Financialised ethics, economic security and the promise of Islamic finance

Abstract

The character and state of a financial system are important contributing factors to the performance, stability and security of any economy, something which has been repeatedly demonstrated during times of financial crisis. While assessments of earlier financial crises tended to focus on shortcomings in the governance of financial sectors, not least when crises occurred in the developing world, many have noted issues with the moral character of the industry, and the attendant processes of securitisation and financialisation, in the wake of the transatlantic financial crisis of 2007–2008. Against these recent criticisms, Islamic finance was pitched as a more ethical, stable and secure alternative. Although the ideas that inform the development of Islamic finance might hold the promise of a more ethical alternative to conventional finance, the industry itself has not been immune to processes of financialisation and securitisation, which have arguably undermined the market's initial promise.

Do customers’ perceptions of Islamic banking services predict satisfaction and word of mouth? Evidence from Islamic banks in Bangladesh

“…This study investigates the relationship between security and the perception of customers toward satisfaction with Islamic banking services. Lai [40] highlighted the importance of the banking transaction security issue and the Islamic financial system. Thus, this formulated that:…”

Islamic Securitization as a Yardstick for Investment in Islamic Capital Markets

“…The prevalence of government credit backing in Islamic securitization is not surprising given the lack of fundamental requirements for securitization in most Islamic countries, except self-contained enterprises with guarantees from host governments, e.g., Malaysia, Indonesia, Pakistan, Turkey, and others. Due to inadequate legislative frameworks and accounting standards for structured finance, regulatory restrictions, subpar market practices, origination, trading, investor protection standards, and a small local institutional investor base, securitization is still at a low level (Lai, 2022). Given the underdeveloped debt markets in Islamic nations, the dominant position of sovereign-sponsored structured finance is consistent with the natural path of capital market development, which begins with public sector debt before investors become accustomed to the product and move down the credit curve to generate demand for lower-rated corporate credit.…”