Classical Islamic Principles and Present Islamic Banking

Abstract

Purpose – The purpose of this paper is to assess perception of the stakeholders about Islamic banking and find out approaches to make it closer to the Shari’ah.
 Methodology – The paper adopts direct survey approach to find out perception of stakeholders about the Islamic banking. The survey results have been evaluated using Ordinary Least Square method. 
 Findings – The paper reveals that respondents have negative perception about the present form of Islamic banking, due to multiple similarities in conventional and Islamic banking products and operations. The respondents supported the idea of different model of Islamic banking.
 Research limitations – The study relies solely on the opinion of limited number of respondents, living in few major cities of Pakistan. It does not provide any empirical evidence for the proposed model of Islamic banking.
 Practical Implications – Riba is significantly condemned and prohibited in Islam. Therefore, avoiding riba in all business transactions is very important for our faith. Islamic world started practicing banking under the branding of Islam which has approval of a sizable group of Islamic scholars but still there is no consensus among the Islamic scholars on this issue. This paper helps in addressing perception issues and suggests a future direction of Islamic banking for the customers, practitioners and the regulators.
 Originality – Many researchers have questioned the Shariah compliance and perception issues of Islamic Banking but most of them have suggested only awareness programs. This research proposes a new model for Islamic banking which has not been witnessed in any other research. 
 Keywords: Islamic Banking and Finance, Perception, Criticism, Regulations, Regulator, New Model.