Sadd Ul Dharai And Modern Financial Contracts: Re-Defining Limits

Abstract

Various Islamic financial contracts have been utilized for business transactions, investments, and dispute resolution, particularly in bank-related business operations for regulatory purposes. However, the expansion of the banking sector has led to numerous legal challenges. As a result, the demand for an Islamic legal system with a specialized approach is increasing. Conducting contracts in a traditional, non-Islamic manner can harm both customers and banks, as it raises the risk of entering into interest-based agreements. It is forbidden to use legal tools or any other means to further the illicit interests of clients. However, there are legal ways to convert illegal tactics into lawful ones. The application of Islamic financial contracts that support illicit means is prohibited by the principle of Sadd ul Dharai. This research study aims to prevent financial contracts from using any illicit tactics. There is no room for doubt or error when applying Sadd ul Dharai to these financial arrangements to ensure business is conducted in an Islamic manner. Islamic banks prohibit illegal contracts and use only lawful strategies with all legal instruments.

Keywords: Sadd ul Dharai, legal fiction, Islamic financial contracts, interest, illegal means.