How Ethical is Islamic Banking in the Light of the Objectives of Islamic Law?

Abstract I slamic banking is based on moral foundations that make it distinct from conventional banking. Some argue that because of its foundation in I slam, I slamic banking may represent a more morally appealing alternative. Yet, evidence shows that this is not the case. Indeed, the current practice of I slamic banking has not been able to achieve its goals which are based on I slam's moral values: to enhance justice, equitability, and social well‐being. This essay examines the extent to which I slamic banking is ethical and concludes that the practice of the industry does not seem to be de facto ethical from the I slamic perspective of ethical values. It only consists in trading the same instruments of conventional banks without genuinely enforcing I slam's ethical vision. The practice of I slamic banking misrepresents I slam and does not contribute to solving social problems. The interaction between maqasid al‐shari᾽a (objectives of I slamic law) and qiyās (deductive analogy) provides a supplementary tool for interpreting the failure of the prior in terms of the practical misuse of the latter by I slamic banks. This essay provides an interpretive approach to the current debate about why I slamic banking has failed and suggests ways to move cautiously in the future.