Islamic Finance : The Ethical Ideals vs the Controversial Practice

Abstract

Ethics resonate well with the Islamic finance moral goals. But, the tremendous commercial and financial success of Islamic finance over the last three decades raises some questions about the compliance to the original moral goals of finance in Islam. The goal of this paper is to highlight the significant criticism addressed by prominent specialists to the excessive use of debt based products and non-participatory financing contracts such as Murabaha and Ijarah. The negligible part of participatory financing contracts such as Musharaka and Mudaraba is also pointed out by jurists and practitioners. Also, some key issues are involved in Islamic banks controls by the Shari’a Supervision Board, and in corporate governance related to investment accounts holders.