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Accounting and pseudo spirituality in Islamic financial institutions

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  • Hidayah, Nunung Nurul
  • Lowe, Alan
  • Woods, Margaret

Abstract

The global financial crisis was followed by calls for a transformation of conventional finance, towards more ethico-aesthetic models. One avenue was to consider the alternative aesthetic of Islamic financial institutions (IFIs). IFIs offer profit-loss sharing (PLS) schemes as a distinctive spiritual alternative to conventional investment products. IFIs ontotheology clashes with the epistemology of modern banking and finance. The accounting for PLS creates tensions due to practical complexity that militates against implementation of the authentic Islamic financial contracts. This paper seeks to identify the role of accounting in IFIs’ practice of interpretation to resolve the struggles that have taken place around the implementation of PLS schemes as a means of spiritual based financial alternatives. We explore how IFIs use accounting in rendering notions of spiritual/prophetic values applicable to practice or how it colludes against their implementation. Our study adopts a qualitative research methodology, framed around 40 interviews and observations of PLS implementation in IFIs in five Muslim countries in Asia and the Middle East, and one in the United Kingdom. We combine the literature on accounting and religion with the ideas/concepts from the literature on religion in organizations, political economy and Islamic law/finance. These perspectives enable us to better reveal how accounting works to reinvent spirituality. In our context we show how accounting mediates the conflicting interests and intentions that arise within the epistemological clashes that happen as the scared/religious strives to take its place in the capitalistic context of the conventional finance industry.

Suggested Citation

  • Hidayah, Nunung Nurul & Lowe, Alan & Woods, Margaret, 2019. "Accounting and pseudo spirituality in Islamic financial institutions," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 61(C), pages 22-37.
    • Handle: RePEc:eee:crpeac:v:61:y:2019:i:c:p:22-37
    DOI: 10.1016/j.cpa.2018.09.002
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    1. Alamad, Samir & Hidayah, Nunung Nurul & Lowe, Alan, 2021. "A shared boundary object: Financial innovation and engineering in Islamic financial institutions," The British Accounting Review, Elsevier, vol. 53(3).
    2. Ahsan, A.F.M. Mainul & Bose, Sudipta & Ali, Muhammad Jahangir, 2024. "Does Islamic religiosity influence professional accountants' judgments? Evidence from global convergence of IFRS," Advances in accounting, Elsevier, vol. 64(C).
    3. Riaz, Umair & Burton, Bruce & Fearfull, Anne, 2023. "Emotional propensities and the contemporary Islamic banking industry," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 94(C).

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