Fatwa, its process & methodology in islamic banking & finance

Abstract

Fatwa (considered an opinion of learned person(s)) plays a very important role in Islamic finance. We find that several Jatawa have been given a very prominent position as Islamic legal rulings as adopted by the Shari'ah advisory board, which is an independent body charged with the responsibility of issuing rulings on how financial transactions are to be conducted in conformity with the such rulings in banking, investment and insurance. Scholars agree that throughout the history of mankind, prophets performed the task of providing rulings as did also Islam's prophet. Generally, scholars knowing the critical nature of ruling, prefer not to get involved in giving such rulings for fear of being wrong. The daily business operations of Islamic financial institutions are influenced by these rulings. There are numerous Jatawa in Islamic finance issued by competent scholars in the national bodies as well as at institutional level by Shari 'ah boards. This paper elaborates the concept of fatwa, its characteristic and its shari 'ah methodology by discussing various issues related to fatwa from the perspective of Islamic finance.