The Integrity of Islamic Finance

Minhat, Marizah; Dzolkarnaini, Nazam; Abdullah, Mazni

Abstract

This chapter provides a critical account of popularly used Islamic financial instruments and discusses the gap between theory and practice in Islamic financial industry. The critical discussion is mainly related to financial innovations, which were derived from concepts including murabahah, ijarah and sukuk. Empirical evidence and/or real-life examples are illustrated to elucidate points. The central thesis of this chapter suggests that an ideal Islamic principle of risk-sharing has not been successfully implemented due to challenges associated with governance (or lack thereof) and behavioural factors including perverse incentives. A solution can be found through effective stakeholders’ education and activism to steer the Islamic finance industry in the right direction.

Citation

Minhat, M., Dzolkarnaini, N., & Abdullah, M. (2021). The Integrity of Islamic Finance. In M. Minhat, & N. Dzolkarnaini (Eds.), Ethical Discourse in Finance - Interdisciplinary and Diverse Perspectives (103-123). Palgrave Macmillan. https://doi.org/10.1007/978-3-030-81596-7_6

• Online Publication Date: Oct 26, 2021
• Publication Date: Oct 26, 2021
• Deposit Date: Oct 26, 2021
• Publisher: Palgrave Macmillan
• Pages: 103-123
• Series Title: Palgrave Studies in Impact Finance
• Series ISSN: 2662-5105
• Book Title: Ethical Discourse in Finance - Interdisciplinary and Diverse Perspectives
• Chapter Number: 6
• ISBN: 978-3-030-81595-0
• DOI: https://doi.org/10.1007/978-3-030-81596-7_6
• Keywords: Islamic finance; Governance; Perverse incentives; Integrity; Murabahah; Ijarah; Sukuk
• Public URL: http://researchrepository.napier.ac.uk/Output/2816660
• Publisher URL: https://link.springer.com/chapter/10.1007/978-3-030-81596-7_6