From Financial to Economic Intermediation: Islamic Banking’s Unheard Message

Abstract

Purpose

This chapter uses Islamic finance to question the universality of contemporary finance leading principles. It establishes the existence of different financial paradigms and attempts to determine the form that might take operations in a non-profit maximising context.

Methodology/approach

This chapter uses Thomas Kuhn’s notion of paradigm to demonstrate that Islamic finance has its own dominant logic and, hence, cannot be reduced to a subset of contemporary finance. It describes how the former has been infused by the leading principles of the latter following the adoption by the Islamic financial field of an accounting system using a conventional referential as a point of reference. Finally, the chapter elaborates on the form that might take financing if profit maximisation is not the operation’s main purpose.

Findings

If the condition of profit maximisation is relaxed, the utilisation of Islamic finance instruments might lead to the creation of economical microcycles able to enlarge the socio-economic reach of financing operation.

Originality/value

The notion of economic intermediation is introduced to describe the operations of Islamic banks using their instruments in a non-maximising context. This approach should not be restricted to Islamic finance but viewed as the result of a case study advocating for an alternative view of finance favouring socio-economic development.

Citation

Chaar, A.-M. (2016), "From Financial to Economic Intermediation: Islamic Banking’s Unheard Message", Finance Reconsidered: New Perspectives for a Responsible and Sustainable Finance (Critical Studies on Corporate Responsibility, Governance and Sustainability, Vol. 10), Emerald Group Publishing Limited, Leeds, pp. 321-353. https://doi.org/10.1108/S2043-905920160000010033