Measures for Limiting Opportunism in The Islamic Banking

Abstract

The article analyzes the sources and manifestations of opportunism, as well as the measures against opportunism in banking. A deep literature review on the problem of opportunism has been carried out. The sources and forms of manifestation of opportunism in Islamic banking have been identified in the paper. The measures against opportunism have been divided into measures to prevent adverse selection and measures to reduce moral hazard. The measures against opportunism specific to Islamic banking have also been described in the article. It is shown that not all common measures to reduce moral hazard have analogues in Islamic banking. Suggestions are made as to which of the Islamic banking-specific measures against opportunism can be borrowed to be exploited in traditional banking. The prospects for the use of smart contracts in Islamic banking as a fundamentally new measure to limit opportunism have been considered. The technical and legal problems of implementing smart contracts as well as the specific problems of implementing smart contracts in Islamic banking are shown. We argue that the widespread introduction of smart contracts is very unlikely in Islamic banking as the principles of smart contracts contradict the principles and spirit of Shariah.