Islamic Structured Products: Innovation or Replication? A New Discussion on Contemporary Application and Shari’ah Issues
Journal Title: Journal of Economics and Business - Year 2019, Vol 2, Issue 2
Abstract
Islamic structured products (Islamic SPs) are similar to conventional SPs, but with a difference that the former is Shari’āh-compliant; whereas, the latter is not. A question, therefore, arises whether Islamic SPs are a real innovation or a mere replication of conventional SPs. This paper juxtaposes Islamic SPs with the conventional SPs and critically examines the concept and current practices of the Islamic SPs by Islamic banks. The paper adopts a qualitative method to analyze the related literature thoroughly and discusses Shari’āh contracts employed in structuring Islamic SPs. The research finds that the Islamic SPs are designed to merely meet the growing Shari’āh-observant investors’ needs without due consideration to the higher objectives of Islam (maqāsid al-Shari’āh). The research also finds that notwithstanding Islamic SPs are Shari’āh-compliant, they are, however, an outright replication of the conventional SPs, which is more likable by the practitioners since it accrues less cost compared to inventing new SPs, which is more costly and time-consuming. It is, however, acknowledgeable that although a Shari’āh-compliant trademark is sufficient to continue doing Islamic banking business, the plethora of investment injected into the replicative SPs hardly manifest any contribution to the real economy, and is far-flung from the essence of Islamic banking and finance that advocates for economic justice, social impact, and financial freedom. Therefore, the research suggests that Islamic SPs be overhauled to inculcate the spirit of Islam in the Islamic banking business.
Authors and Affiliations
Naeem Suleman Dhiraj, Moustapha Chora Ahmat, Ilhamiddin Ikramovich Nazarov, Muhamad Ikhwan Arif
Keywords
Related Articles
- EP ID EP598472
- DOI 10.31014/aior.1992.02.02.98
- Views 83
- Downloads 0
Sociological Impact of Advertisements on Saudi Arabian Consumers
The impact of advertisement can be seen very clearly in various ways on Saudi consumers in the Kingdom. The purpose of this article is to investigate the impact of modern advertisement on Saudi consumers and how it influ...
Analysis of Murabaha Financing from Influence of Asset, Deposit Fund, and Profitability
This study aims to determine the effect of financing to deposit ratio (FDR), DPK, return on assets (ROA), non performing financing (NPF), capital adequacy ratio (CAR), and operational efficiency ratio (BOPO) on murabaha...
Oil Prices and Sectoral Stock Prices with Mining Sector Stock Prices in the Exporting Countries as well as Oil Importers
This paper uses the panel vector autoregressive (PVAR) to find out the dynamic relationship between oil prices, inflation, exchange rates, industrial production and the stock prices of 18 mining sector companies in Indon...
The Accounting Standardization System for Public Administrations and the Impact of their Adoption on Higher Education in Portugal
The Accounting Standardization System for Public Administrations (SNCAP) was approved by Decree-Law no. 192/2015 (DL) of September 11 and constitutes the new accounting system for public administrations. With the approva...
Measuring the Scale Efficiency of Agricultural SMEs Exporting in Vietnam
The paper uses data envelope analysis model to measure the scale effect of agricultural SMEs exporting in Vietnam in the period of 2010 - 2015 and use the Tobit regression model to assess the impact of factors such as re...