Separate Examination of Ethical Compliance of Islamic Financial System: A Western Perspective But Not Representative of Islamic Legal Ethos

4. Islamic Juridical/Ethical Norms 1. Freedom to Contract 2. Freedom from Riba 3. Freedom from Gharar 4. Freedom from Maysir 5. Freedom from Price Control and Manipulation 6. Entitlement to Transact at Fair Prices 7. Entitlement to Equal, Adequate, and Accurate Data 8. Freedom from Darar (Detriment) 9. Mutual Cooperation and Solidarity

5. Structural Compliance Compliance with Gharar and Maysir Injunction Standard Linguistic Meaning of Gharar = Risk/Uncertainty Legal Status of Gharar = Unequivocal Prohibition Hence Legal Status of Risk/Uncertainty = Unequivocal Prohibition Yet Risk-Taking/Sharing = Deemed Underlying Principle of the Permitted Norm of Bay??? Hence Risk-Taking/Sharing = Deemed Foundational Pillar of the Islamic Financial Architecture

6. Structural Compliance Anomaly: Risk-Taking/Sharing = Unequivocal Prohibition under Gharar Risk-Taking/Sharing = Deemed Derived Permission under Bay Unanswered Question: Compliance of Islamic Financial Practice with Ethico - Legal Injunction of Prohibition of Gharar Compliance of Islamic Finance with Islamic Ethics

7. Structural Compliance Controversy: Extent of Prohibited Risk-Taking: If All Risk-Taking Prohibited How Risk-Taking = Foundation of Islamic Financial System? Even if Risk-Taking is the Foundation Why Speculative Transactions are Prohibited? If Only Excessive Risk-Taking is Prohibited What Distinguishes Excessive from Non-Excessive ? What is the Scriptural Authority for the Distinction?

8. Structural Compliance Root of the Controversy: Mistranslation of the Permitted Bay: As an Extended Connotation of Trade As against its Specific Connotation of Bilateral Exchange Distinguishing Characteristic of Trade = Risk-Taking Hence Risk-Taking = Deemed Defining Characteristic of Permitted Bay Hence Risk-Taking = Deemed Foundation of Islamic Financial Structure

9. Structural Foundations Analytical Flaws: Linguistic Meaning of Bay = Exchange Trade Quranic Arabic Equivalent of Trade Tijarah Q. 2:275 Specifically Singles Out for Permission: Bay (Bilateral Exchange) Not Tijarah (Trade)

10. Structural Foundations Tijarah (Trade) Enjoys: Quranic General Permission BUT Not Specific Permission as Alternative to Riba Alternative to Riba is Bay Extreme Divine Importance of Riba/Bay Distinction Miscomprehension of Riba/Bay Distinction Punishment of Satanic Insanity

11. Structural Foundations Bay =Bilateral Exchange = Negotiation = Give/Take: Offer/Acceptance = Mother of All Contracts in Islamic Law = Islamic Jurisprudence Insulates Bay Contract Against All Risks Risk-Taking

12. Structural Foundations Bay Linguistic Meaning: All Exchanges including: Commercial Political Social Common Element of All Bay Contracts: Inter-action of Two Heterogeneous and Opposing Counter- Parties in a Deal A Process of Co-Generation Commensurate with Creation of Everything in Pairs (Zawjan)

13. Structural Foundations Bay: Defining Characteristic: Not the Effect of the Transaction (Risk/Return) But the Underlying Process of Generation of Any Effect Not Risk-Taking as Generally Held But Co-Generation = Inter-action of Opposites Inter-action Leading to Go-Generation: = The Only Common Legitimizing Factor of All Islamic Contracts: - Participatory - Trading - Leasing

14. Structural Foundations Bay: Participatory Contracts: Inter-action of Money & Labor in Musharaka and Mudaraba Trading Contract: Inter-action of Money and Commodity in Murabaha Leasing Contract: Inter-action of Money and Usufruct in Ijara

15. Structural Foundations Riba: Extant Scholarly Misconceptions: Restricted Technical Meaning of Interest/Usury Only Riba = 72 Abwab (chapters, kinds) Deemed Prohibition Rationale: Human Exploitation Not Commensurate with Direst Quranic Punishment for It Focus of Prohibition: Incorrect: Effect of a Business Transaction Correct: Underlying Process of Generation of the Effect

16. Structural Foundations Riba: Islamic Legal Permission: The Effect Profit-Making = Money Ultimately Generating More Money Islamic Legal Regulation: The Generation of The Effect Prohibition: Self-Generation of The Effect (Ribawi Method) Permission: Co-Generation of The Effect (Bayawi Method)

17. Structural Foundations Derived Operative Principles for Ethico-Legal Compliance: Prohibition of Risk-Taking (Gharar) Permission of Co-Generation (Bay) Prohibition of Self-Generation (Riba) Actual Compliance: Extensive Restructuring Required to Comply with the Above Operative Principles