Fatwāshopping and trust: towards effective consumer protection regulations in Islamic finance

Abstract

Purpose This study aims to examine the phenomenon ofFatwāshopping, its effect on consumer trust in Islamic finance products and the need for effective consumer protection regulations in the Islamic finance industry. Design/methodology/approach The methodology used in this study is qualitative research which draws significantly from relevant regulations on financial consumer protection through analytical method to identify common themes onFatwāshopping and consumer trust in the relevant literature. Findings This study finds that the increasing practice ofFatwāshopping through clandestine searches by some Islamic banks to get their new products endorsed by leadingSharī‘ahscholars requires proper legal regulation to avoid a total erosion of trust in the entire Islamic finance industry. Research limitations/implication ThoughFatwāshopping is practiced in the Islamic finance industry, it is always difficult to get some desperate Islamic bankers to agree to this; hence, this study does not portend to examine the evidence onFatwāshopping, but it seeks to bring to the fore the effect ofFatwāshopping on consumer trust in Islamic financial services, and the need for effective consumer protection regulations. Practical implications This study is expected to provide an invaluable guide and policy framework for emerging and promising jurisdictions on the need to regulateFatwāshopping through an effective legal framework based on some best practices identified in the study. Originality/value Though there have been a number of studies relating toFatwāshopping, focusing on the need for effective consumer protection regulations in the Islamic finance industry will enrich the existing literature and have significant implications for the future of the industry.

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