This site is solely dedicated to publish my writing, mostly on the topic of Islamic finance. Some of the articles were written as partial fulfillment for completing the Chartered Islamic Finance Professional (CIFP) certifications and for the Ph.D in Islamic Finance that I am currently undertake. Interested parties, including reporter/press or students, may reproduce or quote materials published provided that the credit has to be given to my blog (arzim.blogspot.com). Comments must be accompanied by names or pseudonyms. Anonymous postings and those containing profanities and obscenities will be rejected.

Sunday, January 17, 2010

The Difference between Shariah Compliance and Shariah Based Products and Services

Shariah is defined as Islamic law or Law of Allah.  It shows one of many ways that humanity strives to harmonize and maintain internal and external belief systems in an holistic approach to life. Hence Shariah covers not only religious rituals, but also many aspects of day-to-day life, politics, economics, banking, business or contract law, and social issues. 

The authority of Shariah is drawn from two primary sources. The first major source is the specific guidance in the Holy Quran, and the second source is the Sunnah, literally the “Way,” as in the way that Prophet Muhammad (pbuh) lived his life. Shariah law can be broadly divided into two main sections; the acts of worship or known as al-ibadat and the human interaction or known as al-mu’amalat which includes financial transactions, endowments, laws of inheritance, foods and drinks, judicial matters and others. Shariah based products and services are the products and services that straightly derived from the primary sources of Islamic laws such as the Qard’ al-hassan (benevolent loan). Shariah based products and services are said to be originated during Prophet’s period. These products and services have undergone the process of cleansing where any prohibited elements were removed by Prophet Muhammad (pbuh) such as al-bay’ (trade), mudarabah (profit sharing), musyarakah (joint venture, profit and loss sharing), murabahah (cost plus), and Ijarah (leasing). 

On the other hand, Shariah compliance products and services are the products and services that comply or adhere to the requirements to the Shariah itself. The good example would be the Sukuk (Islamic bond) that is invented from the application of rules from the Shariah based products. Therefore, it is permissible and complies to the requirements of Shariah. Shariah compliance products and services are also can be said as the modern day products and services after Islamisation of it.

Shariah based also refers to the desired objectives of the Shariah (known as the maqasid shariah) when determining a hukm (rules) aimed at the protecting human maslahah (public interest). Thus, Shariah based products and services like mudarabah are aimed to encourage the entrepreneurship among public and to maintain risk-reward relationships in a just manner. The mudarabah doctrine also implies to recognise same and equal ability to undertake responsibility and to have full authority to act on behalf of the other and are jointly and severally liable for the liabilities of the partnership business. However, the Shariah compliance products and services focusing on what it is needed to make the products and services provided in line with the permissibility in Islam. Therefore, the products and services must not have any elements of riba (usury), maisir (gambling), gharar (excessive uncertainties), excessive speculations, haram (impermissible elements like pork) and others.

Shariah based products and services are also the products from the full-fledged Islamic financial institutions or banks. However, for the Islamic products and services provided by the conventional banks through Islamic windows are known as the Shariah compliance products and services.

References :

Resolutions Of The Securities Commission Shariah Advisory Council. 2nd Edition. Kuala Lumpur.


Chartered Islamic Finance Professional Part 1 Study Material. 2006. “IB1003 : Islamic Finance Regulations And Governance”. Kuala Lumpur. International Centre For ducation In Islamic Finance.


  1. comparison between the shariah based and shariah compliant products and services. Easy and Informative, liked it!

  2. Sir,
    can u give me some input for my assignment?
    Some people argue that shari’ah compliant based instrument is not consistent with the maqāsid al-Sharī`ah. They argue that Islamic bank and financial institution not strictly follow the Islamic base. For this question I will determine what are the important elements should be in the financial instrument under Islamic banking and compare between shari’ah compliant and Islamic Base.

  3. thanks for the entryyy!! brief and easily digest. much love. thank you^^