The institutional development of Islamic finance in the Middle East: A post-colonial comparative perspective

The Islamic finance sector has experienced rapid growth since its commercialisation in the 1970s. For many Muslim countries that gained independence from their colonial rulers, developing a financial industry that represented their faith and value belief systems gave the population a sense of identity. In our study, we traced the historical development of the Islamic finance sector in the Middle East. We applied a post-colonial perspective and the institutional theory lens to analyse the evolution of governance models across the three Middle Eastern countries of Bahrain, Kuwait, and the UAE. We found that the foundation for the Islamic finance sector in these countries was laid soon after they had gained independence. The governance models in these countries have evolved from a decentralised approach to a centralised system aimed at harmonising operations both regionally and globally. This paper highlights implications for theory, policy, and practice and identifies avenues for future research.