The ontological law of Tawhid contra ‘Shari 'ah-compliance' in Islamic portfolio finance

摘要

Purpose - The purpose of this study/paper is the generalized ontological law of monotheism (unity of knowledge) and its functioning in the financial world system is summarized and contrasted with the recent conception of 'shari'ah-compliance". Thereby， some specific rulings of shari' ah-compliance in Islamic finance are critically annulled. The principal problem of the inability of shari'ah-compliance in the formalism of rate-setting and debt cancellation is pointed out in analytical ways. The alternative valuation models in the light of the Tawhidi ontological law are formalized. Many important issues are examined in analytical and Tawhidi authentic ways of Islamic law contra to shan'ah-compliance. Design/methodology/approach - The epistemological approach commencing from the Tawhidi ontological law is used as the premise of developing analytical formalism to counter the irrelevant rulings done by the field of shari'ah compliance. Thereby, endogenous moral and ethical foundations are studied in deriving analytical finance models of asset valuation, rate-determination and debt cancellation. Findings - Substantive analytical results are derived for intellection in the area of the primal ontological law of Tawhid that negates many of the rulings framed up in shari'ah-compliance area of Islamic law. These results can guide financial academia, practitioners and policymakers. Research limitations/implications - The paper can be expanded subsequently to the area of analytical Islamic finance in general by further investigating the Modigliani and Miller theorem on optimal debt-equity structure of corporate finance. An introduction to this study is provided in this paper as a starting point of dealing with the debt problem of shari'ah-compliance. Practical implications - The paper presents important guidance as input for the rulings of shari'ah-compliance idea held by shari'ah advisory boards and similar institutions presently operating at the financial level. Social implications - The paper presents a subtle transformation of the social and financial order in the light of the Tawhidi ontological law quite differently from the way that shati'ah-compliance envisions. Originality/value - The theoretical and projected applied perspectives in analytical finance presented in this paper provide a methodological worldview for all areas of social finance with ethical consciousness. Such analytical approach is much needed today in the reconstruction of global finance in the scale of ethics and away from the sole focus on capital market efficiency.