A Framework for Evaluating Islamic Banking from 'Within'

Literature on Islamic finance/banking claims that this discipline differs significantly from its counterpart both in its business forms as well as underlying values which guide those business practices. Given the growth performance of Islamic finance/banking, it is important to develop a framework for examining convergence between theory and practice of Islamic banking. Islamic banking theory and practice has been evaluated on several grounds, but no integrated theoretical and empirically verifiable framework has thus far been proposed to take account of the practice of Islamic banking in the light of its own objectives. This study aims at developing an empirically verifiable theoretical framework for this purpose. A set of testable propositions is derived from the theory of Islamic banking proposed by its pioneers. This work will provide the foundation for investigating empirically to what extent Islamic finance/banking theory and practice has converged to its ideals overtime.