The concept of trust in the Islamic banking transactions

The element of trust is embedded in Islamic banking transactions given the impermissibility of collateralizing the business risk in Islamic contracts (muḍārabah and mushārakah). In addition,
the existence of information symmetry underlying the financial-decision precludes the trustor from observing the trustworthiness of the trustee. Therefore, it is crucial for the trustee to observe the
fiduciary duty towards the trustor and the use of his fiduciary power. However, given the multistructural nature of trust, there is still disagreement in the literature on the concept. Motivated by the above, this qualitative study aimed at constructing a model of trust in Islamic banking transactions. In view of the social constructivism ontology, the components of trust were acquired by scrutinizing the concept in the literature as well as conducting semi-structured interviews with selected Islamic finance scholars and bankers. Additionally, the classical and contemporary Fiqh writing were the materials for interpretative content analysis. The socially constructed views indicated that trust is the fiduciary relationship emerging from and accommodated by the contractual agreement upon which the Islamic banking transactions are founded. Under this relationship, the performance of the transacting parties is expected to be trustworthy. Trustworthiness (Al-amanah) is the faith- produced quality underpinning the fulfilment of the fiduciary obligation emerging from the contractual agreement. Moreover, the persistence of shari’ah rulings and institutional regulations give rise to the belief and expectancy regarding trustworthiness. Additionally, the principle of reliance (tawakkul) after making the due diligence
enables the enactment of the trustor’s judgement in terms of behavioural trust. Overall, this study offers a new theoretical model of trust which considers the framework of the Islamic qualities and
principles. This will contribute and enhance the trustworthy conducts of the transacting parties and curb their misconducts such as injustice dealings, greed, exploitation, negligence and
transgression.