Islamic Banking: Doing Things Right and Doing Right Things

To do the right thing, the contract (aqad) method is usually employed to define Syariah legitimacy of Islamic banks. Equally important, the Islamic banking business is expected to operate on the moral principles of risk-taking (ghorm), work (kasb) and responsibility (daman). By doing so, the ethico-legal dimension of Islamic banking can be made evident. While claiming Syariah legitimacy, doing things right is critical where Islamic banks must compete on the basis of efficiency. In this way,factors affecting bank performance such as size of capital, scale economies and adverse selection must not be discounted in determining the success of the Islamic banking business