Blind-trust – a Pave Stone for Islamic Financial Institutions

Abstract

Trust is considered to be a key factor before undertaking a transaction whereas smart trust is ideal for any business. Much of our understanding of trust is still in the embryonic stage especially, when it comes to Islamic financial institutions. The purpose of this paper is to determine what factors affect the propensity of clients to choose Islamic banking. These factors are interpreted in terms of trust that clients put into Islamic banking. A specific lens is developed to analyze the propensity to opt Islamic banking product and services plus the knowledge amongst the users of Islamic banking is also analyzed. The study finds that the propensity to trust Islamic financial institutions is high while the analyses of the associated risk is low. High propensity and low analysis is positioned in the blind-trust zone on the trust matrix. Hence, it is concluded that the nature of trust in Islamic financial institutions is blind.

Key Words: Islamic financial institutions, Interest-free banking, profit and loss sharing based financing, blind-trust