Integrating Sharia Principles with Environmental Sustainability: A DSN-MUI Fatwa Analysis in Islamic Capital Markets

¹ Faculty of Law, Universitas Muhammadiyah Yogyakarta, Yogyakarta, Indonesia
² Faculty of Law, Universitas Muhammadiyah Yogyakarta, Yogyakarta, Indonesia

^* Corresponding author: istianah@umy.ac.id

Abstract

This paper critically evaluates the DSN-MUI fatwa on the Islamic stock market, emphasizing the concept of riba (interest) rejection. The fatwa’s present emphasis is solely on the items sold by listed firms, ignoring the larger ramifications, including the environmental devastation caused by these corporations’ operating operations. Environmental degradation in the name of economic growth has become a serious concern in Indonesia and throughout the world. Despite the growing environmental catastrophe that threatens human life, the DSN-MUI fatwa does not include this crucial viewpoint. This study examines the fatwa’s legal logic (istinbat) and assesses Islamic capital market transactions through the lens of maqasid al-Shariah, specifically in terms of environmental preservation (hifz al-bi’ah). This qualitative library study takes a descriptive-analytical approach and applies Islamic legal theory using both deductive and inductive methodologies. The results reveal a serious gap in the fatwa’s application of Islamic legal principles, particularly the lack of the rule “tafriq al-halal min al-haram,” which is crucial in discriminating between permitted and prohibited actions. The fatwa seems to target just economic requirements, ignoring critical social and environmental challenges. As a result, a reform of the fatwa is required to better incorporate environmental protection, promote eco-friendly financial methods, and forbid harmful activities against nature.