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Reforming Islamic Finance: Why and How? إصلاح التمويل الإسلامي: لماذا و كيف؟

Author

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  • Rusni Hassan

    (Professor, IIUM Institute of Islamic Banking and Finance, International Islamic University, Malaysia)

Abstract

After half a century of development, Islamic finance has grown into an industry that is very different from the ideals envisioned by its pioneers. There have been widespread calls for reform, but the direction of this reform has been a subject of great debate. This paper looks at the current state of the Islamic finance, defining where the main issues lie including a discussion on quantity versus quality. This paper will also propose an appropriate direction of reform that works to refine the current practice and expand the scope of Islamic finance to embody the ideals of its founding pioneers. The researcher utilizes both deductive and inductive methods referring to the wealth of Islamic finance literature as well as observation from her extensive practical experience in the industry as a methodology for this paper. The most important findings are that Islamic finance has thus far achieved great growth, but which lacks in quality. Various Shariah, authenticity, regulatory, and maqasid realization issues still lurk. The ideal approach to reform looks at the current state of Islamic finance and attempts to refine the practices of Islamic financial institutions. Furthermore, it is proposed that the scope of Islamic finance be broadened to incorporate the underserved segments of the society including the third sector. The paper recommends that a platform be setup or an authority be commissioned to oversee this transition, and that a talent pool be created to lead the new initiatives and institutions that will result from this reform. بعد نصف قرن من التطور، أصبحت المالية الإسلامية صناعة مختلفة كثيرًا عن المثاليات التي كان ينشدها رواد الصناعة. هناك نداءات واسعة الانتشار إلى التجديد، ولكن اتجاه التجديد لا يزال محل جدل. نَظَرَ هذا البحث في الوضع الراهن للمالية الإسلامية، وذلك بتحديد الإشكالات الرئيسة القائمة بما في ذلك قضية الجودة والكمية. ومن ثَمّ اقترح هذا البحث اتجاهًا مناسبًا للتجديد، والذي يدعو إلى صقل الممارسة الحالية وكذلك توسيع نشاطات المؤسسات المالية الإسلامية لتحقيق المثاليات التي كان ينشدها رواد الصناعة. تم توظيف المنهجين: الاستقرائي والاستنباطي لتحليل الدراسات الجمة حول المالية الإسلامية، كما اعتمدت الباحثة على منهج الملاحظة المتمثّلة في خبرتها العملية الواسعة في صناعة المالية الإسلامية لإجراء هذا البحث. توصلت الدراسة إلى نتائج أهمها: أن صناعة المالية الإسلامية أنجزت نموًّا عظيمًا إلى حد الآن، ولكن لم يصاحب هذا النموَّ الجودةُ المنشودة. كما أوضحت نتائج الدراسة أن ثمة إشكالات عدة لا تزال قائمة، أهمُها: الإشكالاتُ الشرعية والتنظيمية، والأصالة، وتحقيق مقاصد الشريعة. المنهج المثالي للتجديد يتمثّل في تقييم الوضع الراهن للمالية الإسلامية ومحاولة صقل ممارسات المؤسسات المالية الإسلامية. ويقترح البحث توسيع نطاق المالية الإسلامية ليضم القطاعات المهمَّشة في المجتمع بما في ذلك القطاع الثالث. أخيرًا، يوصي البحث بإنشاء منصة أو مفوضًا خاصًا للإشراف على هذا الانتقال، وأن يتم تكوين مجمع مواهب ومؤسسات مخصصة لقيادة المبادرات الجديدة لكي تُحقق الصناعةُ نتائجَ إيجابية من هذا التجديد.

Suggested Citation

  • Rusni Hassan, 2020. "Reforming Islamic Finance: Why and How? إصلاح التمويل الإسلامي: لماذا و كيف؟," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 33(2), pages 67-80, July.
    • Handle: RePEc:abd:kauiea:v:33:y:2020:i:2:no:4:p:67-80
    DOI: 10.4197/Islec.33-2.4
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    References listed on IDEAS

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    1. Mohamed Ariff & Munawar Iqbal, 2011. "Introduction to Islamic Financial Institutions," Chapters, in: Mohamed Ariff & Munawar Iqbal (ed.), The Foundations of Islamic Banking, chapter 1, Edward Elgar Publishing.
    2. Muhammad Akram Khan, 2013. "What is Wrong with Islamic Economics?," Books, Edward Elgar Publishing, number 15292.
    3. Mr. Alfred Kammer & Mr. Mohamed Norat & Mr. Marco A. Piñón-Farah & Mr. Ananthakrishnan Prasad & Mr. Christopher M Towe & Mr. Zeine Zeidane, 2015. "Islamic Finance: Opportunities, Challenges, and Policy Options," IMF Staff Discussion Notes 2015/005, International Monetary Fund.
    4. Muhammad Umer Chapra, 2014. "Morality and Justice in Islamic Economics and Finance," Books, Edward Elgar Publishing, number 15817.
    5. Askari, Hossein & Iqbal, Zamir & Krichene, Noureddine & Mirakhor, Abbas, 2014. "Understanding Development in an Islamic Framework," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 22, pages 1-36.
    6. Mr. Jemma Dridi & Maher Hasan, 2010. "The Effects of the Global Crisison Islamic and Conventional Banks: A Comparative Study," IMF Working Papers 2010/201, International Monetary Fund.
    7. Munawar Iqbal & Philip Molyneux, 2005. "Thirty Years of Islamic Banking," Palgrave Macmillan Studies in Banking and Financial Institutions, Palgrave Macmillan, number 978-0-230-50322-9, December.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Daud Mustafa, 2020. "Reforming Islamic Finance: Mainstreaming Underserved Segment and the Third Sector إصلاح التمويل الإسلامي: الشريحة غير المخدومة والقطاع الثالث," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 33(2), pages 137-144, July.
    2. ALJARHI, Shadia, 2020. "Reforming Islamic Finance," MPRA Paper 103393, University Library of Munich, Germany.
    3. Kamola Bayram, 2020. "Islamic Finance Education: Theoretical Developments and Practical Challenges تعليم التمويل الإسلامي: التطورات النظرية والتحديات التطبيقية," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 33(2), pages 145-155, July.
    4. Mabid Ali Al-Jarhi, 2020. "Reforming Islamic Finance إصلاح المالية الإسلامية," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 33(2), pages 101-107, July.
    5. Ahmed Belouafi, 2020. "Reforming Islamic Finance Industry: Where from? .. Where to? إصلاح صناعة التمويل الإسلامي: من أين؟ .. وإلى أين؟," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 33(2), pages 121-136, July.
    6. Rodney Wilson, 2020. "The Case for Respecting the Status quo in Islamic Finance دواعي احترام الوضع الراهن للتمويل الإسلامي," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 33(2), pages 93-100, July.
    7. Volker Nienhaus, 2020. "Islamic Finance Reform: A Few Points to Ponder إصلاح التمويل الإسلامي: نقاط للتأمل," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 33(2), pages 109-121, July.
    8. Muhammad Ayub, 2020. "Issues in Theory and Practice of Islamic Finance and the Reform Agenda خطة مقترحة لإصلاح صناعة الخدمات المالية الإسلامية," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 33(2), pages 81-92, July.

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    More about this item

    Keywords

    Islamic finance reform; Future of Islamic finance; Islamic financial inclusion. إصلاح التمويل الإسلامي، مستقبل التمويل الإسلامي، الشمول المالي للتمويل الإسلامي.;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • P49 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Other
    • B59 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Other

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