Khawf, Huzn and Sakinah in Islamic finance

Purpose - This article analyses the way in which Islamic finance incorporates certain psychological and emotional states known in Islamic thought, namely khawf (fear and apprehension in the face of the unknown future) and huzn (sadness and regret for choices made in the past), within a system of well-defined norms and operational structures. This methodology is compared with that of traditional finance and behavioral finance, stating that the Islamic approach proposes a structurally different solution to economic precariousness.
Design/Methodology/Approach - The study adopts a qualitative conceptual methodology that combines Qur'anic textual analysis, regulatory examination of Islamic finance standards issued by the Organization of Accounting and Auditing for Islamic Financial Institutions (AAOIFI) and the Islamic Financial Services Board (IFSB), and contextual analysis of macrofinancial data from international institutions. The focus is on institutional design rather than causal inference.
Results - The analysis shows that Islamic finance institutionalizes khawf and huzn as economic constraints through prohibitions of gharar and ribā, risk-sharing, and zakāt. In contrast, conventional finance monetizes fear and regret via debt and risk transfer, while behavioral finance remains primarily descriptive.
Originality/Value – This article contributes to the literature conceptualizing Islamic finance as a normative institutionalization of behavioral insights and promoting sakinah (tranquillity) as a systemic goal of financial design.
Research Limitations/Implications – The study is conceptual and does not empirically test causal relationships.
Practical implications – Selected principles of Islamic finance can inform ethical screening, debt regulation, and financial consumer protection frameworks.
Social implications - By structurally addressing debt-related uncertainty and distress, Islamic finance contributes to financial well-being and social stability.