Islamic Hedging in the Perspective of Maqasid Shariah ‘Abd al-Majid al-Najjar

This study aims to explore the effectiveness of Islamic hedging products in contributing to the Islamic financial industry in Indonesia, particularly in realising the Maqasid Shariah objectives according to ‘Abd al-Majid al-Najjar. Islamic hedging is generally perceived as an instrument designed to protect the business sector from risks, which aligns with Islamic derivatives’ primary objectives. However, the findings of this study reveal that Islamic hedging activities are unable to provide protection for social behaviour and maintain assets against the risks faced by business actors in the Indonesian financial sector. To ensure a fair analysis of these findings, several contributing factors should be further investigated. For instance, there may be a mismatch between the objectives of Islamic hedging and the broader Maqasid Shariah framework established by ‘Abd al-Majid al-Najjar, as the financial-driven nature of Islamic hedging may lack a focus on social aspects. Hence, this study contributes to the existing literature by highlighting the limitations of Islamic hedging in achieving Maqasid Shariah objectives within Indonesia’s Islamic financial sector.