Journal of Economics and Business

ISSN 2615-3726 (Online)

ISSN 2621-5667 (Print)

Published: 20 June 2019

Islamic Structured Products: Innovation or Replication? A New Discussion on Contemporary Application and Shari’ah Issues

Naeem Suleman Dhiraj, Moustapha Chora Ahmat, Ilhamiddin Ikramovich Nazarov, Muhamad Ikhwan Arif

International Islamic University Malaysia (IIUM), Malaysia

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Pages: 418-430

Keywords: Islamic Structured Products, Shari’ah Contracts, Urbun, Amalgamation, Economy


Islamic structured products (Islamic SPs) are similar to conventional SPs, but with a difference that the former is Shari’āh-compliant; whereas, the latter is not. A question, therefore, arises whether Islamic SPs are a real innovation or a mere replication of conventional SPs. This paper juxtaposes Islamic SPs with the conventional SPs and critically examines the concept and current practices of the Islamic SPs by Islamic banks. The paper adopts a qualitative method to analyze the related literature thoroughly and discusses Shari’āh contracts employed in structuring Islamic SPs. The research finds that the Islamic SPs are designed to merely meet the growing Shari’āh-observant investors’ needs without due consideration to the higher objectives of Islam (maqāsid al-Shari’āh). The research also finds that notwithstanding Islamic SPs are Shari’āh-compliant, they are, however, an outright replication of the conventional SPs, which is more likable by the practitioners since it accrues less cost compared to inventing new SPs, which is more costly and time-consuming. It is, however, acknowledgeable that although a Shari’āh-compliant trademark is sufficient to continue doing Islamic banking business, the plethora of investment injected into the replicative SPs hardly manifest any contribution to the real economy, and is far-flung from the essence of Islamic banking and finance that advocates for economic justice, social impact, and financial freedom. Therefore, the research suggests that Islamic SPs be overhauled to inculcate the spirit of Islam in the Islamic banking business.


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