Narratives of Innovation in Islamic Finance: A Review of Legitimacy and Market Dynamics

Abstract

This article explores the narrative constructions of Islamic financial product innovation through an analytical review of scholarly literature and institutional discourse. It examines how themes of sharia compliance, ethical authenticity, and market efficiency intersect in shaping both product design and legitimacy. Drawing from financial innovation theory, Islamic jurisprudence, and discourse analysis, the study analyzes academic publications and institutional reports. It identifies a pattern of legalistic replication of conventional products, critiques surrounding the commodification of sharia, and the institutional role in shaping dominant narratives. The findings highlight a persistent tension between maintaining doctrinal integrity and achieving market competitiveness, as well as the influence of institutional power in defining the boundaries of innovation. This study contributes a new conceptual lens to the literature, positioning Islamic financial products not only as financial instruments but as ideological constructs embedded in socio-political and theological frameworks. It calls for a rethinking of innovation strategies in Islamic finance that are grounded in both ethical substance and practical viability.