IDEAS home Printed from https://ideas.repec.org/a/pal/compes/v48y2006i1p132-155.html
   My bibliography  Save this article

Trusted Markets: The Exchanges of Islamic Companies

Author

Listed:
  • Gül Berna Özcan

    () (School of Management, Royal Holloway, University of London, Egham, Surrey, TW0 OEX, UK.)

  • Murat Çokgezen

    (Department of Economics, Marmara University, 34590 Bahcelievler, Istanbul, Turkey)

Abstract

In recent years, Turkey has witnessed a new form of corporate finance in which companies, commonly called ‘Islamic’, borrow directly from lenders without using any financial intermediaries. Trust among lenders and borrowers has initiated market exchange, secured deals and lowered transaction costs. This paper claims that the base of trust in direct financing for Islamic companies should be largely attributed to the self-interest of the parties rather than just to Islam or ‘shared values’. Here we do not see an individual calculation of ‘economic man’, as argued by neo-classical economists, but individuals embedded in relations within social groups and sharing ethics of money-based relations. Second, we illustrate that self-interest based trust stems from the calculations of trusters using available information in the market about trustees. However, information asymmetry between borrowers and lenders in favour of borrowers has been a source of deep instability and abuse. Finally, the paper shows how groups have used the rhetoric of Islamic economic revival to expand the scope of transactions while trust eroded in favour of abusers. The anonymity came with thousands of investors who eroded the strength of reciprocity, surveillance and retribution in trust-based relations. This case study also illustrates that Islamic societies seek new solutions within capitalist economic systems to maximise their gains and they do not wish to be destined to live in poverty. Comparative Economic Studies (2006) 48, 132–155. doi:10.1057/palgrave.ces.8100073

Suggested Citation

  • Gül Berna Özcan & Murat Çokgezen, 2006. "Trusted Markets: The Exchanges of Islamic Companies," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 48(1), pages 132-155, March.
  • Handle: RePEc:pal:compes:v:48:y:2006:i:1:p:132-155
    as

    Download full text from publisher

    File URL: http://www.palgrave-journals.com/ces/journal/v48/n1/pdf/8100073a.pdf
    File Function: Link to full text PDF
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: http://www.palgrave-journals.com/ces/journal/v48/n1/full/8100073a.html
    File Function: Link to full text HTML
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Naseem Bakht Yar & Bakht Yar Akhtar & Irfanullah Khan & Saqib Khan, 2014. "The Application of Religious Appeal in the Strategic Marketing Communication of Financial Services in Pakistan for "Consumer Manipulation”," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 4(2), pages 88-99, February.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:compes:v:48:y:2006:i:1:p:132-155. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla) or (Rebekah McClure). General contact details of provider: http://www.palgrave-journals.com/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.