Corporate Governance and Ethics of Islamic Finance Institutions
Journal of Islamic Economics, Banking and Finance, Forthcoming
34 Pages Posted: 20 Nov 2013
Date Written: November 19, 2013
Abstract
Islamic finance has grown impressively since its modest beginnings with the establishment of Egypt’s Mitt Ghamar Saving Bank in 1963. By the end of 2011, the global Islamic financial services industry was valued at $1.357 trillion, a 150 percent increase in the past five years. Yet despite this growth, in nearly five decades of its existence, Islamic finance has gained only one percent of the global market share for finance. While some of this can be chalked up to the relative newness of the industry, some of its problems stem from ambiguous corporate governance model and less than stellar commitment to ethics. Islamic Shariah provides guidelines that can help this industry mitigate agency problems resulting from the duality of its objectives – improving financial efficiency and adhering to the rules of Shariah. In addition, a stronger commitment to the higher objectives of Shariah may allow the industry to escape the controversy that Islamic finance is different in form but essentially the same in substance to conventional finance.
Keywords: Islamic Finance, Corporate Governance, Shariah, Ethics
JEL Classification: G10, G20, G30
Suggested Citation: Suggested Citation