APPRAISAL OF USE OF HIYAL (LEGAL STRATAGEMS) IN ISLAMIC BANKING

There is a growing global interest in Islamic finance and economics. An Islamic bank is a financial institution that is governed by Islamic law in its objectives, practices, operations, and principles. The methodology adopted in this work is doctrinal, qualitative and based on libraryoriented research, covering books, journals and Internet based research. The objective of the study is to appraise the use of hiycd in Islamic banking. This work examined the guiding rules unanimously acknowledged regulating Islamic banking and finance; these are the prohibition of interest (riba), uncertainty (gharar) and games of chance (maysir); and the promotion of profit and loss sharing. Hiyal on the other hand, is an Islamic juristic term, which refers to the application of legal stratagems to avoid hardship in one’s commitment to Islamic rulings. It has been used as a legal device in Islamic jurisprudence to actualize a legitimate objective. Therefore, the use of legal stratagems (hiyal) in developing Islamic banking products is considered primarily in this work. Islamic financial institutions rely heavily on hiyal to operate in a predominant conventional financial system. The work identified two major objectives of hiyal based on two schools of thought - economic expediency via doctrines of necessity and public interest, and Shari’ah compliance theorists arguing that hiyal are aimed at circumventing the Shari ’ah. ITiyal treatment under the various schools of Islamic jurisprudence was also identified. We also, examined the use of hiyal in banking products such as hawala, ijarah, murabaha, mudaraba, tawarruq, bai ’al-inah, and parallel salam. These products reveal that in some instances hiyal is utilised to bring them in conformity with the rules of Shari’ah without overriding the overall objective of the Shari ’ah. It was concluded that the objective of Islamic law (maqasid al-shar’Tah) and practicality should determine the validity and use of hiyal in commercial transactions.