The Nexus between Sharia Principles and Banking: Why Islamic Values Matter in Islamic Banking?

https://doi.org/10.35912/bukhori.v4i2.3486
Published: Jan 2, 2025

Abstract:

Purpose: This study aims to examine how Islamic principles and values serve as essential pillars in Islamic banking, distinguishing it from conventional practices. By analyzing the rationale behind prohibitions in Islamic banking, this research provides insights into their impact on stakeholders, clients, the Islamic banking industry, and society at large.

Research Methodology: This study uses qualitative library research to explore the integration of Shariah principle in Islamic banking. Primary Islamic texts and secondary scholarly sources are reviewed systematically, and inductive thematic analysis highlights the ethical rationale behind prohibitions on interest (riba) and unethical investments, underscoring Shariah adherence as a foundational framework in Islamic finance.

Results/Findings: Findings indicate that the adherence to Sharia principles within Islamic banks drives efficiency, risk protection, socio-economic benefits, such as wealth distribution, fair income distribution, sustainable growth, and social welfare. This provides a rational foundation for eliminating prohibited elements, emphasizing the broader social mission of Islamic banking.

Conclusion: This study underscores the critical role of Sharia principles in Islamic banking, particularly emphasizing the prohibitions against riba, excessive uncertainty, and highly speculative investment.

Limitations: This study focuses on the rationale behind prohibitions in Islamic banking broadly and does not empirically test the impact of each prohibition.

Contribution: The study contributes to the field by rationalizing the importance of Sharia values in banking practices, illustrating how these principles create an ethical banking system that fosters mutual benefit rather than exploitation. This insight adds a nuanced perspective on the socio-economic benefits of non-interest-based banking models, which prioritize fairness and community welfare.

Keywords:
1. Islamic Banking
2. Sharia Principles
3. Islamic values
4. Prohibited Elements
5. Islamic Finance
Authors:
Syafwendi Syafril
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How to Cite
Syafril, S. (2025). The Nexus between Sharia Principles and Banking: Why Islamic Values Matter in Islamic Banking?. Bukhori: Kajian Ekonomi Dan Keuangan Islam, 4(2), 95–107. https://doi.org/10.35912/bukhori.v4i2.3486
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Vol. 4 No. 2 (2025): Januari
Articles
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References

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    Ebrahim, M. S. (2009). Can an Islamic model of housing finance cooperative elevate the economic status of the underprivileged? Journal of Economic Behavior & Organization, 72(3), 864–883.

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    Martens, A. (2001). La finance islamique: Fondements, théorie et réalité. L’Actualité Économique, 77(4), 475–498.

    Nada, N., & Ghozali, M. L. (2024). Analysis of fatwa no. 83 of 2023 regarding the boycott of zionist Israeli products from the perspective of sadd al-dzari’ah. Al-Mustashfa: Jurnal Penelitian Hukum Ekonomi Syariah, 9(1), 109–122.

    Nawaz, T., Haniffa, R., & Hudaib, M. (2021). On intellectual capital efficiency and shariah governance in Islamic banking business model. International Journal of Finance & Economics, 26(3), 3770–3787.

    OJK. (2022). Perbankan [Official Government Website]. Undang-undang Nomor 10 Tahun 1998 tentang Perbankan. https://ojk.go.id/id/kanal/perbankan/pages/Bank-Umum.aspx

    Orhan, Z. H. (2018). Business model of Islamic banks in Turkey. Journal of Islamic Accounting and Business Research, 9(3), 290–307. https://doi.org/10.1108/JIABR-10-2014-0037

    Rahman, F. (1964). Rib? and interest. Islamic Studies, 3(1), 1–43.

    Ridwan, M., Pagalung, G., & Luthfi, M. (2023). Maqashid Syari’ah Index Model in Sharia Bank. Bukhori: Kajian Ekonomi Dan Keuangan Islam, 3(1), 29–41.

    Rosly, S. A. (2008). Critical issues on Islamic banking and financial markets: Islamic economics, banking and finance, investments, Takaful and Financial Planning. Dinamas Publishing.

    Ryngaert, C., & Jaarsma, M. (2024). ESG and international criminal liability. In Research Handbook on Environmental, Social and Corporate Governance (pp. 359–376). Edward Elgar Publishing. https://sci-hub.ru/https://www.elgaronline.com/edcollchap/book/9781802202533/book-part-9781802202533-28.xml

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    Siti-Nabiha, A. K., & Adib, N. (2020). An institutional analysis of the emergence and institutionalisation of Islamic banking practices in Indonesia. Journal of Islamic Accounting and Business Research, 11(9), 1725–1738. https://doi.org/10.1108/JIABR-06-2016-0069

    Syafril, S. (2023). Is The Investment Account The Blue Ocean of Islamic Banking? International Journal of Islamic Finance, 1(2), 103–109.

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    Zahan, M., & S Kenett, R. (2012). Hedging instruments in conventional and Islamic finance. Electronic Journal of Applied Statistical Analysis: Decision Support Systems and Services Evaluation, 3(1), 59–74.

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  6. Asni, F., Hasbulah, M. H., Ahmad, K. A., Yusuf, B. N. M., & Noor, A. M. (2023). Disagreement On Tawarruq Among Malaysian Shariah Advisors: An Analysis From Ma’alat Perspective. Journal of Namibian Studies: History Politics Culture, 35, 1384–1411.
  7. Bakar, M. A. (2010). Broad Distinction between Islamic & Conventional Banking. Seminar on Islamic Finance.
  8. Beck, T., Demirgüç-Kunt, A., & Merrouche, O. (2013). Islamic vs. conventional banking: Business model, efficiency and stability. Journal of Banking & Finance, 37(2), 433–447.
  9. Caeiro, A. (2004). The social construction of Shar??a: Bank interest, home purchase, and islamic norms in the west. Die Welt Des Islams, 351–375.
  10. Chapra, M. U. (2000). Is it necessary to have Islamic economics? The Journal of Socio-Economics, 29(1), 21–37.
  11. Dani, R., Mubyarto, N., & Nengsih, T. A. (2024). Risk Profile and Profitability on Mudharabah Financing at Bank Muamalat, Is There any Relation? Bukhori: Kajian Ekonomi Dan Keuangan Islam, 3(2), 79–89.
  12. Dusuki, A. W. (2008). Understanding the objectives of Islamic banking: A survey of stakeholders’ perspectives. International Journal of Islamic and Middle Eastern Finance and Management.
  13. Dusuki, A. W. (2011). Islamic financial system: Principles & operations. Kuala Lumpur: ISRA.
  14. Ebrahim, M. S. (2009). Can an Islamic model of housing finance cooperative elevate the economic status of the underprivileged? Journal of Economic Behavior & Organization, 72(3), 864–883.
  15. Fahamsyah, M. H., & Hamdan’Ainulyaqin, M. (2023). A Bibliometric Analysis of Profit Loss Sharing (PLS) in Islamic Banking Research Using Vosviewer Application. Perisai: Islamic Banking and Finance Journal, 7(1), 126–142.
  16. Fatchurrohman, M., & Saputri, P. L. (2022). Limitation of Non-Halal Income (Interest) in The Criteria of Sharia Securities List in Indonesia Stock Exchange. Bukhori: Kajian Ekonomi Dan Keuangan Islam, 2(1), 29–38.
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  21. Iqbal, M., & Molyneux, P. (2016). Thirty years of Islamic banking: History, performance and prospects. Springer.
  22. Juliyanti, W., & Wibowo, Y. K. (2021). Literature review: Implementation of Musharakah Mutanaqisah partnership over the world. Bukhori: Kajian Ekonomi Dan Keuangan Islam, 1(1), 1–10.
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  32. Nada, N., & Ghozali, M. L. (2024). Analysis of fatwa no. 83 of 2023 regarding the boycott of zionist Israeli products from the perspective of sadd al-dzari’ah. Al-Mustashfa: Jurnal Penelitian Hukum Ekonomi Syariah, 9(1), 109–122.
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  41. Siti-Nabiha, A. K., & Adib, N. (2020). An institutional analysis of the emergence and institutionalisation of Islamic banking practices in Indonesia. Journal of Islamic Accounting and Business Research, 11(9), 1725–1738. https://doi.org/10.1108/JIABR-06-2016-0069
  42. Syafril, S. (2023). Is The Investment Account The Blue Ocean of Islamic Banking? International Journal of Islamic Finance, 1(2), 103–109.
  43. Trilaksono, I., Komalasari, A., Tubarad, C. P. T., & Yuliansyah, Y. (2021). Pengaruh Islamic Corporate Governance dan Islamic Social Reporting terhadap Kinerja Keuangan Bank Syariah di Indonesia. Bukhori: Kajian Ekonomi Dan Keuangan Islam, 1(1), 11–20.
  44. Ullah, S., Jamali, D., & Harwood, I. A. (2014). Socially responsible investment: Insights from S hari’a departments in I slamic financial institutions. Business Ethics: A European Review, 23(2), 218–233.
  45. Wilson, R. (2007). Regulatory Challenges Facing the Islamic Finance Industry. Journal of Financial Transformation, The Capco Institute, 140–143.
  46. Zafar, M. B., & Sulaiman, A. A. (2021). Corporate social responsibility disclosure and Islamic banks: A case study of Pakistan. Journal of Islamic Accounting and Business Research, ahead-of-print(ahead-of-print). https://doi.org/10.1108/JIABR-12-2020-0373
  47. Zahan, M., & S Kenett, R. (2012). Hedging instruments in conventional and Islamic finance. Electronic Journal of Applied Statistical Analysis: Decision Support Systems and Services Evaluation, 3(1), 59–74.