Drawing a Synergy between Theory and Practice - A Move towards a More Stakeholder-Oriented Regulatory Framework for Modern Islamic Finance Institutions: A Comparative Analysis

This article argues that the Islamic finance (IF) industry, in its ideological foundations is very similar to the stakeholder and Business ethics theory in western though. The paper further argues that the principles of Maqasid al sharia and Maslaha form the basis of the Islamic finance jurisprudence and need to be applied throughout the Industry via regulatory standards. However, industry practices of the IF industry do not always follow the Maqasid and Maslaha principles primarily because of the lack of regulation and standard setting at the international level. This article examines the different regulatory framework that are being utilised in different jurisdictions to regulate the Islamic finance Industry. This article takes the examples of Pakistan, Kuwait and the UK as representing three different regulatory frameworks in practice around the globe and then suggests the best possible method of incorporating the Maqasid and Maslaha into the regulation and practice of Islamic finance via a principle based Meta regulatory framework. We take an example from the Basel accord on banking best practices and argue that the Islamic finance industry also needs an International Meta regulatory framework like Basel, which can cater to the specific needs of the IF industry globally, even where jurisdictions do not accept Islamic law as a valid source of law so that the IF industry can incorporate the Maqasid of financial intermediation i.e. to ensure socio-economic justice in society.