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Reviving the Ethics of Islamic Finance

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Abstract

When it comes to definitions of ethics, and business ethics in particular, we have relied in this paper on a quick survey of the literature. We also referred to other writings to explain how interest-based lending escaped religions morality in the west. After providing an Islamic perspective of ethics and business ethics, the article directs itself to the moral responsibilities of system participants. Naturally there is a great deal of soul searching to do and there are tough questions that must be answered by everyone. In this regard, more questions than answers are provided. As a result, the Islamic finance system is found to have deviated from its own ethics and must put some efforts in their regaining. In order to gain the ethics of Islamic finance, the article proposes some modifications in the current system, with a special attention on the process of certification of members of Shari’ah boards before their appointment. In addition, a new system of human resource development is proposed, based on comprehensive treatment of shortages in both knowledge and skills. Rating agencies are called upon to introduce the Shari’ah aspects in their rating systems and specific elements have been proposed in this regard.

Suggested Citation

  • Al-Jarhi, Mabid, 2010. "Reviving the Ethics of Islamic Finance," MPRA Paper 66732, University Library of Munich, Germany, revised 2011.
    • Handle: RePEc:pra:mprapa:66732
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    References listed on IDEAS

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    1. Kritikos Alexander & Kneiding Christoph & Germelmann Claas Christian, 2009. "Demand Side Analysis of Microlending Markets in Germany," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 229(5), pages 523-543, October.
    2. Calum G. Turvey & Rong Kong, 2008. "Vulnerability, Trust and Microcredit: The Case of China's Rural Poor," WIDER Working Paper Series RP2008-52, World Institute for Development Economic Research (UNU-WIDER).
    3. Andersson, Camilla I.M. & Holmgren, Erik & MacGregor, James & Stage, Jesper, 2008. "Giving credit to the microlenders. Formal microlending, credit constraints and adverse selection: a case study of shrimp farmers in Bangladesh," Discussion Papers 37921, International Institute for Environment and Development, Environmental Economics Programme.
    4. Al-Jarhi, Mabid, 1980. "A Monetary and Financial Structure for an Interest-Free Economy: Institutions, Mechanism & Policy," MPRA Paper 66741, University Library of Munich, Germany, revised 2004.
    5. Abeng, Tanri, 1997. "Business Ethics in Islamic Context: Perspectives of a Muslim Business Leader," Business Ethics Quarterly, Cambridge University Press, vol. 7(3), pages 47-54, July.
    6. Lisa J. Servon, 2006. "Microenterprise Development in the United States: Current Challenges and New Directions," Economic Development Quarterly, , vol. 20(4), pages 351-367, November.
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    More about this item

    Keywords

    ethics; finance; Islamic Finance; Islamic banking; Shari'ah;
    All these keywords.

    JEL classification:

    • G0 - Financial Economics - - General

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