Sharīʿah appraisal on the issue of imposing burden of proof to the entrepreneur in trust based contracts

Asmadi Mohamed Naim, Mohd Noor Habibi Hj Long, Mahyuddin Abu Bakar and Muhammad Nasri Md Hussain

Journal of Islamic Accounting and Business Research, 2016, vol. 7, issue 2, 148-169

Abstract: Purpose - The purpose of this paper is to examine the Shariah view on the legitimacy of requiring the entrepreneur to prove that he/she has complied with all business requirements in case the actual profit was below the expected profit in trust-based contracts such as mudarabah and musharakah. Design/methodology/approach - This paper is part of the research which applies qualitative research approaches, including among others, content analysis, interviews, observations and descriptive analysis usingfiqh muqaran(comparative analysis of jurists’ arguments) in few phases. Findings - The study found that shifting the burden of proof to the fiduciary is the weightier view and necessary to ensure that both sides are protected. The considerations of protecting people’s wealth (ḥifẓ amwāl al-nās) and mitigating widespread greed (ṭamaʿ) are among the reasons for allowing elements such asʿurf,tuhmahanddalālat al-ḥālto be treated asbayyinahin trust-based contracts when the fiduciary is obliged to defend himself from litigation. Research limitations/implications - The study is meant to strengthen the practices of Islamic banks world wide. Practical implications - Few protections can be applied for capital provider. Social implications - This study is meant to give solution in dealing with moral hazard of both parties, and to provide solution to the regulator for policy drafting and to increase confidence to the industry. Originality/value - The finding is important in assisting the regulators in drafting the policy to protect both parties without neglecting the essence of trust-based contracts.

Keywords: Burden; of; proof; muḍārabah; taʿaddī; taqṣīr; trust; based; contracts (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jiabrp:jiabr-03-2015-0009

DOI: 10.1108/JIABR-03-2015-0009

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