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Abstract: This study examines the legal and Shariah dimensions of commercial paper discounting and evaluates whether Islamic banking instruments can serve the same financing function. It seeks to clarify the legal characterization of discounting under positive commercial law, assess its compatibility with Islamic jurisprudence, and identify Shariah-compliant instruments capable of providing equivalent liquidity solutions within Islamic banking. The study employs a qualitative normative–doctrinal approach, integrating comparative legal analysis with analytical fiqh methodology. It analyzes statutory provisions governing commercial paper discounting—particularly within Iraqi commercial law—and reviews classical and contemporary juristic debates that classify the transaction as a loan (qard), a sale of debt (bayʿ al-dayn), or a transfer of rights (ḥawālah). The data, derived from statutory texts and authoritative juristic sources, are examined through content and comparative analysis, with source triangulation applied to ensure validity and doctrinal coherence. The findings indicate that, in its conventional form, discounting constitutes a credit-based transaction in which the bank advances funds below the nominal value of a commercial instrument and subsequently claims its full value at maturity. Although legally valid under commercial law, this arrangement generally entails elements of Ribā al-faḍl or Ribā al-nasī’ah from a Shariah perspective, as it involves a predetermined increase linked to deferred payment. Juristic reinterpretations that frame discounting as a sale or transfer mechanism do not fully eliminate the embedded interest component. The study concludes that Islamic banking instruments—such as murābaḥah financing, organized tawarruq, and salam contracts—can achieve similar economic objectives without violating Shariah principles, particularly those concerning asset backing, risk sharing, and the prohibition of Ribā. By combining contemporary legal analysis with classical jurisprudential reasoning, this research contributes to the theoretical refinement of Islamic finance and provides a structured foundation for the development of ethically grounded and sustainable banking practices. Keywords: Discounting; Islamic Banking; Murabaha; Ribā; Shariah Compliance.