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Islamic banking has undergone significant adaption since its inception. This study aims to investigate why and how Islamic banks adapt their services, using participatory financing as evidence.

A qualitative study is designed, using working capital financing and commodity operations financing in Pakistan as analytical units. The data for each analytical unit is analyzed using a qualitative content analysis, while the findings are synthesized using a cross-case synthesis method.

Findings suggest that participatory financing has undergone extensive adaptation in the Islamic banking industry of Pakistan, in the wake of resolving constraints to participatory financing and increasing its viability. Consequently, participatory finance has emerged as an attractive and viable option in Pakistan. These findings suggest that unlike in the past, where Islamic banks used to buffer themselves from the environment and ignore the market demands, they have learned to respond effectively to the market demands and the challenges posed by the environment.

Findings suggest that the adaptation strategy is more effective than the migration strategy, because it enables the financial service systems to reduce the underlying risks by avoiding emergent threats and eradicating the inherent weaknesses.

The extant literature provides a generalized view on the adaptation process that Islamic banks undergo to comply with their environment. However, it is limited in terms of conceptualizing the adaptations and innovations in their products and the underlying structural variations. The present study fills this gap.

There have been many innovations in public finance in the 21st century to address increasing budget constraints and increasing demands from government. One innovation has been civic crowd-funding which began in 2009. This is predicated on the voluntary commitment of funds by individual and institutional donors and investors for specific projects. This paper explores this new approach to funding capital projects and grounds it within a discussion of the Voluntary Theory of Public Finance. There is a lack of research on civic crowd-funding and a lack of theoretical approaches to it. This paper draws these connections and develops future directions of research that includes the continuing application of this approach, the increasing engagement of citizens in the administrative process of government and increasing budget constraints.

The well‐known modes of raising and mobilizing venture capital in Islam known as mudarabah and musharakah (m&m) in Islamic economics are critically examined. In the form as m&m presently exist, they are pointed out to be pre‐Islamic financing instruments that came into usage in the Islamic economic literature. The inability to realise the extensively relational perspectives of Islamic socio‐economic co‐operation with extensive participation across agents, firms and sectors by means of these instruments, which are essential requirements for the Islamic political economy, is shown to make the instruments fraught with many technical and ethical problems of development financing. The alternative to transform m&m into a more integrated financing instrument of Islamic venture capital is formalised. Empirical evidences are given. Institutional issues are examined in the light of Islamic joint venture financing.

This study aims to develop a Sharīʿah-compliance rating mechanism for the Islamic financial services industry (IFSI), with a special focus on banking. The banking sector is taken as the area of focus due to its leadership role in the volume of global Sharīʿah-compliant assets.

The objectives of the Islamic financial system (IFS) are selected as the basis for ratings. A range of performance indicators (leading to achievement of the objectives) is grouped into four broader categories and used in the study to allocate scores with a sum total of 100. Special considerations – including the amount of resources required in performing an activity, suitability of prevailing business conditions, the degree of compulsion/discretion in performing a task and linkage with the essence of the IFS – were taken into account in the allocation of scores.

This study groups multiple performance measures into four categories, including portfolio construction (deposits mechanism, participatory and asset-based modes of financing), access to finance (service to the less-privileged and sector screening), reputation (disclosures and stakeholders’ survey) and Sharīʿah governance (Sharīʿah supervision and controls, charitable operations, human resources, product development and organization). The Portfolio, Audit, Reputation and System (PARS) rating system is then developed.

A Sharīʿah-compliance rating system is helpful in measuring the progress towards goal achievement of the IFS and in gaining stakeholders’ trust. It is also important for Sharīʿah boards and regulators in policy formulation, for management in addressing weaknesses and taking corrective measures and potentially for standard-setting bodies.

This study presents a comprehensive quantitative Sharīʿah-compliance rating mechanism, taking into consideration the objectives of the IFS – equitable distribution of wealth and financial stability, in addition to Sharīʿah-compliance in operations. Development of Sharīʿah-compliance quality ratings for Islamic banking is essential to gain customers’ trust; the suggested methodology is thus a contribution to the literature on Islamic finance.

This paper aims to explain the “murabaha syndrome” of Islamic banks. It further attempts to offer alternatives for the expansion of profit and loss sharing (PLS)-based financing.

Audited financial statements of 18 Islamic banks in the GCC countries are analyzed to assess the financing structures of banks. Moreover, additional data about financing pattern of Islamic banks in other Muslim majority countries are collected from the Islamic finance literature. A comparative analysis is offered to examine the financing structures of Islamic banks.

The paper confirms murabaha (mark-up financing) concentration of Islamic banks. About 90 per cent of the total financing are concentrated on murabaha, which is the result of existing institutional underpinnings. Islamic banks would logically be involved with PLS-based financing only limitedly unless the current governing institutions are changed. Entrepreneurs’ financing needs based on PLS contracts should be catered by venture capital, whereas micro-finance enterprises can meet the demand for funds of marginal clients.

PLS investment in the portfolio of Islamic banks would result in higher risk and uncertainty. Ambiguity, or its equivalent uncertainty, is prohibited in Islam. This is a dilemma which the existing literature does not sufficiently explain.

Ideally, Islamic banks should practice PLS-based financing; otherwise, their raison d’être would be difficult to justify. Islamic finance literature does not shed sufficient analytical lights in explaining Islamic banks’ preference of mark-up financing to PLS-based financing. Moreover, strategies to ameliorate this condition have largely remained unexplored.

The purpose of this study of this methodological abstraction is erected the nature of the well-being function as evaluative criterion. The well-being function (maslaha) evaluates the interrelationships between long-run investment (real sector), the corresponding financial instruments (financial sector) and the embedded socioeconomic variables and ethical values conveyed by extensive complementarities and participation in a systemic approach of unity of knowledge. Among the financing variables to be selected will be the transformation of debt-instruments into equity instruments. All financial instruments are to be transformed into a holistic participatory pooled portfolio.

The paper establishes the point that, the idea of long-run is appropriately that of a juncture of Islamic change during which the objective of well-being (maslaha) is evaluated (estimation leading to simulation) with long-run investment and Islamic financing instruments on the basis of the Islamic methodological worldview. This methodological worldview is premised on the ontological foundation of the episteme of organic unity of knowledge and the resulting world-system. The Qur’an refers to this foundation of knowledge as Tawhid. Tawhid is used in this paper to mean the Primal Ontological Law of Unity of Knowledge.

The most critical long-run investment program focused on is poverty alleviation and its equity-based financing instruments that reduce debt progressively to attain sustainable grassroots development with the ability to own, and the social capability to distribute resources and enable the grassroots. The corresponding interaction, integration and evolutionary dynamics of learning that emanate from the interrelationship of poverty alleviation as the focus of long-run investments and their attenuating financing instruments, along with the implications of inter-causal socioeconomic variables and the embedded episteme of unity of knowledge in the well-being function (maslaha). This paper is thus an abstracto-empirical contribution to the literature of Islamic finance, long-run investment and socioeconomic development with global significance.

The choice of long-run investment for poverty alleviation and the corresponding Islamic financing instruments are summarized by the following Tawhidi epistemic schema (an extractive picture). Upon this epistemic methodological worldview, the entire structure of well-being and sustainability of socioeconomic development lies.

The paper brings out many of the properties that ought to be the truly moral/ethical and thereby the conformable analytical nature of the model of financing and investment in a combination of short-, medium- and long-term mobilization of resources to attain levels of social well-being as the objective criterion. Empirical work is done to bring the objective criterion to an applied level and to critically examine the work in the same field being carried out by many other ones, including authors and institutions. The empirical work done here can be widely extended to the case of estimating of the maslaha function (well-being).

This paper carries an essentially moral and social perspective in its methodological orientation that is derived from the Islamic epistemological foundations of unity of knowledge (Tawhid) and applied to Islamic finance and investment theory with the well-being objective criterion.

This is an original paper that combines methodological abstraction with applied financing and investment perspectives. Such an abstracto-empirical approach has not been done in Islamic research writings.

The basis of the present financial crisis, which is bound to continue inflicting its venom because of structural problems of society, economy, finance, and institutions, is the insatiable preferences of households and investors that fuel excessiveness in the real estate market. Then there is the contagion that this kind of preference has on the economy and the foreboding uncertain market expectations everywhere. Finally, the excessiveness is allowed to survive and proceed on with unrelenting animal spirit by weak government polices, outmoded understanding of the economic and financial world-system, being unable to simulate the otherwise complex system by a spent-out methodology.

Explains how the adoption of Islamic law (Shariah) theoretically affects a political economy, why it requires the abolition of interest rates as a price for money and how this is achieved. Takes Saudi Arabia as an example of a Muslim country governed by Shariah and investigates how far it accords with theory. Argues that equity financing (including non‐interest bearing government bonds) has helped to finance growth and insulated the stock market from speculative financing. Looks at statistics on the financial structures, assets and loans of Saudi banks (including joing ventures with foreign banks) and concludes that they have “done well” in implementing Islamic principles; and that interest‐free financing is appropriate for this country.

The paper's purpose is to present and empirically validate a learning model of participatory grassroots development among the poor and needy in Bangladesh.

The approach used is conceptual modeling and its empirical validation for a case study of poor women's sewing project in an interior village of Chittagong, Bangladesh.

A perpetual charity‐fund with endogenous values and productive transformation of the needy at the grassroots can prove to be an effective approach to socioeconomic development.

The empirical validation can be enhanced with more data being generated with experience in the women's sewing project in the near future.

This is a policy‐oriented paper with practical ways and means‐test for implementation in development planning.

A formal modeling of grassroots development premised on human resource development and perpetual charity‐fund for financing and their empirical validation is presented. Such an approach is not presently found in the hierarchical models of development planning. It should be included for making development meaningful as the grassroots. Particular reference is made here to Bangladesh development planning.

Contrary to what its title might suggest, this chapter does not develop an alternative vision of finance. On the basis of the financial world as it currently operates, we propose to identify the paradoxes and the likely evolution of a banking and financial system evolving. Based on the facts, this chapter seeks to extend the discussions initiated in the last chapter, entitled “Socially responsible banks?” of our book “The management of the bank,” published by Vuibert editions. The frantic pace of innovation and the requirements of regulators encourage banks to review their organization and their governance. This chapter attempts to position the bank between two paradoxes: on one side, the crises have not made more responsible banks. The facts remain: rates and currency manipulation, embezzlement rules on bonuses, even if some are still under financial assistance of the United States. On the other hand, the “finance otherwise” innovates, disturbs, and upsets. Creative players such as collaborative funding or virtual currencies are not really threatening to the big banks. But in the past, marked by their personnel costs and infrastructure cannot meet the agility of these new entrants “crowdfunding,” and other online payment methods have backed the Web. These innovations really threaten banks that do not lack the resources to adapt. And if tomorrow, the banks no longer existed? Behavior changes and already a growing number of clients save, borrow, and lend the use of means of payment to settle their online purchases without using the services of traditional financial institutions! A certainty, “finance otherwise,” will play a stimulatory role. The speed and magnitude of change is such that it becomes necessary for banks and financial institutions to adapt to these new technologies to increase or simply maintain their business. Based on the facts, the chapter explores and analyzes the developments that may become sustainable for a banking system reluctant to lose the monopoly of the distribution of credit and means of payment. The “end of the banks,” is a “provocative” subject but insufficiently addressed in the economic literature.