VALUE CO-CREATION IN SHARĪAHCOMPLIANT BANKING: A SAUDI ARABIAN CASE STUDY

Abstract

This paper argues that Sharīah-compliant Islamic banking is essentially a value co-creation business model that illustrates attributes associated with the emerging service-dominant logic paradigm. The underpinning Sharīah philosophy of minimising ‘usage’ of one party by another results in the sharing of profit, losses, risk and the promotion of interest-free principles. Islamic banks that follow Sharīah traditions endeavour to co-create value with their business and corporate customers in a manner that would resonate with the proponents of service-dominant logic. The authors argue that Sharīah-compliant business models may be more appropriate for today’s volatile and socio-economic climate, evidencing their potential via business case examples. Sharīah-compliant Islamic financing, such as ṣukūk (Islamic bonds), istiṣnā (construction finance), murābaṣah (commodity trade finance), muṣārabah (finance trusteeship), mushārakah (joint venture) and ijārah (Islamic leasing), is generally based on a business relationship and partnership approach. Such approaches are now gaining popularity and offer those engaged in service exchange the opportunity to co-create value or at least mutual benefit.