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Journal of Business Ethics

Erschienen in:

01.09.2014

Western Financial Agents and Islamic Ethics

verfasst von: Eddy S. Fang, Renaud Foucart

Erschienen in: Journal of Business Ethics | Ausgabe 3/2014

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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.

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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.

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).

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.

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.

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).

The pilot study that helped us to build our questionnaire is described in Fang (2013).

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Titel: Western Financial Agents and Islamic Ethics
verfasst von: Eddy S. Fang
Renaud Foucart
Publikationsdatum: 01.09.2014
Verlag: Springer Netherlands
Erschienen in: Journal of Business Ethics / Ausgabe 3/2014
Print ISSN: 0167-4544
Elektronische ISSN: 1573-0697
DOI: https://doi.org/10.1007/s10551-013-1850-8

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