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KembaraXtra–Islamic Finance: Qiyas (Analogy) in Islamic Commercial Law
Introduction
In Islamic jurisprudence (fiqh), the Qur’an and Sunnah serve as the primary sources of law. However, not every possible issue is explicitly addressed in these sacred texts. To bridge this gap, scholars employ Ijtihad (independent reasoning). One of the most systematic and widely used methods of Ijtihad is Qiyas, or analogical reasoning.
Qiyas involves extending a legal ruling from an established case mentioned in the texts to a new situation that shares the same underlying cause (‘illah). For example, the Qur’an prohibits wine due to its intoxicating effect. By analogy, this ruling extends to other intoxicants such as drugs, spirits, or modern narcotics, even though these are not directly mentioned in the texts.
Unlike purely textual interpretation, Qiyas is based on logical reasoning (ratiocination) to ensure that the objectives of Shariah (Maqasid al-Shariah) are upheld in new and evolving circumstances. This makes it indispensable for Islamic commercial law, where new financial products and business practices constantly emerge.
Another related approach is induction (istiqra’), where jurists derive a general rule from multiple specific cases sharing a common element. For instance, the prohibition of exchanging gold, silver, dates, barley, wheat, and salt in unequal amounts was extended to all goods with similar characteristics. Scholars differ slightly on what the underlying ‘illah (cause) is—edibility, measurability, storability, or monetary function—but all agree that the principle of avoiding riba (usury) applies.
Therefore, Qiyas and induction not only safeguard the integrity of Islamic finance but also provide jurists with the flexibility to adapt rulings to new financial instruments, technologies, and global trade practices.
10 Case Scenarios with Solutions
Case 1: Cryptocurrency as a Medium of Exchange
Scenario: Bitcoin and Ethereum are not mentioned in classical texts. Can they be traded like currency?
Solution: By Qiyas, since gold and silver functioned as currency due to their monetary value, cryptocurrency can also be considered a medium of exchange if it is widely accepted. However, speculative trading (gharar) and unjustified risks must be avoided.
Case 2: Energy Drinks with Intoxicating Effect
Scenario: A new energy drink mildly intoxicates when consumed in large amounts.
Solution: By analogy with wine, the drink is prohibited since the ‘illah (intoxication) is the same. This prevents harm to individuals and society.
Case 3: Digital Gold Certificates
Scenario: An investor buys and sells gold electronically through certificates without physical possession.
Solution: By Qiyas, since gold transactions require hand-to-hand delivery to avoid riba, digital gold must represent actual physical possession or custodianship. Otherwise, it resembles a prohibited paper trade.
Case 4: Leasing Cars with Buy-Back Guarantee
Scenario: An Islamic bank leases cars with a clause that forces the lessee to purchase the car at the end.
Solution: By analogy with bay‘ al-‘inah (a form of disguised loan with interest), such a guarantee is prohibited. Instead, a separate sale contract may be offered at market value once the lease ends.
Case 5: Stock Market Short-Selling
Scenario: A trader sells shares he does not own, hoping to buy them later at a lower price.
Solution: By Qiyas, this resembles selling what one does not possess, which the Prophet prohibited. Thus, short-selling is impermissible.
Case 6: Trading of Carbon Credits
Scenario: Companies trade carbon credits to offset environmental pollution.
Solution: By analogy with tradeable rights such as water distribution shares in classical fiqh, carbon credits may be tradable if backed by real, measurable environmental obligations, avoiding speculation.
Case 7: Derivative Contracts (Futures Trading)
Scenario: Futures contracts involve buying or selling commodities at a set price for future delivery.
Solution: By Qiyas, since forward sales without possession involve excessive gharar, such contracts are generally prohibited unless structured as salam (advance payment) or istisna‘ (manufacturing contract).
Case 8: Exchange of Digital Currencies
Scenario: A person exchanges Bitcoin for Ethereum but not instantly (settlement is delayed).
Solution: By analogy with the prohibition of delayed exchange of gold for silver (riba al-nasi’ah), cryptocurrency exchanges must be conducted hand-to-hand (instant settlement).
Case 9: Insurance vs. Takaful
Scenario: Conventional insurance involves uncertainty (gharar) and interest.
Solution: By Qiyas, it is impermissible since it shares the same ‘illah of uncertainty. Takaful, however, is allowed since it is based on mutual cooperation, not profit from risk.
Case 10: Digital Wallet Loans with Interest
Scenario: A fintech app offers instant loans through e-wallets with added interest.
Solution: By analogy with classical riba al-nasi’ah, charging interest on delayed repayment is prohibited. Instead, Shariah-compliant alternatives like qard hasan (benevolent loan) or murabahah financing should be introduced.
Conclusion
Qiyas plays a vital role in ensuring that Islamic finance adapts to the realities of modern economies while preserving Shariah principles. By extending rulings from classical cases to contemporary issues such as cryptocurrencies, digital trading, derivatives, and fintech innovations, jurists can protect the integrity of Islamic finance and uphold its ethical foundations.
Introduction
In Islamic jurisprudence (fiqh), the Qur’an and Sunnah serve as the primary sources of law. However, not every possible issue is explicitly addressed in these sacred texts. To bridge this gap, scholars employ Ijtihad (independent reasoning). One of the most systematic and widely used methods of Ijtihad is Qiyas, or analogical reasoning.
Qiyas involves extending a legal ruling from an established case mentioned in the texts to a new situation that shares the same underlying cause (‘illah). For example, the Qur’an prohibits wine due to its intoxicating effect. By analogy, this ruling extends to other intoxicants such as drugs, spirits, or modern narcotics, even though these are not directly mentioned in the texts.
Unlike purely textual interpretation, Qiyas is based on logical reasoning (ratiocination) to ensure that the objectives of Shariah (Maqasid al-Shariah) are upheld in new and evolving circumstances. This makes it indispensable for Islamic commercial law, where new financial products and business practices constantly emerge.
Another related approach is induction (istiqra’), where jurists derive a general rule from multiple specific cases sharing a common element. For instance, the prohibition of exchanging gold, silver, dates, barley, wheat, and salt in unequal amounts was extended to all goods with similar characteristics. Scholars differ slightly on what the underlying ‘illah (cause) is—edibility, measurability, storability, or monetary function—but all agree that the principle of avoiding riba (usury) applies.
Therefore, Qiyas and induction not only safeguard the integrity of Islamic finance but also provide jurists with the flexibility to adapt rulings to new financial instruments, technologies, and global trade practices.
10 Case Scenarios with Solutions
Case 1: Cryptocurrency as a Medium of Exchange
Scenario: Bitcoin and Ethereum are not mentioned in classical texts. Can they be traded like currency?
Solution: By Qiyas, since gold and silver functioned as currency due to their monetary value, cryptocurrency can also be considered a medium of exchange if it is widely accepted. However, speculative trading (gharar) and unjustified risks must be avoided.
Case 2: Energy Drinks with Intoxicating Effect
Scenario: A new energy drink mildly intoxicates when consumed in large amounts.
Solution: By analogy with wine, the drink is prohibited since the ‘illah (intoxication) is the same. This prevents harm to individuals and society.
Case 3: Digital Gold Certificates
Scenario: An investor buys and sells gold electronically through certificates without physical possession.
Solution: By Qiyas, since gold transactions require hand-to-hand delivery to avoid riba, digital gold must represent actual physical possession or custodianship. Otherwise, it resembles a prohibited paper trade.
Case 4: Leasing Cars with Buy-Back Guarantee
Scenario: An Islamic bank leases cars with a clause that forces the lessee to purchase the car at the end.
Solution: By analogy with bay‘ al-‘inah (a form of disguised loan with interest), such a guarantee is prohibited. Instead, a separate sale contract may be offered at market value once the lease ends.
Case 5: Stock Market Short-Selling
Scenario: A trader sells shares he does not own, hoping to buy them later at a lower price.
Solution: By Qiyas, this resembles selling what one does not possess, which the Prophet prohibited. Thus, short-selling is impermissible.
Case 6: Trading of Carbon Credits
Scenario: Companies trade carbon credits to offset environmental pollution.
Solution: By analogy with tradeable rights such as water distribution shares in classical fiqh, carbon credits may be tradable if backed by real, measurable environmental obligations, avoiding speculation.
Case 7: Derivative Contracts (Futures Trading)
Scenario: Futures contracts involve buying or selling commodities at a set price for future delivery.
Solution: By Qiyas, since forward sales without possession involve excessive gharar, such contracts are generally prohibited unless structured as salam (advance payment) or istisna‘ (manufacturing contract).
Case 8: Exchange of Digital Currencies
Scenario: A person exchanges Bitcoin for Ethereum but not instantly (settlement is delayed).
Solution: By analogy with the prohibition of delayed exchange of gold for silver (riba al-nasi’ah), cryptocurrency exchanges must be conducted hand-to-hand (instant settlement).
Case 9: Insurance vs. Takaful
Scenario: Conventional insurance involves uncertainty (gharar) and interest.
Solution: By Qiyas, it is impermissible since it shares the same ‘illah of uncertainty. Takaful, however, is allowed since it is based on mutual cooperation, not profit from risk.
Case 10: Digital Wallet Loans with Interest
Scenario: A fintech app offers instant loans through e-wallets with added interest.
Solution: By analogy with classical riba al-nasi’ah, charging interest on delayed repayment is prohibited. Instead, Shariah-compliant alternatives like qard hasan (benevolent loan) or murabahah financing should be introduced.
Conclusion
Qiyas plays a vital role in ensuring that Islamic finance adapts to the realities of modern economies while preserving Shariah principles. By extending rulings from classical cases to contemporary issues such as cryptocurrencies, digital trading, derivatives, and fintech innovations, jurists can protect the integrity of Islamic finance and uphold its ethical foundations.
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