Yousuf, 34, joined the lucrative but unrecognised ICL on Wednesday, prompting the Pakistan Cricket Board (PCB) to ban him from national and international cricket.
"Under the scenario when Pakistan's batting strength is already weak, Yousuf's move to the ICL is a big loss," said Abbas, himself a batting legend in 1970s and 80s.
"Although it's a great loss to the country, you can't stop anyone from playing privately. Banning Yousuf is not the right step," said Abbas.
Yousuf left for India on Monday, hours after being named in a Pakistan squad to play three-one-day internationals against the West Indies at Abu Dhabi in what could have capped a glorious career.
The player, from a poor background, was plucked from the obscurity of a tailor's shop in the slums of the eastern city of Lahore to play a local match in the mid-1990s.
His well-crafted shots attracted attention and he rose through the ranks to become the backbone of Pakistan's batting line-up.
In 2006, he broke the world record of the most runs in a calendar year, scoring 1,788. His nine Test hundreds in 2006 is also a record.
But another former Pakistan captain, Aamir Sohail, said Yousuf's ICL move was "unethical".
"The PCB supported him in his fight with the court cases relating to the ICL and he left them in the lurch at a time when Pakistan cricket is in a turmoil," he added.
Pakistan last month sacked its Australian coach Geoff Lawson over poor results. Intikhab Alam replaced Lawson.
And the side has been badly hit by having to play at neutral venues as foreign teams have refused to tour the troubled country over security fears.
"Yousuf converted to Islam and it became his strength but I am sorry to say that he spoiled his image by ditching the country, a country which has given him fame and wealth," said Sohail.
Yousuf, formerly Youhana as a Roman Catholic, converted to Islam in 2005 and has since grown a bushy beard. He also bows in the middle of the pitch to give thanks after he scores a century.