Ethical And Social Responsibility Models For Islamic Finance

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Pages: 38

As institutions that are governed by the principles of the Shari’ah, Islamic financial institutions should depart significantly from their conventional counterparts. The intense commitment of Islam to brotherhood, morality and justice makes the well-being of all human beings the principal goal of Islamic financial institutions. This well-being includes both material and spiritual satisfaction encompassing considerations of the present world and the hereafter. Thus, while ordinary business institutions are likely to make profit their primary objective, Islamic banks have to incorporate both profit and social responsibility into their objectives, as Islam strives for a balance between profit and social objectives. Scholars have noted, however, that constructing a model that provides clear parameters for how to make trade-offs among diverse stakeholders is one of the most difficult problems of business ethics. For Islamic financial institutions, this issue becomes more acute, especially when their business objectives include reassuring stakeholders that they are likely to receive a fair return on their investments, while at the same time they are bound to maintain conformity with the Shari’ah. This paper, therefore, attempts to address this issue by putting forward a Shari’ah prescription that provides a framework for managers to resolve problems arising from potentially conflicting responsibilities towards various stakeholders. In particular, the pyramid of maslahah may serve as a viable and effective model for a decision framework to manage conflicts between the interests of various stakeholder groups.



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