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Abstract

Islamic finance has long been guided by an aspiration toward harmonization, with standardization and regulatory alignment viewed as pathways to coherence across jurisdictions and institutions. However, persistent variation in governance structures, interpretive approaches, and financial practices suggests that convergence has not been fully realized. This paper reconceptualizes variation not as a residual outcome of incomplete harmonization, but as a structurally generated feature of the system.
Drawing on a conceptual framework of polycentric authority, the study argues that Islamic finance operates through multiple, overlapping centers of decision-making, including transnational standard-setting bodies, national regulators, institutional Shari'ah boards, and market actors. Within this configuration, interpretation is distributed and contextually embedded, producing differentiated outcomes across jurisdictions and institutions. This paper develops the concept of structured differentiation to explain how variation emerges through the interaction of interpretive plurality, institutional arrangements, regulatory environments, and market dynamics.
By shifting the analytical focus from convergence to differentiation, the study challenges prevailing assumptions in the literature and offers a more robust account of how coherence is maintained without uniformity. The paper demonstrates that differentiation is not a residual condition, but an endogenous outcome of the system's organizational structure. This shift from harmonization to coordination represents not merely a policy adjustment, but a reorientation in how the system itself is understood.

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Creative Commons License

Creative Commons Attribution 4.0 International License
This work is licensed under a Creative Commons Attribution 4.0 International License.

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