Reforming the methodolgoy of product development in Islamic finance

It is commonly observed that the current methodology of product development in Islamic finance has failed to reflect the productive nature of Islamic economics. This is evidenced by a number of current products being substantially indistinguishable from their conventional counterparts according to the commonly-held views. Reform in this regard, if to be undertaken, must not overlook the positive and sound aspects of the current methodology used for product development, since this methodology has undoubtedly yielded some good products and helped fulfill basic Sharia requirements in transactions. As such, the following methodology needs to be adopted. First is to identify the necessary Sharia elements in any product structuring in terms of both form and substance, with a special emphasis on the ones that reflect the special constructive nature of Islamic finance. Second is to group these elements according to their observance in the current structured products. Having identified the neglected Sharia elements, the article will then examine the reasons behind their negligence, whether it is for necessary and unavoidable factors or just for ease pursuance. In light of the findings, the article will either consolidate the current methodology adopted for product development, or propose and lay down the basics of a new one that upholds the unjustifiably neglected Sharia requirements.