The 4 schools of law (madhabs) and their differences in finance
In Islam, fiqh (Islamic jurisprudence) is organised into four major schools of law, called madhabs. Each represents a tradition of interpreting the foundational texts (Quran, Sunnah, ijma and qiyas), developed by a founding imam and enriched by centuries of scholars.
The four madhabs agree on the essentials: the prohibition of riba, gharar and maysir. Their differences concern more specific questions of interpretation — in modern finance, these differences have concrete consequences for Zakat, tokenised gold, or crypto staking.
The four schools at a glance
1. Hanafi school
Founded by Imam Abu Hanifa (699–767 CE, Kufa, Iraq). Methodology: frequent recourse to reasoning by analogy (qiyas) and to juristic preference (istihsan). Predominant in South Asia (Pakistan, India, Bangladesh), Turkey, and French-speaking North Africa — hence HalalStack's choice to apply it by default for French-speaking European users.
2. Maliki school
Founded by Imam Malik ibn Anas (711–795 CE, Medina). Gives significant weight to the practice of Medina ('amal ahl al-Madina) as a legal source. Predominant in West Africa, Morocco, Algeria and Tunisia.
3. Shafi'i school
Founded by Imam al-Shafi'i (767–820 CE). Systematised legal theory (usul al-fiqh). Widespread in Egypt, Syria, Jordan, Malaysia and Indonesia.
4. Hanbali school
Founded by Imam Ahmad ibn Hanbal (780–855 CE). The strictest in adherence to the texts (Quran + Hadith). Predominant in Saudi Arabia and the Gulf — which explains its influence on certain Gulf Islamic financial institutions.
Practical differences in finance
A. Zakat on gold and silver jewellery
This is the most concrete difference for a French user:
| School | Position on jewellery |
|---|---|
| Hanafi | Zakat is due on gold and silver in all forms, including regularly worn jewellery |
| Maliki | Jewellery for personal use is exempt from Zakat |
| Shafi'i | Same as Maliki — regularly worn jewellery is exempt |
| Hanbali | Dominant position: not due on jewellery for personal use; internal divergence within the madhab |
Practical impact: a woman owning 150 g of gold jewellery (value ~€8,500 at May 2026 prices) is subject to Zakat according to Hanafi (2.5% = ~€212/year), but not according to Maliki/Shafi'i/Hanbali. HalalStack applies Hanafi by default and informs the user of this divergence in the interface.
B. PoS staking (Ethereum post-Merge)
Staking consists of "locking" ETH to participate in validating the network's transactions and receiving a variable reward.
| School | Position on variable PoS staking |
|---|---|
| Hanafi | Doubtful — active scholarly debate (reward not guaranteed, but the nature of the contract is discussed) |
| Shafi'i | Doubtful — same analysis as Hanafi |
| Maliki | Doubtful — same position |
| Hanbali | Strongly doubtful — some Hanbali scholars apply a more restrictive framework |
No school classifies native PoS staking with variable reward as clearly haram or halal. It is a subject of active scholarly debate (cf. Mufti Faraz Adam, LinkedIn, 2024).
C. Tokenised gold (PAXG, XAUT) — the question of qabd
Qabd refers to the "taking of possession" of an asset. In Islamic law, certain exchanges must be executed immediately (yadan bi yad — "hand to hand"), notably for precious metals (ribawi).
| School | Position on tokenised gold (PAXG-type) |
|---|---|
| Hanafi | Doubtful — digital qabd is contested. Possession of a token would not be equivalent to physical possession of the gold |
| Maliki | Accepted if the title of real ownership is established |
| Shafi'i | Accepted if the legal guarantee is strong |
| Hanbali | Cautious — recommends physical qabd |
D. Debts deductible from Zakat
| School | Debts deductible from the zakatable base |
|---|---|
| Hanafi | Short-term debts + annual portion of long-term debts |
| Maliki | Short-term only |
| Shafi'i | Short-term only |
| Hanbali | Debated among scholars |
Quantified impact: if you have a conventional mortgage of €200,000 (€10,000/year in instalments), the Hanafi school allows you to deduct €10,000 from your zakatable base. The Maliki and Shafi'i schools only allow the deduction of debts due within the year, sometimes resulting in a higher Zakat.
Why HalalStack uses Hanafi by default
The choice of the Hanafi school as the default is not arbitrary:
- Representativeness: the majority of HalalStack's targeted users (France, Belgium, French-speaking Switzerland) are of North African or South Asian origin, two predominantly Hanafi areas.
- Codified tradition: the Hanafi school has a very rich legal literature on transactions (mu'amalat), notably through the work of Mufti Taqi Usmani on contemporary Islamic finance.
- Modifiability: the user can choose their madhab in the settings. The HCS calculation and the Zakat calculation adapt automatically.
In practice
The four schools converge on the essentials:
- All prohibit riba, gharar fahish and maysir
- All validate investment in shares of licit companies (subject to AAOIFI ratios)
- All prohibit conventional banks as a primary activity
The differences concern nuances of application — jewellery, digital qabd, debt deduction — which can have a real financial impact on your Zakat or your classification of crypto assets.
Disclaimer
This article is provided for informational purposes by HalalStack, based on methodology v1.0.0 (AAOIFI Sharia Standard N°21, Hanafi school by default, unless otherwise stated). It constitutes neither a personal fatwa nor investment advice within the meaning of Article L.541-1 of the French Monetary and Financial Code. HalalStack is not a financial investment advisor (CIF) registered with the AMF.
The verdicts presented are the result of the deterministic application of objective criteria to public factual data. They do not take into account your personal situation (assets, objectives, investment horizon, risk aversion).
For any significant decision, we recommend consulting a scholar qualified in fiqh al-mu'amalat and, if necessary, a registered wealth management advisor.
The HalalStack methodology is public, versioned and contestable. Any disagreement can be reported to methodology@halalstack.app.