Islamic financial product innovation

Abstract

Purpose-The purpose of this paper is to study the financial product innovativeness of Islamic financial institutions. Design/methodology/approach-A qualitative research methodology is used to collect and analyze the views of practitioners and researchers of Islamic finance. Different assessments are noted which raise the issue of lack of clarity on that subject. Findings-Innovation levels of Islamic financial institutions are low owing to the development of Islamic finance as a new activity. Research limitations/implications-The data available for the study are limited to the views of a small sample of practitioners and researchers in the field of Islamic finance. Practical implications-The major practical implication is the necessity of developing financial product innovativeness programs as a means for survival and growth. Originality/value-The paper demonstrates the value of Islamic financial product innovation within the wider context of product innovation.

Grievances on Islamic Banks: A Survey

“…Accusations that the Islamic banking products are a form of circumventing riba [18] will only render the Islamic banks as similar with the conventional banks and invalidate the purpose of their establishment. It is therefore critical to ensure that the banks meet the requirements of Shariah and prohibit riba elements in their businesses.…”

“…• The banks have complex procedures, yet there are similarities with the conventional banks in order to meet the local legal requirements [8,18].…”

“…The Muslim Consumers Association of Malaysia (PPIM) has received about 4,000 complaints against Islamic banks since 2003 [15]. The Islamic banks have been described as moving away from its sacred intentions [9], promoting similar products of those conventional banks [10,13,16,17], and it was stressed that there is a need to innovate new products which based on Islamic foundations and yet harmonious with the demands of the modern market [18].…”

“…• Fatwa on legitimacy of conventional banks [18]. In spite of the resolution in 1965 [1], Sheikh Muhammad Sayyid Atiyyah Tantawi who was the Grand Mufti of Egypt from the period 1986-1996 and the Chairman of the Al-Azhar Research Academy from the period 1996-2010 had issued several fatwas at a much later period, in 1989, 1990 and 2002, stating that investing funds with banks that prespecify profits or returns is legally permissible in Islam [1,9,38].…”

“…Amongst the issues are related to the education, experience and training of the bank staff [31,[33][34][35][36], their market familiarity and customisation [2,4,8,18,37], issues on the banking procedures [8,18,27] and matters of product descriptions [8,14,27].…”