Corporate Governance and Micro-Banking Stability in Islamic Financial Institutions: Towards an Integrated Approach

Abstract

In this paper, critical governance levers of micro-banking stability are theoretically and normatively analyzed, with a particular spotlight given to Islamic banks. Moreover, this idea is examined through classical theoretical frameworks, namely, agency theory and stakeholder theory, arguing how governance mechanisms can discipline managerial behavior, lower information asymmetries, and consequently tighten institutional trust. In the case of Islamic banks, governance takes on a specific dimension rooted in compliance with Shariah principles, adding a religious and ethical layer to conventional mechanisms. The paper showcases a hybrid model of attaining institutional resilience and sustainability where internal discipline, risk management, and social legitimacy meet. Islamic finance governance dimension emerges, within this context, as an alternative strategic tool for stability, broadening the financial regulation function from the technical perspective towards an integrated approach of protection and social legitimation.