Islamic Financial Innovation in Literature: Reviewing Market-Based Narratives

Abstract

This article explores how Islamic financial product innovation is framed within academic literature prior to 2009. Drawing from institutional theory and discourse analysis, the study investigates the role of narratives in shaping perceptions of legitimacy and market adaptation in Islamic finance. It identifies three dominant themes in the literature: theological justification, functional market discourse, and socio-cultural contextualization. Through critical analysis of books, journal articles, and institutional reports, the paper reveals how scholarly narratives act as discursive tools for innovation legitimation. These narratives are not only reflective of religious doctrines but also responsive to economic and political realities, leading to diverse interpretations and implementations of Islamic financial principles. The study contributes a novel typology of innovation narratives and highlights the contextual factors influencing financial product design and adoption. The findings offer theoretical and practical implications for future research, policy formulation, and institutional strategy in Islamic financial markets.