Over the past two weeks ago, I attended the annual meeting of the Association of American Geographers in Tampa, FL and  also presented at the Global Donors Forum, organized by the World Congress of Muslim Philanthropists in Washington D.C. While these two events brought together very different groups of scholars and practitioners, the panels on philanthropy had very similar people, interested in issues of global finance, cash flows, equity, social justice. I will focus on just a few ideas from scholars who are researching and working in this field, that is growing in importance and has, according to the researchers, the potential to address some of the structural issues that our current global system is ignoring. What can Islamic finance models offer to the ‘mainstream’ world of finance ?  This may seem like a difficult question to ask, much less answer, given the hysteria around anything Islamic and the purported negative influence of Islamic ideas in our world. For the sake of this discussion, I will not deal with the critiques of any political dimensions of Islam or its aspects of Islamic financing that have come under the scanner, due to post 9/11 securitization discourse. I will deal with that in another article, at a later date. This piece deals primarily with how the West is understanding Islamic finance and what lessons, if any, it can offer to the global capitalist system.

In a book titled Islam and the Moral Economy (2006) Charles Tripp argues that Muslim scholars have devised strategies deal with capitalism, while remaining true to their faith. While there are those who have resorted to confronting the global capitalist system, a majority have aspired to innovation and ingenuity in search for a compromise and interaction with global capitalism. This is evident, from Wall Street to the Arab Street. Similarly, Lena Rethel (2011) has argued that the search for legitimacy among Islamic financial institutions has forced them to look for greater adoption of the Western norms of governance, knowledge structures making it reproduce the existing global financial order. This, despite of the efforts of these institutions to create a more equitable financial and economic order, based on the Qur’an and Sunnah (traditions of the Prophet Muhammad).

Dean of School of Advanced International Studies ( SAIS) Vali Nasr makes the case for looking at the intersections of Islamic piety with capitalism in the ‘Middle class’ Muslims around the world. In his book Forces of Fortune (2009) he says: “The United States has been supporting economic reform and business initiatives in the Muslim world, but with too much emphasis on working with the government planners and top-business elite. Change will not come from this upper crust – it has too much invested in the status quo and depends too heavily on the state. It is business with a small “b” that should hold our attention.” (p.12). While there has been a discourse of treating American Muslims as somewhat ‘exceptional,’ by virtue of being more diverse, economically more better off than the rest of the world, I would argue that at the level of practice of faith in day-to-day life, and in particular, that of charitable giving, these the parallels between American Muslims and those in the rest of the world are striking. While his emphasis on commerce and comparing the emergence of the middle class in Turkey, Iran and Dubai with Calvinistic mercantilism seems a bit stretched, there is certainly some merit in it. Like the Calvinists, the middle class Muslims of the world want to have their religion and their commerce too. It is apt to be reminded that the Prophet Muhammad was a merchant himself. But not in the style of current capitalists. That is a distinction that Nasr doesn’t make.

Nasr’s bigger contribution through this book is in arguing that it is time we look past fundamentalism and violence linked with Muslim societies as a framing issue and actually focus on development and related issues, if we are to gain a better understanding of these societies and what they have to contribute to the world. I concur.

How the capitalist notions of dealing with societal issues meet the arguably ‘socialist’ notions of wealth distribution in Islam are of interest in our discussion here. As Tripp says “The capacity of capitalism to be reinvented in the wake of the crises to which it has inevitably been prone has been one of the distinctive features of such as system, historically confounding those in the Islamic world and beyond who have seen crisis as the harbinger of self-destruction.” (p.3). He further argues that Islamic system’s response has been to rein in the processes of exploitation and to make it authentically yet also productively part of the Islamic system, with an emphasis on building a ‘real’ economy, as opposed to a ‘speculative’ one, as on Wall Street. Tripp also says that the responses to capitalism have been varied, across the Muslim world, and not singular. The development of Islamic banks, mutual funds that are Shariah compliant, social investment funds and the like are examples of this new vocabulary of understanding and making sense of the capitalist economy. My attempt in my study will be to map this intersection of Islamic norms of giving and the mainstream notions of giving that are arguably influenced by capitalistic norms, as it occurs in the nonprofit sector in the American Muslim sphere.

 An ‘alternate economic rationality’? One of the main critiques of the capitalist system is the commodification of both money and people. As Tripp points out in his book, in Islamic thought, the dominant social imaginary is the subservience of human society to the will of God. “Service to the creator is the goal of existence, social and individual, and, insofar as the moral purpose enshrined in such service is only possible in the company of other beings, the telos of society is evident. This was the function by which society should be judged.” (p.19). How does this tally with the extreme individualism that capitalism promotes? While not central to my study, this forms the background to the kind of inquiry that I am undertaking. The notions of zakat and sadaqa (forms of charitable giving) as ‘financial worship,’ are also important to keep in mind (Benthall, 1999).

Lessons to be learnt from the Islamic financial model?As Rethel (2011) has argued, the reorientation towards religious and cultural values in Muslim societies both in the ‘West’ and the ‘East’ and the rise of the Muslim middle class that has coincided with the rise in demand for Shariah compliant tools of finance can be seen as an alternative to the existing global order. She has used the lens of legitimacy to explore the extent to which the Islamic finance system offers us alternative to the existing system. Both Rethel (2011) and Tripp(2006) do seem cautiously optimistic with the prospects of Islamic finance offering an alternative to the existing system, Rethel more than Tripp. While this seems so, one might ask: what is one to make of the existing demand for the Islamic finance products, increasing market share of the industry and indeed a greater push among Muslim nations and societies for expansion of the Islamic finance markets? At the ontological level, will this change things, even as epistemically, it just seems to be replicating the logic of the Western economic system?

Jane Pollard, another researcher whose work on Islamic charity in London, among the Somalis points to a strong sense of resilience and solidarity. This also complicates the understanding, in a postsecular world, of the religious practices of the Islamic Banking and Financial institutions. This system also offers us an opportunity to re-think territoriality, cosmopolitan legalities and neoliberalization. “In a world where sukuk traded in London and New York rest on English common law but are subject to the decisions of a Shari’ah scholar based in Pakistan, it might be the moment to reflect critically on how territory, embodiment and cosmopolitan legalities interest to shape different sorts of economic activity.” Pollard argues.

I would argue that despite the skepticism of the scholars mentioned above, Islamic finance is relatively new, a system that has not been fully tested yet and one that must be taken seriously. The industry came into existence in the 1970s, after the Oil embargo and the emergence of a dominant ‘Muslim solidarity,’ in the economic sphere. As Rethel says “Moreover, Islamic finance is not only an empirical phenomenon that warrants scholarly scrutiny, but also an intriguing analytical counterfactual. A literature that claims that a different world order is possible should become more curious about the potential of existing alternatives. Such an agenda could also support current efforts to expand, indeed, its narrow focus on mainly advanced, mainly Western Political economies.” (p.78). Rethel argues that Islamic financial system seeks its legitimacy from a moral and ethical system, based in the Quran and Sunnah – that prohibits interest, gambling, sale of haram (forbidden) products and speculation; all of which aim towards redistribution of wealth and risks. The growing Islamic finance sector, with over 300 institutions, $500 billion in cumulative assets and operations in 50 of the World Bank countries is not meant to be challenge to the West, but can be seen as the assertion of Islamic social and economic rationality argue Pollard and Sammers ( 2007). Ali Shari’ti, the Islamic scholar and Sayyid Qutb, the charismatic Egyptian scholar wrote about Islamic systems as being exceptional, in the sense that their epistemic categories would also need to break off completely with the Western modes, so as to create its own logic of society, finance and community. There was no space for a ‘syncretic’ evolution, so to say. Charles Tripp argues that the call for direct action versus reasoned debate made Qutb’s project a direct one, that of confrontation. But the question remains, how much of current thinking owes its genesis to that of Qutb’s thought. One can see that despite the prevalence of this thought in some circles, the likes of Yusuf Qaradawi and other influential scholars, who wield enormous influence are advocating a compromise of sorts. They are on the boards of Islamic banks and institutions that partner with Western investment banks and are finding ‘common ground’ to work and promote ‘welfare.’

Whether the Islamic banks and financial system will offer an alternative in the near future is perhaps a speculative question. The real one is how the entry of this system of banking and commerce impact the ‘mainstream’ system of finance. As this New York Times article points out, Islamic financial institutions are investing in the West and it seems to be business as usual. Will the vocabulary and ontological assumptions of Islamic finance shift the epistemic knowledge base of the current system is a much bigger question and one that cannot be answered here.

While it may seem that Islamic finance institutions are not adding anything spectacularly new, in terms of doing business ( on a day to day basis), the biggest contribution so far that they have made is to bring ‘ethics’ into the equation. As mentioned earlier, all instruments of Islamic banks and institutions have to comply with ethical norms that are mandated by scholars and comply with Shari’ah. This means no exploitatively high interest rates, no investment in exploitative business practices etc. While these are high moral principles that may sometimes be flouted, this is the game-changing aspect that Islamic institutions bring to the table. And this is perhaps the biggest lesson that Wall Street can learn from them. Ethics can no longer be ignored. And moreover, the commodification of people and money must stop.