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Islamic Finance


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Istihsan


Arabic (استحسان) for a doctrine of Islamic law (shari’a) that implies reconsidering an action, behavior, or practice that was impermissible or constrained by legal reasoning, to the effect of allowing it exceptionally in special circumstances or occurrences where it brings about unseen benefits or improvements to individuals, the society, or the wider economy. The concept of istihsan is used in cases a jurist, after applying reasoning, concludes that something is preferable or beneficial, even if it is not approved by others.

Certain jurists defined istihsan as the restriction of analogy by an evidence that is stronger or nearer to human welfare. Others put it this way “sacrificing some of the implications of an evidence by way of exception insofar as the exception opposes some of these implications.” As such, istihsan, in Islamic shari’a, implies the preference of hidden analogy (qiyas khafi) over apparent analogy (qiyas jali). It involves providing an exception to an analogy-based, general principle if there arises a stronger evidence.

In practice, istihsan is applied to the contract of salam. In principle, on the basis of analogy (qiyas), the salam contract is not permissible since it involves the deferred exchange of underlying goods which belong to the class of ribawi items (items in which riba arises upon delay of exchange hand to hand). However, salam was made an exception due to the need of people, at various times, to transact on the basis of paying down the price (capital) immediately, whilst delaying receipt or taking delivery of the underlying goods to a future date.

Istihsan is an Arabic term that denotes “juristic preference“.


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