Genealogical Study on the Legitimacy Strategies in the Islamic Banking

Abstract

This study aimed to explore legitimacy strategies in Islamic financial institutions andunderstand the process and reason for their shifting over time. A reflective approach was used towards literature data sources and a thematic analysis of interview results. Islamic Banking and financial institutions were seeking a legitimacy strategy by adopting sharia compliance to distinguish them from conventional banks. This study examined the development of Indonesia's Islamic banking and assessed responses from participants with an Islamic banking background. The results showed that the legitimacy strategy of Islamic banking changes over time. Initially, it used labeling, but the stakeholders' pressures and demands have led Islamic banking to change its strategy. It has moved through integrating financial and non-financial performance to a sharia compliance strategy. This study contributes to understanding Islamic banking's legitimacy strategy that has developed over time. Additionally, it helps develop a better legitimacy strategy in line with the future philosophical and ideological basis of Islamicbanking.