Handbook of Research on Islamic Business Ethics
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Handbook of Research on Islamic Business Ethics

Edited by Abbas J. Ali

The complex relationship between society and business is vividly captured by ethical standards and obligations. This is especially pertinent in the Islamic world, where religion plays a key role in both social and commercial interactions. Many people see the presence or absence of ethical commitments as an indicator of whether business actors uphold their social responsibilities, and there is an increasing recognition of the significance of ethical value for business. This Handbook explores the interweaving relationship between Islamic business ethics and the market, and examines the critical role that ethics can play in ensuring that business thrives. By offering theoretical perspectives on research it goes beyond the conventional treatment of Islamic ethics, and asks what is important for the various market and social actors in the business world to behave in a morally responsible manner.
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Chapter 12: Managing the ethical aspects of Islamic banking and finance

Hussain G. Rammal


The Islamic banking and finance sector has experienced rapid growth since the 1970s and has established a reputation for being an ethical and socially responsible alternative to the conventional banking sector (Kamla and Rammal, 2013). The operations of Islamic finance have received much attention in the last few years due to the sector’s strong performance during the global financial crisis triggered in 2008 (Chapra, 2011). However, despite the growing importance of the sector, little attention has been paid to the way that Islamic financial institutions are governed and managed, and the social role they play in bettering the lives of the community. This chapter addresses this issue by highlighting the ethical aspects of Islamic banking and finance, the role it can play in the achievement of social justice, and the issues related to management and governance in Islamic financial institutions. The next section provides a historical overview of the Islamic banking and finance sector, followed by a detailed discussion of issues of social justice and distribution of wealth under the Islamic system. The chapter then explains the management issues and governance structures of Islamic financial institutions, and concludes by providing the setting for a future research agenda. The Islamic financial system has its roots in shariah law, which is the moral code derived from the Holy Qur’an (Aggarwal and Yousef, 2000). The guiding principle of the Islamic financing system is the prohibition of the use of interest in lending and commercial practices.

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