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The Islamic religious law is viewed as an expression of God’s command for Muslims and, in practice, consists of a set of duties imposed on all Muslims based on their religious beliefs. The Sharīʿah (roughly, “road leading to the watering place”) is a divinely prescribed way of conduct that guides Muslims towards a practical manifestation of religious conviction in this world and the aim of divine favor in the next.

What is the definition of Sharia?

Sharia means “the right path” in Arabic. Islam refers to Muslims’ divine guidance to live moral lives and become closer to God. Sharia is based on two primary sources: the Quran and hadith—words and actions attributed to the Prophet Mohammed and collectively known as the Sunna.

In addition to religious rites, sharia is a body of Islamic law regulating many facets of Muslims’ daily lives. Sharia law also offers Islamic adherents a set of values and standards to assist them in making significant life decisions, such as financial and economic choices. Islamic finance and banking provide guidelines for investment amounts and interest rates. The interpretation and application of Sharia vary somewhat, particularly in the financial sector.

Islamic law varies across countries, is affected by local norms, and evolves throughout time. Sharia is also the foundation for legal views known as fatwas, which Muslim scholars issue in response to requests from individual Muslims or governments for guidance on a specific subject. In Sunni Islam, fatwas are strictly advisory; in Shia Islam, practitioners must accept the fatwas of their preferred religious leader.


The four primary sources of Sharia law are:

  • The Holy Book, the Quran, reveals Allah’s universal and eternal messages the Prophet conveys.
  • The Hadith, or account of the Prophet’s Sunnah, is the basis for the Muslim community’s religious norms.
  • Ijma – Ijma is a collection of legal opinions from Islam’s knowledgeable thinkers.
  • Qiyas—Qiyas compares complex doctrine issues to similar cases decided by the authority of the Holy Book and Sunnah.

Many regional and local practices are acknowledged as sources of Sharia when they are for the greater good. Thus, the Sharia requires Muslims to follow the good and generally wholesome customs of the region in which they live.

The Sharia is revealed, and other sources require interpretation to create substantive law. The process of legal interpretation is known as “fiqh,” which means understanding. It necessitates skilled scholars and is comparable to the functions of religious scholars in determining the specifics of Rabbinical law in Judaism.

Islam has several recognized traditional schools of law, each with its technique for deriving and applying the law to certain situations. Each school provides a significant number of verdicts and views. Islamic law is one of the most valuable elements of Islamic civilization over the centuries, and it must be adapted suitably to new times and places.

Intricacies of Sharia law

Sharia law includes legal, moral, and ethical instructions. It divides all man’s actions into five categories:




Discouraged and 


Sharia consists of three main elements:

  1. Aqidah refers to all forms of religion and belief in Allah held by Muslims.
  2. Fiqh oversees man’s connection with his Creator (ibadat) and other men (muamalat). Muamalat encompasses political, economic, and social activity. Muamalat connects Islamic finance, part of economic activity, to Sharia rules.
  3. Akhlaq encompasses every Muslim’s behavior, attitude, and work ethic.

While aqidah, ibadah, and akhlaq directives are fixed and unchangeable, muamalat directives (including rulings on contractual law transactions, criminal law, the judiciary, and Islamic finance) that govern the relationship between man and man can change due to changes in circumstance, custom, time, and place.

Fundamental Principles for Islamic Banking and Finance

Sharia law encourages Muslims to engage in trading operations. The foundation of Islamic business is that trade should be done faithfully and beneficially.

Commerce manipulations and malpractices, such as hoarding, black marketing, profiteering, and adulteration, are considered dishonest commerce.

Islamic finance is a technique of governing a financial system that follows Sharia law. The essential concepts that govern Islamic banking and finance today are the following:

  • Riba: In Islam, providing and receiving riba (interest or usury given to depositors and interest charged from fund users) is severely banned.
  • Qimar: Qimar, or gambling, is prohibited since it represents value obtained with no effort, is addictive and compulsive, can lead to bankruptcy, and creates wrath and fury when lost.
  • Jahala: Jahala denotes ignorance, and Jahala sales are invalid due to information asymmetry, which provides an unfair benefit to one of the parties involved.
  • Gharar: Sharia law defines gharar as risk or a transaction similar to “a zero-sum game with unknown payoffs.” Gharar sales are invalid due to the considerable uncertainty and risk involved, which resembles gambling.
  • Halal: Halal refers to activities that Allah permits without restriction. Acts that are forbidden, on the other hand, are considered haram. Prostitution, gambling, and the intake of alcohol or pork, for example, are deemed destructive and impure and hence pronounced haram.

Main Categories in Islamic Finance

Risk-sharing is the core principle of Islamic banking. The bank shares the risk of an investment with its customers, and the reward is distributed among them based on predetermined parameters. The primary financial products in Islamic finance are:

  • Ijara is a leasing deal in which a bank leases an item to a consumer for a set time.
  • Ijara-wa-Iqtina is similar to Ijara, except that the consumer can purchase the rented item at the end of the period.
  • Mudaraba – Investment products given by financial specialists in which the bank and the customer split the earnings.
  • Murabaha – An interest-free credit that permits customers to make purchases.
  • Musharaka is an investment partnership between the bank and the customer, with profit sharing based on a predetermined contract.


Sharia is a Muslim guideline that combines moral and legal teachings from the Quran and Sunnah. It evolves through interpretation and adapts to diverse ideas and periods. It also impacts Islamic finance by encouraging fair and ethical behaviors. So it is like the heartbeat of Islamic civilization, keeping up with the times but preserving its essential ideals. I hope this guide has helped you to understand Islamic law or Sharia, so stay tuned for more Islamic-related or Quranic-related blogs.