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'Fatwa repositioning': the hidden struggle for Shari'a compliance within Islamic Financial Institutions

'Fatwa repositioning': the hidden struggle for Shari'a compliance within Islamic Financial Institutions
'Fatwa repositioning': the hidden struggle for Shari'a compliance within Islamic Financial Institutions

Islamic Financial Institutions (IFIs) have recently witnessed remarkable growth driven by their holistic business model. The key differentiator of IFIs is their Shari’a-based business proposition which often requires some financial sacrifices, e.g. being ethical, responsible and philanthropic. It also requires them to refrain from investments in tobacco, alcohol, pornography or earning interest. For IFIs’ sponsors and managers, however, the key motivational factor for entering the Islamic financial market is not the achievement of Shari’a objectives through the holistic business model, but rather the urge to tap this highly profitable market where customers are inclined to pay a premium for Shari’a compliance. In order for IFIs to be accepted by the market, their financial instruments need to be approved by Shari’a scholars, known for their integrity and expertise in Shari’a. One can therefore expect potential tensions between IFIs’ managers and Shari’a scholars. The purpose of this research is to probe the hidden struggle between managers and Shari’a scholars in pursuit of their respective objectives. The study investigates this phenomenon using grounded theory as a methodological framework based on data collected from three IFIs from two countries. The findings reveal that Shari’a scholars and managers of IFIs have divergent objectives, which creates incongruence of objectives at the strategic level. The findings illustrate the tension and latent struggle for Shari’a compliance, which has been termed as ‘Fatwa Repositioning’ resulting in four possible consequences: deep, reasonable, minimum and superficial Shari’a compliance. Fatwa Repositioning is the core category of this study, which exhibits how managers and Shari’a scholars struggle to position the Shari’a compliance of their institutions so as to best serve their respective objectives. Interestingly, Shari’a scholars are seemingly not always in control of what they are supposed to be controlling, i.e. Shari’a compliance.

Fatwa Repositioning, Islamic Financial Institutions, Shari’a compliance, Shari’a governance, Shari’a objectives, Shari’a scholars
0167-4544
895-917
Ullah, Shakir
dc11df8b-6dea-4b5c-a100-998b36212621
Harwood, Ian A.
8f945742-3e33-445e-9665-0f613f35fc5b
Jamali, Dima
cddcdb14-bb36-4423-a766-0b1e1d7985ba
Ullah, Shakir
dc11df8b-6dea-4b5c-a100-998b36212621
Harwood, Ian A.
8f945742-3e33-445e-9665-0f613f35fc5b
Jamali, Dima
cddcdb14-bb36-4423-a766-0b1e1d7985ba

Ullah, Shakir, Harwood, Ian A. and Jamali, Dima (2018) 'Fatwa repositioning': the hidden struggle for Shari'a compliance within Islamic Financial Institutions. Journal of Business Ethics, 149 (4), 895-917. (doi:10.1007/s10551-016-3090-1).

Record type: Article

Abstract

Islamic Financial Institutions (IFIs) have recently witnessed remarkable growth driven by their holistic business model. The key differentiator of IFIs is their Shari’a-based business proposition which often requires some financial sacrifices, e.g. being ethical, responsible and philanthropic. It also requires them to refrain from investments in tobacco, alcohol, pornography or earning interest. For IFIs’ sponsors and managers, however, the key motivational factor for entering the Islamic financial market is not the achievement of Shari’a objectives through the holistic business model, but rather the urge to tap this highly profitable market where customers are inclined to pay a premium for Shari’a compliance. In order for IFIs to be accepted by the market, their financial instruments need to be approved by Shari’a scholars, known for their integrity and expertise in Shari’a. One can therefore expect potential tensions between IFIs’ managers and Shari’a scholars. The purpose of this research is to probe the hidden struggle between managers and Shari’a scholars in pursuit of their respective objectives. The study investigates this phenomenon using grounded theory as a methodological framework based on data collected from three IFIs from two countries. The findings reveal that Shari’a scholars and managers of IFIs have divergent objectives, which creates incongruence of objectives at the strategic level. The findings illustrate the tension and latent struggle for Shari’a compliance, which has been termed as ‘Fatwa Repositioning’ resulting in four possible consequences: deep, reasonable, minimum and superficial Shari’a compliance. Fatwa Repositioning is the core category of this study, which exhibits how managers and Shari’a scholars struggle to position the Shari’a compliance of their institutions so as to best serve their respective objectives. Interestingly, Shari’a scholars are seemingly not always in control of what they are supposed to be controlling, i.e. Shari’a compliance.

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Fatwa Repositioning Final - Accepted Manuscript
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More information

Accepted/In Press date: 8 February 2016
e-pub ahead of print date: 17 February 2016
Published date: 1 June 2018
Keywords: Fatwa Repositioning, Islamic Financial Institutions, Shari’a compliance, Shari’a governance, Shari’a objectives, Shari’a scholars
Organisations: Southampton Business School

Identifiers

Local EPrints ID: 387095
URI: http://eprints.soton.ac.uk/id/eprint/387095
ISSN: 0167-4544
PURE UUID: c929694f-d84a-4080-b337-67f068b29862
ORCID for Ian A. Harwood: ORCID iD orcid.org/0000-0002-8647-2169

Catalogue record

Date deposited: 09 Feb 2016 12:19
Last modified: 06 Jun 2024 01:39

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Contributors

Author: Shakir Ullah
Author: Ian A. Harwood ORCID iD
Author: Dima Jamali

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