Concept and Application of Shariah for the Construction Industry
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Concept and Application of Shariah for the Construction Industry

Shariah Compliance in Construction Contracts, Project Finance and Risk Management

Khairuddin Abdul Rashid, Kiyoshi Kobayashi;Sharina Farihah Hasan;Masamitsu Onishi

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eBook - ePub

Concept and Application of Shariah for the Construction Industry

Shariah Compliance in Construction Contracts, Project Finance and Risk Management

Khairuddin Abdul Rashid, Kiyoshi Kobayashi;Sharina Farihah Hasan;Masamitsu Onishi

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About This Book

The application of Shariah compliance in business transactions continues to increase. The Asian financial crisis of 1997, global financial crisis of 2007–2008, Enron scandal and other reported ills besieging conventional business transactions have led to advocates of Shariah-compliant business transactions promoting the latter as a credible alternative. However, unlike the banking, commerce and financial sectors, the uptake by the construction sector was sluggish due to limited understanding of Shariah among the practitioners and policymakers compounded by the lack of research and publications on its application for the construction sector.

This book is intended for students, researchers, practitioners and policymakers of the construction industry as well as the related upstream and downstream activities. It offers basic theories, challenges current practices, and proposes innovative ideas on Shariah compliance and its application for the construction industry.


  • Acknowledgments
  • About the Editors
  • Contributors' Biographies
  • Preface
  • List of Tables
  • List of Figures
  • List of Text Boxes
  • List of Appendices
  • List of Abbreviations
  • List of Surahs (Chapters) in the Quran
  • Shariah:
    • Shariah and Its Meaning in Islam (M Kamal Hassan)
    • Understanding of the Shariah in Regards to Construction (Mohamad Akram Laldin)
    • Promoting Efficiency in Construction Practices: Lessons from Shariah (Ainul Jaria Maidin)
    • Shariah-Compliant Construction Marketing: Development of a New Theory (Khairuddin Abdul Rashid and Christopher Nigel Preece)
  • Shariah-Complaint Construction Contract: Concept and Application:
    • Shariah-Compliant Contract: Concept and Application for Construction Works (Khairuddin Abdul Rashid)
    • Istisna' Model for Construction Works' Contracts (Khairuddin Abdul Rashid)
    • Validity of Istisna' for Construction Works Contracts (Khairuddin Abdul Rashid)
    • The Application of Limited Liability in Construction Contracts from the Malaysian Law and Shariah Perspectives (Zuhairah Ariff Abdul Ghadas)
    • The Application of Shariah Principles of ADR in the Malaysian Construction Industry (Zuhairah Ariff Abdul Ghadas, Rozina Mohd Zafian and Abdul Majid Tahir Mohamed)
  • Shariah-Compliant Project Finance and Risk Management:
    • The Three Rs in Islamic Project Finance: Its Relevance Under Maqasid al-Shariah (Etsuaki Yoshida)
    • Islamic Home Financing Through Musharakah Mutanaqisah: A Crowdfunding Model (Ahamed Kameel Mydin Meera)
    • Proposed Model on the Provision of Affordable Housing via Collaboration Between Wakaf-Zakat-Private Developer (Khairuddin Abdul Rashid, Sharina Farihah Hasan and Azila Ahmad Sarkawi)
    • Shariah-Compliant Risk-Sharing in Islamic Contracts (Masamitsu Onishi and Kiyoshi Kobayashi )
    • Takaful for Construction Works' Contract: Concept and Application (Puteri Nur Farah Naadia Mohd Fauzi and Khairuddin Abdul Rashid)
    • Hibah Mu'Allaqah (Conditional Gift) and Its Application in Takaful (Azman Mohd Noor)
    • Managing the Risk of Insolvency in the Construction Industry with Equity Financing: Lessons from Nakheel (Abdul Karim Abdullah)
  • Index

Readership: This book is intended for postgraduate students, researchers, policy makers, practitioners related to construction such as clients, quantity surveyors, architects, engineers, planners, project and construction managers, construction law experts, banking & financial experts.
Key Features:

  • Shariah in construction projects. There exist books on Shariah in general business transactions and construction projects/contracting in conventional world, but no book covers both
  • Shariah in international community. Shariah has been discussed among the Muslim community, but this book involves non-Muslim academics and practitioners. This implies the knowledge here is written commonly understandable for both Muslims and non-Muslims
  • Shariah in interdisciplinary context. Shariah has been discussed by Shariah lawyers from the religious and legal aspects. On the contrary, this book involves experts from different disciplines such as construction management and business, financiers and economics. Interdisciplinarity is a unique feature of this book

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Part 1


Chapter 1

Shariah and Its Meaning in Islam

M. KAMAL Hassan
The term “Shariah” has been defined in various styles by different authors and researchers. The purpose of this chapter is to provide a reasonably clear and common understanding of the meaning of “Shariah.”
The term “Shariah” has been defined as:
“. . . water hole, drinking place; approach to a water hole; law”, while al-Shariah (with the definite article) is defined as “. . . the revealed, or canonical law of Islam.”1
Classical Arab lexicographers defined the term “Shariah” as:
“Shariah and mashra‘ah mean a watering place; a resort of drinkers [both men and beasts]; a place to which men come to drink therefrom and to draw water, and into which they sometimes make their beasts to enter, to drink: but the term mashra‘ah, or Shariah is not applied by the Arabs to any but [a watering place] such as is permanent, and apparent to the eye, like the water of rivers, not water from which one draws with the well rope; or a way to water because it is a way to the means of eternal life [shariah is] the religious law of God; consisting of such ordinances as those of fasting, prayer and pilgrimage, and other acts of piety, or of obedience to God, or of duty to Him and to men: Shariah signifies also [A law, an ordinance, or a statute: and] a religion, or way of belief and practice in respect of religion and way of belief or conduct that is manifest and right in religion.”2
Some of the aforementioned definitions are found in Lisan al-Arab, which defined Shariah linguistically as the place where people and animals come to drink water from it. It also says that Shariah and Shir‘ah refer “to the religious duties that Allah has prescribed and commanded, such as fasting, prayer, pilgrimage, paying the zakat due and all the deeds of righteousness.”3
In the Quran the term “Shariah” occurs in Surah al-Jathiah (Quran 45: 18):
“And now, We have set you (O Muhammad, and sent you) to help establish a way of religion (complete) constituting rules of religion; so you follow that way and do not yield to the desires of those who are ignorant (of the truth).”
M. Kamal (2015) reviewed the works of scholars of the Quran namely al-Tabari’s Tafsir Jami‘ al-Bayan; Abd al-Rahman al-Sa‘di’s al-Tafsir al-Karim al-Rahman fi Tafsir Kalam al-Manan; Al-Shawkani’s Fath al-Qadir and Mutawwali al-Sha‘rawi’s Tafsir Khawatir respectively and listed the meanings of the term “Shariah”, namely:
Shariah is the religious obligations (al-fara’id), and the divinely prescribed limits (al-hudud), and commandments (al-amr) and prohibitions (al-nahy) (which Allah has clearly laid down to be followed by human beings). There were those who equated al-Shariah with al-Din (the religion of man’s complete submission to the One True God).
Shariah is “A perfect way (Shariah kamilah) which calls to all that is good and prevents all that is evil. In following the way there is everlasting happiness (al-sa‘adah al-abadiyyah), righteousness (al-salah) and wellbeing in this world and in the Hereafter (al-falah).”
al-Shariah is “what Allah has ordained for His servants [to follow] with regard to the religion (al-Din).”
The Shariah is the way that will lead to water which is “the origin of life.”
In addition, al-Raghib al-Isfahani proposed the literal meaning of the word Shariah as “the way to a watering-place.” He argued that the word Shariah is derived from the noun Shar‘ which means a clear open way for people to travel on. The Arabs have adopted the term Shariah to refer to the Divine Way (al-Tariqah al-Ilahiyyah), because according to some of them, the metaphor of the way to the watering-place implies that if “one were to enter into it in accordance with its true and validated nature, one would quench one’s thirst [for the Truth] and become purified.”4
Furthermore, Ibn Qayyim al-Jawziyyah explains the meaning of Shariah as follows: the edifice and foundation of the Shariah are divine authority (al-hukm) and the good welfare of the servants (of God) (masalih al-‘ibad) in earthly existence and in the life to come. It is justice (‘adl), all of it; mercy (rahmah), all of it; wisdom (hikmah), all of it; and (individual and public) welfare (maslahah), all of it. Therefore, any matter that draws away from justice to injustice (al-jawr), from mercy to its opposite, from welfare to causing corruption or perversion (al-mafsadah), from wisdom to foolishness (al-‘abath), then it is not of the Shariah, even if it is included in it by allegorical interpretation (al-ta’wil) (Jasser, 2008a).
Viewing Shariah from the perspective of contemporary Islamic religion on traditional religious science, Yusuf al-Qaradawi explains the Shariah as follows: the Shariah is what Allah has ordained in the form of ahkam (commandments, injunctions, rules, regulations, laws), irrespective of whether they are primary (lit. “root”, asliyyah) ahkam or subsidiary (lit. “branch”, far‘iyyah) ahkam. The Shariah is what Allah has made obligatory through His commands or prohibitions. This means that the Shariah is a totality of ahkam, some of which are commandments (awamir) to be carried out, prohibitions (nawahi) to be renounced. Some of them deal with forbidden matters (muharramat), some others deal with permissible matters (halal). So the whole of the Shariah contain these ahkam, and some of them are related to creedal matters (al-‘aqa’id) as has been said by Sa‘d al-Din al-Taftazani [1322–1390, a well-known Islamic polymath]:
“Know that the rules and regulations (ahkam) of the Shariah, some of them are related to the proper ways of performing religious acts (kaifiyyat al-‘amal) and they are called subsidiary (far‘iyyah) and practical (‘amaliyyah) aspects. And some of them are related to the fundamental principles of the religious acts (asl al-‘amal) and they are called primary (asliyyah) and creedal (i‘tiqadiyyah) aspects. The religious science that is related to the first aspect is called ‘the knowledge of injunctions and rules, the science of jurisprudence (‘ilm al-fiqh).’ And the religious science that is related to the second aspect is the science of scholastic theology (‘ilm alkalam), or the science of Islamic monotheism (‘ilm al-tawhid) or the creeds (al-‘aqa’id).”5
Yusuf al-Qaradawi goes on to say that “Thus the Muslim scholars have agreed that all those (aspects) be called Shariah ordainments or rulings (ahkam shar‘iyyah), except that when they refer, sometimes, to the “practical side” (al-janib al-‘amali), they are al-Shariah, while the second is called al-‘Aqidah. He supports this distinction by explaining how al-Azhar University had decided to establish two separate faculties, one called the Faculty of Usul al-Din (lit. “the roots of religion”, meaning the science that deals with fundamental beliefs, theology, spirituality and related matters), the other called the Faculty of al-Shariah (injunctions, norms, rules, regulations and laws). Furthermore, he argued that the Shariah’s main function (mahammat al-Shariah) is the same as the function of the mission of the Quran, namely:
“. . . to take human beings out of darkness to light; the darkness of polytheism to absolute monotheism; the darkness of being astray to the divine guidance; the darkness of falsehood to the Truth; the darkness of ignorance to knowledge; darkness of chaos to order. Everything that brings order to life and guides mankind to the straight path is what the Quran brought, and these are the primary concerns and function of the Shariah, guiding human beings to what is good in it with regard to the religious and worldly aspects, to the life of discipline, of just balance.”6
Arising from the aforementioned definitions of the Shariah it is fair to conclude that the Quranic usage of the metaphor of “the path leading to water ” in the term al-Shariah, is most fitting because like water, the God-given Way is absolutely necessary for the safety, security and the survival of human life. In other words, the Quran uses the most appropriate term in Arabic language to convey the supreme importance of following the divinely prescribed ordainments to ensure wellbeing in this world (hasanah fi al-dunya) and wellbeing in the Hereafter (hasanah fi al-akhirah).
Traditional Islamic religious scholars generally agree that the divinely prescribed ahkam (God’s ordainments, judgments, rules, regulations and laws) which are meant to serve as a code of man’s right conduct and action (‘amal) as His servants, vicegerents and believers on earth are organically connected to, and inseparable from, the fundamental articles of faith (iman), the Creed of Absolute Monotheism (‘Aqidah of Tawhid) which form the metaphysical presuppositions upon which the Islamic way of life, culture and civilization are to be constructed. Right faith (iman) and righteous action (‘amal salih) as the inseparable twin preconditions for human wellbeing is reiterated in many places in the Quran.
However, on the issue of whether the Creed of Absolute Monotheism or fundamental Islamic beliefs are part and parcel of the Shariah, there is no uniformity of opinions among Muslim scholars on it. One group is of the opinion that Shariah embraces both the Islamic Creed as the fundamental beliefs or “root” (al-asl) of Islam and the divine rules, regulations and laws governing the practical aspects (al-janib al-‘amali) as subsidiary component or “branch” (al-far‘) of Islamic faith. The other group of Muslim scholars prefers to look at the Shariah as mainly dealing with prescribed religious obligations and practical dimension of the religion which include rules and regulations regarding matters of worship proper (‘ibadah), such as the prayer (salah), fasting (saum), pilgrimage (hajj) and the zakah-tax, or compulsory charity as four of the five Pillars of Islam; marriage and divorce matters, the detailed rules and law of inheritance (fara’id), different types of commercial transactions which are not based on interest (riba), gambling (maysir) or uncertainties (gharar) but aimed at establishing a just economic system; and other matters related to human conduct in the spheres of good governance, criminal justice, international relations, war and peace.
It is important to clarify at this juncture that from the worldview of the Quran, the fundamental beliefs or ‘Aqidah of Islam, namely faith in the existence of the One True God, faith in His divine scriptures and all His human Messengers and faith in the existence of the Hereafter have remained the same throughout history. They are constant and unchangeable, but that part of the Shariah consisting of rules and regulations concerning forms of worship, specific economic transactions, special dietary rules, socio-cultural norms, etc., have been allowed by God to undergo changes and modifications to suit the changing circumstances.
The mission of the Shariah as Allah’s ordained way towards mankind’s welfare and wellbeing in this world and happiness and felicity in the Hereafter nevertheless, has indeed a broader scope of coverage and relevance insofar as it embraces not just the injunctions, rules and regulations covering all aspects of human life, but good moral values, ethical norms and moral laws. It is in the nature of the worldview of Islam that law, ethics and morality are basically intertwined and inseparable, unlike the positivistic theory of modern law which separates morality from law.
It should be clarified that “the ultimate objectives of the Shariah” (Maqasid al-Shariah) are, in fact, embedded in fundamental ethical values and norms, while the divine commandments and prohibitions covered by...

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