Sustainable Islamic Banks' Financing System Through Supply Chain Operations Reference Model: A Novel Perspective

Abstract

Islamic banking is an emerging system having its roots especially after the global financial crisis of 2008.and is linked with real business transactions. Similarly, the Supply Chain Operations Reference (SCOR) model represents real business transactions and can support understanding Islamic banks' financing system in a better way, but both are less studied together. Therefore, the purpose of the study is to elaborate on Islamic banks’ financing system through the SCOR model. Qualitative case study research is suitable for an in-depth understanding of less discovered areas of knowledge so, this research used this methodology. This study reveals that Islamic banks adopt the purchase and sell operations of financed assets in almost all modes of finance implying a real economic situation which differentiates Islamic banks’ financing from its conventional counterpart. Purchasing is related to the sourcing process of the SCOR model whereas selling is aligned with the delivery process of the SCOR model. Thus, Islamic banking is operationalized as a trading company along with a banking company. In conclusion, the combination of Islamic finance and supply chain connects the financial sector with the real sector and opens new dimensions of research. It can lead current and potential stakeholders toward a win-win situation by avoiding disasters such as the global financial crisis in 2008 that neglects the real economy.