The role of knowledge diffusion in evolving governance principles for Islamic banking

摘要

Purpose - This study aims to describe the role of knowledge diffusion in evolving governance principles for Islamic banking. Design/methodology/approach - This study develops a discursive theoretical debate using the discourse analysis method on the Shari'ah principles related to interest (Riba), excessive uncertainty (Gharrar) and profit and loss sharing and their convergence with the conventional banking principles of profitability, solvency and liquidity. Findings - The study proposes a novel framework that describes how knowledge diffusion bridge-up the Shari'ah and banking principles in terms of integration of banking principles by Shari'ah scholars, integration of Shari'ah principles by managers and the resultant, emergent principles for the governance of Islamic banking. Practical implications - The proposed framework can inform professionals on how knowledge of banking practices and Shari'ah can help them in governing Islamic banking. The Board of Directors may adopt a holistic approach for encouraging enhanced interactions between Shari'ah scholars and managers. Such interaction may be increasing harmony, reducing conflicts and better coordination resulting in Shari''ah-compliant and market wise viable products and services, thus increasing banking profitability. Originality/value - This is the first study, which acknowledges and illustrates the role of the knowledge diffusion process in evolving governance principles for Islamic banks. This paper contributes to the theory of corporate governance by using the knowledge, aptitude and practice theory lens to examine conceptually how Islamic banking governance principles emerged through the knowledge diffusion process.