Islamic financial engineering: A bundling and unbundling process approach

This paper reviews different theories that have been developed to explain financial innovation. these include constraint-induced approach,the regulatory dialectic theory,the bundling and unbundling process theory,the zero supply theory. the main aim of the theory of financial innovation is to define and explain the causes of financial innovation. the bundling and unbundling process and theory is widely accepted in the literature of financial innovations,so we demystified the implications of such an approach in islamic finance. the findings suggest that the bundling and unbundling process theory can explain to a large extent innovations in islamic financial,however some innovations cannot be considered as islamic because of its circumvention of islamic finance principles.