Integrating Shariah-Based Risk Governance for Inflation Mitigation in Islamic Banking: A Thematic Review

Abstract

Inflation poses significant challenges to Islamic banking, where compliance with Shariah principles prohibits conventional interest-based hedging instruments. This study explores how Islamic banking governance can integrate Shariah-compliant risk management strategies to address inflationary pressures effectively. Using a conceptual and thematic review methodology, the research synthesizes insights from classical jurisprudence, including fiqh muʿāmalāt and maqāṣid al-sharīʿah, alongside contemporary governance models. The objective is to develop a normative framework that aligns ethical imperatives with risk resilience in Islamic financial institutions. Key findings highlight that inflation undermines contractual justice and asset stability, violating Shariah objectives such as ʿadl (justice) and ḥifẓ al-māl (preservation of wealth). The study proposes a hybrid governance model featuring inflation-indexed contracts, fiqh-validated instruments, and institutional oversight structures rooted in Islamic law. Practical recommendations include embedding inflation sensitivity in operational procedures, enhancing the role of Shariah supervisory boards, and promoting collaborative regulation. The study bridges theoretical gaps and offers actionable pathways for managing inflation within Islamic banking without compromising religious integrity.