The methodology of product development needed for Islamic banks upholding social responsibility

Unarguably the current methodology of product development in Islamic finance has failed to reflect the social dimension embedded in Islamic economics. This is evidenced by the nature of the current financing products in Islamic banks being hardly distinguishable from that of conventional products, according to critics and observers. Therefore, a substantial change is required in this methodology in order to observe the social responsibility while structuring a financing product. This entails the departure from the notion that bases the legality of the product on its structure without considering its essence and implications. The new methodology however must not overlook the positive and sound aspects of the current methodology of product developing, since this methodology has undoubtedly yielded some good products and helped fulfll basic Shariah requirements in transactions. Therefore, a reform rather than a replacement
of this methodology is required. For outlining the new reformed methodology, the article starts by stating the basic Shariah requirement in financial contracts, whose fulfllment ensures consistency with the social mission of Islamic Finance. It then examines the current methodology used for developing financing products in Islamic banks in order to identify its flaws. After identifying the flaws the paper investigates and discusses the justifications provided by the Islamic financial institutions for neglecting the Shariah elements whose absence has led to stripping Islamic finance of its socially constructive nature. In light of the discussion, the article works on laying down the basics of a new methodology which upholds the social responsibility and still takes into account the constraints facing the proper application of Islamic finance.