The Integrity of Islamic Finance

Marizah Minhat (), Nazam Dzolkarnaini () and Mazni Abdullah ()
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Marizah Minhat: Edinburgh Napier University
Nazam Dzolkarnaini: Edinburgh Napier University
Mazni Abdullah: University of Malaya

Chapter Chapter 6 in Ethical Discourse in Finance, 2021, pp 103-123 from Palgrave Macmillan

Abstract: 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.

Keywords: Islamic finance; Governance; Perverse incentives; Integrity; Murabahah; Ijarah; Sukuk (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:pal:psifcp:978-3-030-81596-7_6

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DOI: 10.1007/978-3-030-81596-7_6

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