Islamic Finance and Debt Culture: Treading the Conventional Path?

International Journal of Social Economics, Vol. 42, No. 12, pp. 1168 -1195, 2015

28 Pages Posted: 12 Dec 2015 Last revised: 1 Jan 2016

Date Written: December 1, 2015

Abstract

Purpose - This paper examines the phenomenon of debt culture in the conventional financial systems and then compares the existing or emerging trends in the Islamic finance industry. It provides critical insight into why economic policies that are delinked from some fundamental wisdom about sustainable lifestyle might be increasingly less effective. Design/methodology/approach - The paper identifies various areas of impact of the debt culture and provides qualitative analysis based on relevant data.

Findings - The data presented in the paper shows that the Islamic finance industry is clearly biased in favor of debt-creating modes, which is expected to lead to promoting the same kind of debt-culture as experienced in the conventional financial system.

Research limitations/implications - Finding comprehensive and current data for Islamic financial institutions is a challenging task. The IFIs are not as transparent as their conventional counterparts in sharing relevant data and information.

Practical implications - The paper highlights and analyzes a problem – i.e., the debt culture. Dealing with this problem would be indispensable in the long run for any credible as well as sustainable solutions to contemporary crisis.

Originality/value - This is probably the first research paper that looks into the issue of debt culture in the context of Islamic finance. The contemporary, ongoing global crisis underscores the kind of conventional problems that Islamic Finance needs to avoid.

Keywords: Islamic Finance, Debt culture, Islamic debt products

JEL Classification: B29, H63, P43

Suggested Citation

Farooq, Mohammad Omar, Islamic Finance and Debt Culture: Treading the Conventional Path? (December 1, 2015). International Journal of Social Economics, Vol. 42, No. 12, pp. 1168 -1195, 2015, Available at SSRN: https://ssrn.com/abstract=2684407

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