Value co-creation in Shari'ah-compliant banking: a Saudi Arabian case study

Paton, R.A. , Jan, S.R. and Al-Rajhi, K.S. (2011) Value co-creation in Shari'ah-compliant banking: a Saudi Arabian case study. ISRA: International Journal of Islamic Finance, 3(1), pp. 65-90.

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Abstract

This paper argues that Shari'ah-compliant Islamic banking is essentially a value co-creation business model that illustrates attributes associated with the emerging service-dominant logic paradigm. The underpinning Shari'ah philosophy of minimising ‘usage’ of one party by another results in the sharing of profit, losses, risk and the promotion of interest-free principles. Islamic banks that follow Shari'ah traditions endeavour to co-create value with their business and corporate customers in a manner that would resonate with the proponents of service-dominant logic. The authors argue that Shari'ah-compliant business models may be more appropriate for today’s volatile and socio-economic climate, evidencing their potential via business case examples. Shari'ah-compliant Islamic financing, such as ÎukËk (Islamic bonds), istiÎnÉÑ (construction finance), murÉbaÍah (commodity trade finance), muÌÉrabah (finance trusteeship), mushÉrakah (joint venture) and ijÉrah (Islamic leasing), is generally based on a business relationship and partnership approach. Such approaches are now gaining popularity and offer those engaged in service exchange the opportunity to co-create value or at least mutual benefit.

Item Type:Articles
Status:Published
Refereed:Yes
Glasgow Author(s) Enlighten ID:Paton, Professor Robert
Authors: Paton, R.A., Jan, S.R., and Al-Rajhi, K.S.
Subjects:H Social Sciences > HG Finance
H Social Sciences > HB Economic Theory
College/School:College of Social Sciences > Adam Smith Business School > Management
Journal Name:ISRA: International Journal of Islamic Finance
Publisher:ISRA
ISSN:0128-1976

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