Skip to main content
Disciplines
Automotive Business IT + Informatics Construction + Real Estate Electrical Engineering + Electronics Energy + Sustainability Insurance + Risk Finance + Banking Management + Leadership Marketing + Sales Mechanical Engineering + Materials
Events
DE
EN
Books
Journals
Topic Page
Marketing
Start single access now
Access for companies
EXTENDED SEARCH
Log in
Top
Journal of Business Ethics
Published in: Journal of Business Ethics 3/2014

01-09-2014

Western Financial Agents and Islamic Ethics

Authors: Eddy S. Fang, Renaud Foucart

Published in: Journal of Business Ethics | Issue 3/2014

Log in

Activate our intelligent search to find suitable subject content or patents.

search-config
loading …

Abstract

This paper investigates Western professional bankers’ perceptions of Islamic finance. Exploiting data from an original survey, we carry out a principal component analysis (PCA) to characterize the main dimensions on which financial agents diverge. The PCA extracts five dimensions—accounting for 61 % of the variance in the agents’ answers—that we interpret with the help of a pilot field survey. In addition to confirm the increased association of Islamic financial values with ethical practices in the West, our results allow us to understand how the observed growth of the industry has been conceptualized by conventional agents. The five dimensions identified shed light on the multitude of constructs that have informed the diffusion of Islamic financial ideas to international markets. This supports the fact that Islamic finance cannot be seen as a single movement but is characterized by opposing and concurrent logics in global markets.
previous article Private Regulation and Trade Union Rights: Why Codes of Conduct Have Limited Impact on Trade Union Rights
next article Meaning Making by Managers: Corporate Discourse on Environment and Sustainability in India

Dont have a licence yet? Then find out more about our products and how to get one now:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

  • über 102.000 Bücher
  • über 537 Zeitschriften

aus folgenden Fachgebieten:

  • Automobil + Motoren
  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Elektrotechnik + Elektronik
  • Energie + Nachhaltigkeit
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Maschinenbau + Werkstoffe
  • Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

inform now

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

  • über 67.000 Bücher
  • über 340 Zeitschriften

aus folgenden Fachgebieten:

  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Versicherung + Risiko




Jetzt Wissensvorsprung sichern!

inform now
Appendix
Available only for authorised users
Footnotes
1
The industry was recently estimated to have reached a value of US$1.2bn globally (UKIFS 2012), with active institutions in more than 75 countries worldwide.
 
2
As opposed to the Gulf Cooperation Council (GCC), Middle East and North Africa (MENA)—excl. GCC—and Malaysia. This trend is most obvious in the United Kingdom, where the number of financial institutions and law firms offering Shariah-compliant financial products and services grew from a handful in the late 1990s to 47 in 2012 (UKIFS 2012).
 
3
As r corresponds to a certain distribution of risk in the market, assuming that v is heterogeneous among agents would boil down to considering agents’ varying preferences toward competing risk structures, thereby avoiding the “ethical” or “religious” aspect of the financial asset in question. In this case, the choice of investment would depend on differences in the risk aversion of economic agents.
 
4
If, for some agents, the expected utility of r E is higher than the expected utility of r*, the δ i become obsolete as the choice between ethical/Islamic and conventional products would be obvious for all α i,j given that g i,j(1) and h i,j(1) are assumed to be non-negative.
 
5
The concepts of PC and IC refer to the traditional incentive model in microeconomic theory, which traces back to Hurwicz (1972). In a nutshell, the decision of an economic agent to take a specified action is understood to be contingent upon two concurrent conditions. First, in order for an agent to take action—that is switch from conventional to alternative financial solutions—the new option must make him better off than in the initial instance (PC). Second, the new option adopted must be better than any other available options (IC).
 
6
The pilot study that helped us to build our questionnaire is described in Fang (2013).
 
Literature
Abdullah, D., & Chee, K. (2010). Islamic finance. Why it makes sense. Singapore: Marhsall Cavendish International.
Ahmad, M. (2008). Sub-prime crisis from Islamic commercial law perspective. Kuala Lumpur: Social Science Research Network.
Akerlof, G., & Dickens, W. (1982). The economic consequences of cognitive dissonance. American Economic Review, 72(3), 307–319.
Alreck, P., & Settle, R. (2004). Survey research handbook. New York: McGraw-Hill.
Askari, H., Iqbal, Z., et al. (2010). Globalization and Islamic finance. Chichester: Wiley.
Aydin, N. (2009). The 2008 financial crisis: A moral crisis of capitalism. Harvard University: 9th Harvard University Forum on Islamic Finance.
Ayub, M. (2007). Understanding Islamic finance. Chichester: Wiley Finance.
Azarian, R. (2011). Outline of an economic sociology of Islamic banking. International Journal of Business and Social Science, 2(17), 258–268.
Aziz, Z. (2010). The Global Islamic Financial market today—Challenges and way forward. The Asset Triple A Awards for Islamic Finance, 6th July. Kuala Lumpur.
Beck, T., Demirguc-Kunt, A., et al. (2010). Islamic vs. conventional banking. The World Bank Policy Research Working Paper 5446.
Berry, D. (2004). Internet research: Privacy, ethics and alienation: An open source approach. Internet Research, 14(4), 323–332.CrossRef
Boatright, J. (2010). Finance ethics. Critical issues in theory and practice. Hoboken, NJ: Wiley.CrossRef
de Goede, M. (2006). International political economy and poststructural politics. Basingstoke: Palgrave.CrossRef
Dillman, D. (2000). Mail and internet surveys (2nd ed.). Hoboken: Wiley.
Dunteman, G. (1989). Principal components analysis. Beverly Hills: Sage.
Elmelki, A., & Ben Arab, M. (2009). Ethical investment and the social responsibilities of the Islamic banks. International Business Research, 2(2), 123–130.
Fabian, A. (1990). Card sharps, dream books & bucket shops. Ithaca: Cornell University Press.
Fang, E. (2013). The diffusion of Shariah-based knowledge in global finance. A cognitive investigation among Western Economic Agents. Unpublished doctoral dissertation, University of Cambridge, Cambridge.
Festinger, L. (1957). A theory of cognitive dissonance. Evanston, IL: Row Peterson and Company.
Goodman, L. A. (1961). Snowball sampling. The Annals of Mathematical Statistics, 32(1), 148–170.
Hayat, R., & Kraeussl, R. (2011). Risk and return characteristics of Islamic equity funds. Emerging Markets Review, 12(2), 189–203.CrossRef
Heckathorn, D. (1997). Respondent-driven sampling: A new approach to the study of hidden populations. Social Problems, 44(2), 174–199.CrossRef
Hosseini, H. (1997). Cognitive dissonance as a means of explaining economics of irrationality and uncertainty. Journal of Socio-Economics, 26(2), 181–189.CrossRef
Hurwicz, L. (1972). On informationally decentralized systems. In R. Radner & C. B. McGuire (Eds.), Decision and organization: A volume in honor of Jacob Marschak (pp. 297–336). Amsterdam: North-Holland Pub.
Ilieva, J., Baron, S., et al. (2002). Online surveys in marketing research: Pros and cons. International Journal of Marketing Research, 44(3), 361–376.
Jensen, N. (2008). Avoiding another subprime mortgage bust through greater risk and profit sharing and social equity in home financing: An analysis of Islamic finance and its potential as a successful alternative to traditional mortgages in the United States. Arizona Journal of International and Comparative Law, 25(3), 825–855.
Joliffe, I. (2002). Principal component analysis. New York: Springer.
Kolb, R. (2010). Ethical implications of finance. Finance ethics. Critical issues in theory and practice. Hoboken, NJ: Wiley.
Koyama, M. (2009). Evading the ‘taint of usury’: The usury prohibition as a barrier to entry. Explorations in Economic History, 47(4), 420–442.CrossRef
Kuran, T. (2004). Islam and Mammon: The economic predicaments of Islamism. Princeton, NJ: Princeton University Press.
Lewis, M., & Algaoud, L. (2001). Islamic banking. Cheltenham: Edward Elgar.
Likert, R. (1932). A technique for the measurement of attitudes. Archives of Psychology, 140, 1–55.
Malhotra, N. (2004). Marketing research: An applied orientation (4th ed.). Englewood Cliffs, NJ: Prentice Hall.
Malhotra, N., & Peterson, M. (2001). Marketing research in the new millennium: Emerging issues and trends. Marketing Intelligence & Planning, 19(4), 216–235.CrossRef
Maniam, B., Bexley, J., et al. (2000). Perception of Islamic financial system: Its obstacles in application and its market. Academy of Accounting and Financial Studies Journal, 4(2), 22–36.
Maurer, B. (2005). Mutual life, limited: Islamic banking, alternative currencies, lateral reason. Princeton, NJ: Princeton University Press.
McDaniel, C., & Gates, R. (2005). Marketing research (6th ed.). New York, NY: Wiley.
Metwally, M. (1997). Economic consequences of applying Islamic principles in Muslim societies. International Journal of Social Economics, 24(7/8/9), 941–957.CrossRef
Naughton, S., & Naughton, T. (2000). Religion, ethics and stock trading: The case of an Islamic equities market. Journal of Business Ethics, 23(14), 145–159.CrossRef
Nazim, A. M., & Ibrahim, I. (2012). The world Islamic banking competitiveness report 2011–2012, Ernst & Young, 18th Annual world Islamic banking conference, Dubai.
Neil, J. T. (2012). Exploratory factor analysis. Survey research & design in psychology. Unpublished report, University of Canberra, Canberra.
Nienhaus, V. (2011). Islamic finance ethics and Shari’ah law in the aftermath of the crisis: Concept and practice of Shari’ah compliant finance. Ethical Perspectives, 18(4), 591–623.
Perry, F., & Rehman, S. (2011). Globalization of Islamic finance: Myth or reality? International Journal of Humanities and Social Science, 1(19), 107–119.
Pollard, J. S., & Samers, M. (2007). Islamic banking and finance: Postcolonial political economy and the decentring of economic geographies. Transactions of the Institute of British Geographers, 32(3), 313–330.CrossRef
Rethel, L. (2011). Whose legitimacy? Islamic finance and the global financial order. Review of International Political Economy, 18(1), 75–98.CrossRef
Rice, G. (1999). Islamic ethics and the implications for business. Journal of Business Ethics, 18(4), 345–358.CrossRef
Schonlau, M., Fricker, R., et al. (2001). Conducting research surveys via e-mail and the Web. Santa Monica, CA: Rand Corporation.
Segrado, C. (2005). Islamic microfinance and socially responsible investments. Microfinance Project at the University of Torino, Torino.
Shlens, J. (2009). A tutorial on principal component analysis. San Diego, CA: Systems Neurobiology Laboratory, Salk Institute for Biological Studies.
Spaeth, M. (1977). Recent publications on survey research techniques. Journal of Marketing Research, 14(3), 403–409.CrossRef
UKIFS. (2012). Islamic finance. Financial markets series. London: U. I. F. Secretariat.
Warde, I. (1997). Perceptions of Islamic banks among European and American bankers. IBPC Working Paper. San Francisco: IBPC.
Warde, I. (2000). Islamic finance in the global economy. Edinburgh: Edinburgh University Press.CrossRef
Warde, I. (2010). Islamic finance in the global economy. Edinburgh: Edinburgh University Press.
Metadata
Title
Western Financial Agents and Islamic Ethics
Authors
Eddy S. Fang
Renaud Foucart
Publication date
01-09-2014
Publisher
Springer Netherlands
Published in
Journal of Business Ethics / Issue 3/2014
Print ISSN: 0167-4544
Electronic ISSN: 1573-0697
DOI
https://doi.org/10.1007/s10551-013-1850-8

Other articles of this Issue 3/2014

Journal of Business Ethics 3/2014 Go to the issue

OriginalPaper

The End of Religion? Examining the Role of Religiousness, Materialism, and Long-Term Orientation on Consumer Ethics in Indonesia

OriginalPaper

Does Ethical Leadership Lead to Happy Workers? A Study on the Impact of Ethical Leadership, Subjective Well-Being, and Life Happiness in the Chinese Culture

OriginalPaper

Environmental Leadership and Consciousness Development: A Case Study Among Canadian SMEs

Report

Religiosity, CSR Attitudes, and CSR Behavior: An Empirical Study of Executives’ Religiosity and CSR

OriginalPaper

Legitimizing Negative Aspects in GRI-Oriented Sustainability Reporting: A Qualitative Analysis of Corporate Disclosure Strategies

OriginalPaper

Deconstructing Subtle Racist Imagery in Television Ads

Premium Partner

    Image Credits