From Legal Formalism to Value-Based Impact

Abstract

This study examines the concept of maqāṣid al-sharīʿah (the higher objectives of Islamic law) and its application in contemporary Islamic finance. Employing a systematic qualitative literature review, this study synthesises classical Islamic legal sources and recent empirical scholarship across five thematic dimensions: (1) the theoretical foundations and evolution of maqāṣid al-sharīʿah; (2) the operationalisation of its objectives within Islamic financial institutions; (3) maqāṣid-based performance measurement frameworks; (4) the integration of maqāṣid al-sharīʿah with sustainability, corporate social responsibility, and environmental, social, and governance (ESG) principles; and (5) persistent challenges and future research directions. The findings reveal a persistent gap between formal Sharīʿah compliance and the substantive realisation of maqāṣid al-sharīʿah, particularly in relation to social justice, public welfare, and equitable wealth distribution. Emerging approaches, including Maqāṣid Performance Measures and the Maqāṣid al-Sharīʿah Index, provide alternative mechanisms for assessing the broader social and ethical performance of Islamic financial institutions. The literature further indicates that stronger alignment with maqāṣid al-sharīʿah can support long-term institutional efficiency, stakeholder trust, and sustainable value creation. Accordingly, the study argues for a transition from predominantly compliance-oriented models towards an integrative framework that incorporates social-impact indicators, risk-sharing mechanisms, Islamic social-finance instruments, and broader Sharīʿah governance. This framework repositions Islamic finance as a value-based system in which legal compliance is complemented by measurable contributions to social welfare and equitable economic development.