Regulating Morality and Markets: A Critical Study of Fatwa Issuance Mechanisms in Islamic Economic Practice

Abstract

This study critically examines the role of fatwa issuance in shaping the moral and regulatory frameworks within Islamic economic practices. It explores how religious authority, particularly through formal fatwa institutions, intersects with market governance, influencing the ethical conduct and operational standards of Islamic financial systems. As Islamic finance experiences global expansion, mechanisms of fatwa issuance are increasingly scrutinised for their transparency, consistency, and ability to adapt to the complexities of modern economies and diverse institutional landscapes. Focusing on selected Muslim-majority countries and transnational contexts, the research investigates the institutional frameworks and administrative processes involved in fatwa issuance. It deliberately avoids theological debate, concentrating instead on the procedural and economic dimensions of religious rulings in financial markets. The study addresses two primary questions: How do fatwa issuance mechanisms influence the governance of Islamic economic practices? And what are the regulatory implications and challenges of institutionalising religious authority in financial markets? Employing a qualitative methodology, the research draws from document analysis, expert interviews, and comparative case studies. It evaluates procedural transparency, structural diversity, and legal pluralism to understand how different jurisdictions balance religious authority with financial regulation. The findings suggest that while fatwa mechanisms help shape market norms and build investor confidence, they often struggle with issues such as institutional fragmentation, lack of standardisation, and limited responsiveness to dynamic economic conditions. The study concludes by recommending more coherent institutional design, improved cross-jurisdictional coordination, and greater procedural transparency. Future research should explore the digitalisation of fatwa processes and its implications for transnational governance in Islamic finance, particularly in enhancing consistency and regulatory alignment across borders