Document Type

Article

Publication Date

January 2009

Abstract

The religion of Islam has existed for 1400 years but Islamic economic theory and its financial institutions emerged as an industry only in the 1970s. Islamic financial institutions (IFIs) are designed to help Muslims conduct business internationally while simultaneously upholding traditional Islamic values related to trade finance and currency movement. The basis for their existence is the Islamic moral prohibition on charging interest—interest is a central component of capitalist banking—yet IFIs conduct billions of dollars of business annually in the world economy and the de facto Islamic banking transaction is—in most cases—virtually identical to a capitalist banking transaction. Business practices in the industry of Islamic banking and finance (IBF; Maurer 2005) have evolved to reinforce some of the major tenets of a moral belief system based on Islamic principles. In this chapter, I will discuss specific practices put into place by the IBF community that are designed to embody tenets of a belief system based on Islam while at the same time generating profits for the institution and its customers. This chapter will contribute to the discussion of best corporate practices by introducing some of those practices and discussing how those practices contribute to the success of the industry.

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