- Studies in Islamic Finance, Accounting and Governance series
Chapter 6: Innovation and authenticity in Islamic finance
This implies that forward movement through progress and development is the lifeblood of societies. If societies do not move forward, they will not be able to remain stagnant for a long time; they will ultimately start declining. One of the essential requisites to enable societies to move forward is innovation. A well-known legal maxim of Islamic jurisprudence states that ‘something without which an obligation cannot be fulfilled is also obligatory’. (Shatibi, n.d., p._394; Zarqa, 1967, pp._784 and 1088; and Nadvi, 2000, p._480). If it is necessary for a society to move forward to prevent stagnation and decline, innovation is also, therefore, indispensable. Don Sheelan has expressed the same idea recently by saying that ‘innovation is the lifeblood of an organization’ and that ‘without it, not only is there no growth, but, inevitably, a slow death’ (Sheelan, 2007, p._3). There is, however, a snag that if the innovations are not well conceived, or if they are misused, they may create problems rather than solve them. The accelerated development that the world has witnessed after the Second World War would not have been possible without an unending stream of innovations. The financial system has decidedly played an active role in this development, also as a result of innovations, including the revolution in information and communications technology. The financial system is, however, now plagued by persistent crises. According to one estimate, there have been more than 100 crises over the last four decades (Stiglitz, 2003, p. 54).
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