The concept and application ofḍamān al-milkiyyah(ownership risk)

Lutfi Abdul Razak,Muhammad Nabil Saupi

doi:10.1108/ijif-06-2017-0002

Abstract

PurposeThe purpose of this paper is to elucidate the concept ofḍamān al-milkiyyah(ownership risk) and to assess its application in contemporary Islamic financial products and services.Design/methodology/approachThe methodology adopted is that of descriptive research.FindingsFrom an Islamic law of contract perspective, the concept ofḍamān al-milkiyyahis central to legitimate profit-making transactions and hence must be adhered to in practical applications of Islamic finance.Research limitations/implicationsThis study should help motivate further investigation into the position ofḍamān al-milkiyyahamong different parties in existing Islamic financial products and services.Practical implicationsPolicymakers and regulators should ensure that Islamic financial products and services are structured in a way that does not allow parties to profit without adequately bearing the liability for potential loss.Social implicationsThe condition ofḍamān al-milkiyyahas a source of legitimate profit reflects the idea that the role of finance in Islam is to promote and ensure social benefits.Originality/valueThis paper emphasizes the importance ofḍamān al-milkiyyahas a fundamental condition for profit in Islamic financial transactions.

Highlights

Throughout the passage of time, economic systems have grappled with the concept of ownership and its characteristics
This paper argues that the source of any legitimate and profitable economic activity rests with the concept of dÁ aman al-milkiyyah
Future research could build on our descriptive research by analysing product documents used by Islamic banks to assess the application Islamic finance practice in a deeper sense

Summary

Introduction

Throughout the passage of time, economic systems have grappled with the concept of ownership and its characteristics. This paper argues that the source of any legitimate and profitable economic activity rests with the concept of dÁ aman al-milkiyyah (ownership risk). In an Islamic economic system, risk or uncertainty is to be minimized in financial transactions and should not be manipulated to become a source of profit.

Results

Conclusion