Unlocking maqasid theory to better predict consumer behaviour

MAQASID theory tells us about the inter-relationship from one occurrence to another. In my view, the theory provides answers to queries of how and why. It explains an event about why such behaviour takes place and how it happened.

Typically, holistic knowledge in Islamic banking literature stems from the primary sources of Islam (i.e. the Quran and the Hadith), which are of interest to protect one’s tawheed, akhlaq and fiqh for the benefits of all parties involved. The knowledge has been applied to consumers to predict their behaviours better, giving a birth to an Islamic theory in this area.

Consequently, this write-up introduces a maqasid theory to provide better explanation, prediction and measurement of consumer behaviour of Islamic banking acceptance like in the case of tawarruq-based mortgage.

This week, I was called to provide some views of theory development using a maqasid alShariah approach in the context of the Islamic banking industry in Malaysia. Generally, three issues are expounded.

Issue #1 – What is meant by the term maqasid al-Shariah? Issue #2 – Does literature offer a link between maqasid al-Shariah and consumer behaviour? Issue #3 – What are the variables that can best reflect a theory originating from maqasid al-Shariah?

By definition, the term maqasid al-Shariah refers to an objective of Shariah to give a balanced deliberation on one’s life, religion, intellect, property and lineage.

To be specific, Choudhury (1986) provides an insightful concept of maqasid al-Shariah. He asserts that maqasid is the basis of an integrative or systematic approach to Islamic values distinguishing between universal goals and principles on the one hand, and instrumental goals and specific applications on the other so as to define the hierarchy of values in Islamic law. Auda (2010) refers to maqasid as purpose, objective, principle, intent and goal, among others.

Taken as a set, the objectives of Shariah are of three kinds. The first is to educate an individual, the second is to establish justice and the third is to realise public interest covering all individuals to serve the ummah better.

With respect to the second issue, three points are provided but which are not limited to: #1 - Fairness. Maqasid al-Shariah plays a vital rule to promote fairness in banking transactions between banks and customers. Chapra (2000) notes the importance of promoting a balance between individual and social interest, which helps in actualising the maqasid alShariah or what may be referred to as the vision of Islam, two of the most important constituents of which are socio-economic justice and the well-being of all of Allah (S.W.T)’s creatures. Chapra’s (2000) stance is also supported by Kamali (2008), who believes that fairness is upheld through the inculcation of justice, elimination of prejudice and alleviating hardship in one’s action.

#2 - Falah attainment. My argument in here is concurred by Chapra (1992) who asserts that maqasid al-Shariah is related to an Islamic business activity to meet the falah and individual well-being. It is also of a need to promote ethical practices among individuals in society. For instance, Richardson (2011) asserts that Islamic economics is venerated as promoting equity, communal justice, prevention of exploitation, protection of private property and elimination of greed. In fact, the author views that a fully successful Islamic economy has yet to be achieved anywhere, which explains the reason why Islamic banking is lagging behind to that of the existing traditional banking model, implying the growing need for maqasid theory as a solution.

#3 - Integration. Maqasid alShariah is able to minimise any diversity in society by providing a means to promote integration and interaction. Chapra (2000) believes that Islamic and conventional economies are of two different things, where different societies and visions are brought into play. In Western society, well-being is defined in a purely material and hedonist sense, whereby it would be perfectly rational for economics to give prominence to the serving of self-interest and the maximisation of wealth, bodily pleasures, and sensual satisfactions. Unlike conventional economics, Islam views the importance of moderation and self-sacrifice for the ummah’s benefit.

In essence, this article intends to suggest a theory representing a maqasid theory. It is called as “Theory of Maqasid Consumer Behaviour” – TMCB. I will explain two reasons I have for proposing this.

Firstly, it is a pioneer effort to promote new research to extend the theory for comparison and evaluation. Secondly, it is also a pioneer effort to suggest variables capturing the theory for new debate and contribution.

Furthermore, given the existing literature, a framework that represents the theory should capture four variables but which are not confined to: Variable #1 Islamic consumer education–Islam gives a key priority to disclose any information that can help consumers make a sound decision pertinent to spending, saving and consumption. Dimensions like clear advertisement and full disclosure are of importance to deliberate.

Variable #2 - Islamic justice - It deals with fairness, equity and impartiality as prescribed in the primary sources.

Variable #3 - Islamic welfare approach - Like in the case of mortgage, for instance, helping bank customers in hardship and protecting their confidentiality and interest are upheld in the Islamic business philosophy, so do Islamic banks. It captures both financial and non-financial support given to customers in need.

Variable #4 - Islamicity of debt policy - It is defined generally as the Shariah compliance of debt policy by Islamic banks. Shariah is the core reason of why Islamic banks exist. The higher the extent of Islamicity of debt policy, the better the consumer acceptance of Islamic financing products.

All in all, the TMCB is a theory that is modified from maqasid al-Shariah that offers numerous benefits to banks and customers at large. From the banks’ side, maqasid al-Shariah needs to represent the structure, process and culture of the bank. The bank is expected to promote the welfare of the customer in a just and equitable manner for enhanced Islamic banking operations.

In short, maqasid al-Shariah moderates the need for profit and social factor for Islamic banking, in turn, promoting true Islamic banking operations. From the customers’ side, the TMCB proposed provides a better prediction for the relationship between consumer behaviour and maqasid al-Shariah. The TMCB can establish new relationships that build new debates and extension of new idea for better empirical supports.

The TMCB is expected to open a new spectrum of doing research in the area of Islamic banking and finance where the benefit it offers is greater than other theories introduced in the West, at least.

*The author is an Associate Professor/Dean at the Labuan Faculty of International Finance, Universiti Malaysia Sabah, Labuan International Campus. He has a PhD from the International Islamic University Malaysia (IIUM) in Islamic Banking and Finance (PG310163).