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Islamic Finance (Islamic Studies)

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  1. Introduction
  2. The term “Islamic finance” generally refers to a corpus of theoretical economics and the practice of banking according to the principles of Shariʿa, or Islamic law. It is often viewed as the theoretical response to the challenge posed by Western capitalism and Marxism. Its emergence in the early 1970s coincided with the development of Political Islam, although, at the time of its formation (and certainly today), supporters of Islamic finance were decidedly nonpolitical and resistant to any association with politics.
  3.  
  4. General Overviews
  5. General works on Islamic finance tend to be catalogues of Sharia-compliant instruments that replace conventional interest-based financing. Mohammad Nejatullah Siddiqi (Siddiqi 2004) is one of the academic pioneers of the subject, together with Nabil A. Saleh (Saleh 1986). Western-trained economists offer somewhat different perspectives, however. While Kuran 2004 is extremely critical of “Islamic economics,” others, such as el-Gamal 2000, take a more nuanced approach but also recognize that Islamic finance has faced trade-offs between principle and expediency in the competitive world of international finance. Vogel and Hayes 1998 and Usmani 2002 analyze the principles of Islamic jurisprudence underlying contemporary financial practices.
  6.  
  7. el-Gamal, Mahmoud Amin. A Basic Guide to Contemporary Islamic Banking and Finance. Houston, TX: Rice University, 2000.
  8.  
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  10.  
  11. El-Gamal provides a quick reference guide that covers the main topics and controversies within Islamic banking. Available online from Rice University.
  12.  
  13. Find this resource:
  14.  
  15. Henry, Clement M. and Rodney Wilson, eds. The Politics of Islamic Finance. Edinburgh: Edinburgh University Press, 2004.
  16.  
  17. Save Citation »Export Citation »E-mail Citation »
  18.  
  19. This edited volume covers political as well as economic constraints after the September 11 attacks. In addition to an analysis of global trends, it includes articles on the Islamic banking experience in Egypt, Jordan, Kuwait, Sudan, Tunisia, and Turkey.
  20.  
  21. Find this resource:
  22.  
  23. Iqbal, Munawar, and Philip Molyneux. Thirty Years of Islamic Banking: History, Performance, and Prospects. New York: Palgrave Macmillan, 2005.
  24.  
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  26.  
  27. Covers the development and growth of Islamic banking from the point of view of economists and financiers.
  28.  
  29. Find this resource:
  30.  
  31. Kuran, Timur. Islam and Mammon: The Economic Predicaments of Islamism. Princeton, NJ: Princeton University Press, 2004.
  32.  
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  34.  
  35. This collection of essays by a professional economist is highly critical of the extensive literature on “Islamic economics” and finance, although he recognizes some of the positive potential of Islamic banking as well.
  36.  
  37. Find this resource:
  38.  
  39. Rahman, Fazlur. “Riba and Interest.” Islamic Studies 3, no. 1 (1964): 1–43.
  40.  
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  42.  
  43. Rahman's article is one of the earliest statements on riba in English, for a general audience (not classically trained Islamic scholars).
  44.  
  45. Find this resource:
  46.  
  47. Saleh, Nabil A. Unlawful Gain and Legitimate Profit in Islamic Law: Riba, Gharar, and Islamic Banking. Cambridge, UK: Cambridge University Press, 1986.
  48.  
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  50.  
  51. Saleh examines riba and gharar, two restrictive rules in Islamic law, in the five schools of Islamic law.
  52.  
  53. Find this resource:
  54.  
  55. Siddiqi, Mohammad Nejatullah. Riba, Bank Interest, and the Rational of its Prohibition. Jeddah, Saudi Arabia: Islamic Development Bank, 2004.
  56.  
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  58.  
  59. Siddiqi presents an excellent and readily available summary of the principal arguments in support of Islamic banks, together with a succinct history of their evolution in various parts of the world. Available online from the Islamic Research & Training Institute and at the personal website of Siddiqi.
  60.  
  61. Find this resource:
  62.  
  63. Usmani, Muhammad T. An Introduction to Islamic Finance. The Hague: Kluwer Law International, 2002.
  64.  
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  66.  
  67. Focuses on Islamic banking products, such as musharakah, murabahah, ijarah, salam, and istina'.
  68.  
  69. Find this resource:
  70.  
  71. Vogel, Frank E., and Samuel L. Hayes III. Islamic Law and Finance: Religion, Risk, and Return. Boston: Kluwer Law International, 1998.
  72.  
  73. Save Citation »Export Citation »E-mail Citation »
  74.  
  75. Vogel and Hayes present one of the most in-depth studies of Islamic finance available in English.
  76.  
  77. Find this resource:
  78.  
  79. Warde, Ibrahim. Islamic Finance in the Global Economy. Edinburgh: Edinburgh University Press, 2000.
  80.  
  81. Save Citation »Export Citation »E-mail Citation »
  82.  
  83. An excellent critical introduction to Islamic finance that copes with the issue of defining an “Islamic bank.” Warde describes the paradox of Islamic finance, which on the one hand is rooted in medieval Islamic scholarship, and on the other is a modern industry operating in more than seventy countries and (at the time of writing) enjoying growth rates of more than 20 percent a year.
  84.  
  85. Find this resource:
  86.  
  87. Reference Works
  88. Some themes in the Islamic banking literature include: how to define an “Islamic bank,” regulatory and other standardization challenges, and the industry's varied success across the Muslim world. el-Gamal 2006, for example, analyzes Islamic finance, defined in the broadest terms practicable, in order to explore the many facets or disciplinary perspectives that can help in understanding the industry, its origins, and the contexts in which it thrives. For an overview of the literature see Zaher and Hassan 2001.
  89.  
  90. Archer, Simon, and Rifaat Ahmed Abdel Karim, ed. Islamic Finance: The Regulatory Challenge. Singapore: John Wiley, 2007.
  91.  
  92. Save Citation »Export Citation »E-mail Citation »
  93.  
  94. This edited volume discusses the nature of the risks in Islamic banking, securitization, and corporate governance challenges. Karim became the secretary general of the Islamic Financial Services Board (IFSB) in 2003, and he is a former secretary general of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI).
  95.  
  96. Find this resource:
  97.  
  98. el-Gamal, Mahmoud A.. Islamic Finance: Law, Economics, and Practice. Cambridge, UK: Cambridge University Press, 2006.
  99.  
  100. Save Citation »Export Citation »E-mail Citation »
  101.  
  102. The author analyzes Islamic banking as it is practiced today, concluding it is really “a form of rent-seeking legal arbitrage.” He proposes that the industry reorient itself toward substance rather than form.
  103.  
  104. Find this resource:
  105.  
  106. Iqbal, Munawar and Rodney Wilson, eds. Islamic Perspectives on Wealth Creation. Edinburgh: Edinburgh University Press, 2005.
  107.  
  108. Save Citation »Export Citation »E-mail Citation »
  109.  
  110. This edited volume includes articles on Islamic retail banking issues; methods of measuring Islamic Bank efficiency; Islamic mortgages, insurance, and risk management; and equity finance and venture capital.
  111.  
  112. Find this resource:
  113.  
  114. Islamic Finance Project (IFP).
  115.  
  116. Save Citation »Export Citation »E-mail Citation »
  117.  
  118. The IFP is part of Harvard Law School's Islamic Legal Studies Program (ILSP). The IFP Databank contains books, articles, theses, and conference papers, with complete bibliographic information and abstracts. It also contains a Sharia database on classical and contemporary Islamic jurisprudence, including Arabic and transliterated texts. Harvard Law School also publishes the proceedings of the university's Forums on Islamic Finance.
  119.  
  120. Find this resource:
  121.  
  122. Zaher, Tarek S. and M. Kabir Hassan. “A Comparative Literature Survey of Islamic Finance and Banking.” Financial Markets, Institutions & Instruments 10, no. 4 (November 2001).
  123.  
  124. Save Citation »Export Citation »E-mail Citation »
  125.  
  126. Good overview of the literature. Available online.
  127.  
  128. Find this resource:
  129.  
  130. Zaman, Asad. “Islamic Economics: A Survey of the Literature.” Working Paper No. 22. Birmingham, UK: University of Birmingham, Religions and Development Research Programme, 2008.
  131.  
  132. Save Citation »Export Citation »E-mail Citation »
  133.  
  134. Good introduction to the field. Available online from the Social Science Research Network.
  135.  
  136. Find this resource:
  137.  
  138. Foundations of Islamic Finance
  139. Fiqh Al-mu'amalat (Islamic jurisprudence on banking and finance) continues to develop alongside the Islamic banking industry. The International Islamic Fiqh Academy is an influential participant in the fiqh deliberations. The Academy's official publication is the Journal of the Islamic Fiqh Academy. Other important players include Sheihk Yusuf al-Qaradawi, the Egyptian Sheikhs al-Haqq and Tantawi, and other Ifta (fatwa-issuing) bodies such as the fiqh committee at Al-Azhar University in Cairo. Islamic finance, as a practice, is a project of the second half of the 20th century (Iqbal and Molyneux 2005). Most parts of the Muslim world had been introduced to Western-style banking practices through trade and colonization. In some places, the system of Western-style banks was locally owned and controlled. In these Muslim nations, it was often religious minorities, especially Christians and Jews, who dominated this sector of the economy. Islamic scholars during the 19th century and the early part of the 20th century were occupied with broader issues, such as the dissolution of the caliphate, struggles for independence, and the prospect of a secular political authority. For these reasons and others, the Islamic critique of riba (usury) did not begin in earnest until the 1940s. By the 1950s, Muslim economists were experimenting with interest-free finance. The Mit Ghamr project, established in Egypt in 1963, was the first experience in Islamic financing. Profit-sharing models were developed in the 1960s (see Aggrawal and Yousef 2000). Today, Islamic economists articulate a distinct approach to banking, finance, and development (Iqbal and Molyneux 2005, DeLorenzo 2006).
  140.  
  141. Aggrawal, Rajesh K. and Tarik Yousef. “Islamic Banks and Investment Financing.” Journal of Money, Credit, and Banking 32 (2000): 93–120.
  142.  
  143. DOI: 10.2307/2601094Save Citation »Export Citation »E-mail Citation »
  144.  
  145. The authors argue that the bulk of Islamic financing operations do not conform to the principle of profit-and-loss sharing (e.g., equity contracts), but instead are based on the mark-up principle, which is very debt-like in nature. They argue that debt will become the dominant instrument of finance because it is a rational response on the part of Islamic banks to informational asymmetries in the environments in which they operate.
  146.  
  147. Find this resource:
  148.  
  149. DeLorenzo, Yusef Talal. “Shariʿah Compliance Risk.” Chicago Journal of International Law 7, no. 2 (2006): 397–408.
  150.  
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  152.  
  153. Sheikh DeLorenzo discusses Sharia compliance risk, or the possibility that a financial service or product is not or will not be in compliance with established Sharia principles and standards.
  154.  
  155. Find this resource:
  156.  
  157. Iqbal, Munawar, ed. Islamic Perspectives on Sustainable Development. New York: Palgrave Macmillan, 2005.
  158.  
  159. Save Citation »Export Citation »E-mail Citation »
  160.  
  161. Papers from the 5th International Conference on Islamic Economics and Finance, held 7–9 October 2003 in Manama, Bahrain.
  162.  
  163. Find this resource:
  164.  
  165. Iqbal, Munawar, and Philip Molyneux. Thirty Years of Islamic Banking: History, Performance, and Prospects. New York: Palgrave Macmillan, 2005.
  166.  
  167. Save Citation »Export Citation »E-mail Citation »
  168.  
  169. This text can be used as a history of Islamic finance or a general introduction to the subject.
  170.  
  171. Find this resource:
  172.  
  173. International Islamic Fiqh Academy.
  174.  
  175. Save Citation »Export Citation »E-mail Citation »
  176.  
  177. Established in 1981 by the Organization of the Islamic Conference, the Islamic Fiqh Academy is an influential participant in fiqh deliberations. Website is in Arabic only.
  178.  
  179. Find this resource:
  180.  
  181. Journal of the Islamic Fiqh Academy.
  182.  
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  184.  
  185. Official journal of the International Islamic Fiqh Academy.
  186.  
  187. Find this resource:
  188.  
  189. Development and Growth
  190. Several authors have explored the challenges that shaped the development and success of Islamic financial institutions, which vary greatly across the Muslim world (Ibrahim 2008). Vogel and Hayes 1998 explore how national governments have applied Islamic finance. The conservative and oil-rich nations of the Gulf propelled Islamic finance onto the global stage. Today's most successful commercial Islamic banks were incorporated in one of the member states of the Gulf Cooperation Council (GCC). The development of Islamic educational institutions that offer certificates to individuals is undoubtedly driven by market competition. For example, the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) designed programs of study and has begun issuing licenses for “certified Islamic Accountant” and the like. The AAOIFI also appoints Islamic scholars, or ulema, as consultants to Sharia Supervisory Boards, which certify that an institution and its practices are Sharia-compliant. Lamm 2008 argues that the nexus of conservative Islamic scholars and international investment firms has created an opportunity for disempowered ulema to reassert their authority in the areas of social and economic policy (see also Kahf 2004 and Galloux 1999). Given that Islamic scholars cannot agree on whether or not “Islamic economics” exists apart from secular economics, it may be some time before the political, social, and economic implications are fully felt (see Addas 2008 and Lamm 2008). More recently, the global growth of Islamic banking has sparked a dialogue among lawyers, academics, and Islamic scholars about globalization, money, and values (Bianchi 2007).
  191.  
  192. Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI).
  193.  
  194. Save Citation »Export Citation »E-mail Citation »
  195.  
  196. The AAOIFI was established in 1991 in response to market demand for standardization. Its board of directors is drawn from the consortium of Islamic bankers who founded it.
  197.  
  198. Find this resource:
  199.  
  200. Addas, Waleed A. J. Methodology of Economics: Secular versus Islamic. Kuala Lumpur, Malaysia: International Islamic University of Malaysia, 2008.
  201.  
  202. Save Citation »Export Citation »E-mail Citation »
  203.  
  204. Synthesizes the literature on the economic, legal, and religious nature of Islamic economics. Available online.
  205.  
  206. Find this resource:
  207.  
  208. Bianchi, Robert R. “The Revolution in Islamic Finance.” Chicago Journal of International Law 7, no. 2 (2007): 569–580.
  209.  
  210. Save Citation »Export Citation »E-mail Citation »
  211.  
  212. Bianchi discusses how Islamic economics represents an ambitious effort “to turn Shariah into a living law,” and how the flexibility of Sharia allows for the mixing of modern international (nonreligious) law and the disparate traditions of the Muslim world.
  213.  
  214. Find this resource:
  215.  
  216. Galloux, Michel. “The State's Responses to Private Islamic Finance Experiments in Egypt.” Thunderbird International Business Review 41, no. 4–5 (1999): 481–500.
  217.  
  218. Save Citation »Export Citation »E-mail Citation »
  219.  
  220. This article, written by a French doctoral student, analyzes the defensive responses of the Egyptian government to Islamic banks and the ostensibly “Islamic” financial investment companies.
  221.  
  222. Find this resource:
  223.  
  224. Hamoudi, Haider Ala. “Muhammad's Social Justice or Muslim Cant? Langdellianism and the Failures of Islamic Finance.” Cornell International Law Journal 40, no. 1 (2007): 89–135.
  225.  
  226. Save Citation »Export Citation »E-mail Citation »
  227.  
  228. Provides a contrasting view of the relationship between medieval and contemporary Sharia (as it relates to finance) to that given by Vogel and Hayes 1998. Available online.
  229.  
  230. Find this resource:
  231.  
  232. Ibrahim, Ali Adnan. “The Rise of Customary Businesses in International Financial Markets: An Introduction to Islamic Finance and the Challenges of International Integration.” American University International Law Review 23, no. 4 (2008): 661–695.
  233.  
  234. Save Citation »Export Citation »E-mail Citation »
  235.  
  236. Presents an overall history of the Islamic finance industry and discusses potential avenues of research that the author believes are critical to the growing growth of Islamic finance in international markets. Available online.
  237.  
  238. Find this resource:
  239.  
  240. Kahf, Monzer. “Islamic Banks: The Rise of a New Power Alliance of Wealth and Shariʿa Scholarship.” In The Politics of Islamic Finance. Edited by Clement M. Henry and Rodney Wilson, 17–36. Edinburgh: Edinburgh University Press, 2004.
  241.  
  242. Save Citation »Export Citation »E-mail Citation »
  243.  
  244. Discusses how the industry has affected patterns of religious authority.
  245.  
  246. Find this resource:
  247.  
  248. Lamm, Jennifer E. “The Effects of Globalization on Religious Authority in Egypt: Islamic Banks and Azhar Sheikhs.” Paper presented at the annual meeting of the Midwest Political Science Association, Chicago, 3–6 April 2008.
  249.  
  250. Save Citation »Export Citation »E-mail Citation »
  251.  
  252. Discusses how the forces of globalization interacted with the structure of Islamic banking to produce space for new interpretations of and authorities on Islamic law. Text is available online from All Academic Research.
  253.  
  254. Find this resource:
  255.  
  256. Vogel, Frank, and Samuel Hayes. Islamic Law and Finance: Religion, Risk, and Return. Boston: Kluwer Law International, 1998.
  257.  
  258. Save Citation »Export Citation »E-mail Citation »
  259.  
  260. One of the most in-depth studies of Islamic finance available in English. Authors describe four stances national governments have taken towards Islamic finance: those entirely Islamic in form, those that “embrace Islamic banking as a national policy while supporting dual banking tracks,” those with no official position, and “those that actively discourage a separate Islamic banking presence.”
  261.  
  262. Find this resource:
  263.  
  264. Riba
  265. The classical debate in fiqh revolves around the issue of riba—something prohibited or not permissible (haram)—according to the Holy Qu'ran (see Vogel and Hayes 1998 or, for a contrasting view, Hamoudi 2007). Generally speaking, traditionalist scholars are likely to define riba broadly, as referring to all the forms of interest on which modern Western banking relies. The most traditionalist scholars point out that even if these banks could avoid the use of riba, Muslims are prohibited from taqlid, or the imitation of non-Muslims. Islamic banking and the ulema who serve on Sharia Supervisory Boards, which certifies a bank Sharia-compliant, are often criticized by traditionalist Muslim scholars. These boards, which are appointed by a financial institution's board of directors, justify the use of the “Islamic brand.” Traditionalist scholars who charge that Islamic banking is nothing more than Western banking thinly disguised with an Islamic label, worry about the industry's effects on Muslim societies. The development of Islamic educational institutions that offer certificates to individuals is undoubtedly driven by market competition (Ray 1995). Even among these proponents of an Islamic banking sector, there is much disagreement about how to define Islamic banks and permissible activities. The most controversy, however, surrounds the use of the term “Islamic.”
  266.  
  267. Hamoudi, Haider Ala. “Muhammad's Social Justice or Muslim Cant? Langdellianism and the Failures of Islamic Finance.” Cornell International Law Journal 40, no. 1 (2007): 89–135.
  268.  
  269. Save Citation »Export Citation »E-mail Citation »
  270.  
  271. Discusses the history and growth of Islamic finance and presents a contrast to the interpretation of the reasons for the industry's expansion given in Vogel and Hayes 1998.
  272.  
  273. Find this resource:
  274.  
  275. Ray, Nicholas Dylan. Arab Islamic Banking and the Renewal of Islamic Law. London: Graham and Trotman, 1995.
  276.  
  277. Save Citation »Export Citation »E-mail Citation »
  278.  
  279. Discusses the interaction between economic growth and religious law.
  280.  
  281. Find this resource:
  282.  
  283. Vogel, Samuel, and Frank Hayes. Islamic Law and Finance: Religion, Risk, and Return. Boston: Kluwer Law International, 1998.
  284.  
  285. Save Citation »Export Citation »E-mail Citation »
  286.  
  287. One of the foundational works in the field, providing an overview of the major debates.
  288.  
  289. Find this resource:
  290.  
  291. Derivatives
  292. As their role in Western markets grew throughout the 1990s, derivatives and secondary-market instruments became a contentious issue for commercial Islamic financial institutions and development banks (al-Omar and Abdel-Haq 1996, el-Gamal 2006, Kamali 1999). Kamali 1999 argues that the Malaysian futures market in palm oil could be Sharia-compliant under proper government supervision and urges further “ijtihad-oriented discourse” about innovative financial instruments. el-Gamal 2006 describes the “paradox of Islamic banking,” calling it medieval theory adjusted to compete with conventional banks, whose model dominates the global financial structure. The practice, according to el-Gamal, has become overly legalistic, and he recommends that the industry focus on substance rather than on the details of contracts (el-Gamal 2003). A number of authors have explored the experience of Islamic retail banking.
  293.  
  294. el-Gamal, Mahmoud A.. “Interest and the Paradox of Contemporary Islamic Law and Finance.” Fordham International Law Journal 27, no. 1 (2003): 108–149.
  295.  
  296. Save Citation »Export Citation »E-mail Citation »
  297.  
  298. El-Gamal argues that financial practice has become overly legalistic and recommends that the industry focus on substance rather than on the details of contracts.
  299.  
  300. Find this resource:
  301.  
  302. el-Gamal, Mahmoud A.. Islamic Finance: Law, Economics, and Practice. Cambridge, UK: Cambridge University Press, 2006.
  303.  
  304. Save Citation »Export Citation »E-mail Citation »
  305.  
  306. The author analyzes Islamic banking as it is practiced today, concluding it is really “a form of rent-seeking legal arbitrage.” He proposes that the industry reorient itself toward substance rather than form.
  307.  
  308. Find this resource:
  309.  
  310. Kamali, Mohammad Hashim. “Prospects for an Islamic Derivatives Market in Malaysia.” Thunderbird International Business Review 41, no. 4–5 (1999): 523–540.
  311.  
  312. Save Citation »Export Citation »E-mail Citation »
  313.  
  314. Kamali argues that the greatest benefit of trading in futures and options is that they facilitate risk management and risk reduction. All of these would fall, from the Sharia point of view, within the broad scope of public interest, or maslahah. He concludes that the validity of maslahah in areas and issues that have given rise to controversy needs to be established through valid Sharia evidence.
  315.  
  316. Find this resource:
  317.  
  318. al-Omar, Fuad, and Mohammad Abdel-Haq, eds. Islamic Banking: Theory, Practice, and Challenges. Atlantic Highlands, NJ: Zed Books, 1996.
  319.  
  320. Save Citation »Export Citation »E-mail Citation »
  321.  
  322. See especially, “Derivatives, and the Challenges in the Development of Islamic Secondary-Market Instruments: The Experience of the Islamic Development Bank,” pp. 88–95.
  323.  
  324. Find this resource:
  325.  
  326. Legitimacy
  327. The debate surrounding the legitimacy of Islamic finance reflects the debate about the field of “Islamic economics” more broadly (Iqbal and Wilson 2005). Zaman 2008 argues that the development of Islamic economics is part of the process of transition away from Western colonial institutions. Some scholars believe that the current practice of Islamic economics is nothing more than the application of Sharia to secular economic theory, rather than a discipline that replaces Western (secular) economics (Addas 2008). Another challenge to the Islamic banking industry's legitimacy is the association—if only in the use of the term “Islamic”—with unsavory topics. The industry still struggles to overcome the misuse of the “Islamic” brand by criminals such as those involved in the BCCI affair and pyramid schemes (i.e., Egyptian money houses) in the 1980s. Islamic banks may also suffer from associations with money laundering and criminal financing (el-Gamal 2006). The heavy scrutiny of Islamic organizations after the September 11 terrorist attacks has already put many Islamic charities out of business, including some legitimate ones as well as illegitimate ones (Warde 2007, Crimm 2008).
  328.  
  329. Addas, Waleed A. J. Methodology of Economics: Secular Versus Islamic. Kuala Lumpur, Malaysia: International Islamic University of Malaysia, 2008.
  330.  
  331. Save Citation »Export Citation »E-mail Citation »
  332.  
  333. Addas explains why Islamic educational institutions worldwide have adopted structure and values of the West, which he argues are built on the assumption of an “impersonal market environment.” Available online.
  334.  
  335. Find this resource:
  336.  
  337. Crimm, Nina J. “The Moral Hazard of Anti-Terrorism Financing Measures: A Potential to Compromise Civil Societies and National Interests.” Wake Forest Law Review 43, no. 3 (2008): 577–626.
  338.  
  339. Save Citation »Export Citation »E-mail Citation »
  340.  
  341. According to Crimm, some of the post-9/11 antiterrorism financing measures may “constrain philanthropic aid structures and nongovernmental organizations crucial to healthy civil societies. In so doing, anti-terrorism finance regulatory regimes ironically may compromise essential national interests.” Thus, “more nuanced, targeted, and tailored approaches could be developed to mitigate the moral hazard of the current antiterrorism finance tactics.” Available online.
  342.  
  343. Find this resource:
  344.  
  345. el-Gamal, Mahmoud A.. Islamic Finance: Law, Economics, and Practice. Cambridge, UK: Cambridge University Press, 2006.
  346.  
  347. Save Citation »Export Citation »E-mail Citation »
  348.  
  349. Analyzes Islamic banking as it is practiced today, concluding it is really “a form of rent-seeking legal arbitrage.” El-Gamal proposes that the industry reorient itself toward substance rather than form.
  350.  
  351. Find this resource:
  352.  
  353. Iqbal, Munawar, and Rodney Wilson, eds. Islamic Perspectives on Wealth Creation. Edinburgh: Edinburgh University Press, 2005.
  354.  
  355. Save Citation »Export Citation »E-mail Citation »
  356.  
  357. Iqbal and Wilson focus on the long-term consequences of capital accumulation and how it has affected Islamic societies.
  358.  
  359. Find this resource:
  360.  
  361. Warde, Ibrahim. The Price of Fear: The Truth behind the Financial War on Terror. Berkeley and Los Angeles: University of California Press, 2007.
  362.  
  363. Save Citation »Export Citation »E-mail Citation »
  364.  
  365. Warde argues that “the post-9/11 series of financial crackdowns initiated by the U.S. government has had virtually no impact on terrorism … because, as he demonstrates, these actions are based on a fundamental misconception of how terrorism works.”
  366.  
  367. Find this resource:
  368.  
  369. Zaman, Asad. “Islamic Economics: A Survey of the Literature.” Working Paper No. 2. Birmingham, UK: University of Birmingham, Religions and Development Research Programme, 2008.
  370.  
  371. Save Citation »Export Citation »E-mail Citation »
  372.  
  373. Zaman surveys the literature and argues that the development of Islamic economics is part of the process of transition away from Western colonial institutions. Available online.
  374.  
  375. Find this resource:
  376.  
  377. Regulation
  378. As the Islamic banking industry boomed in the 1980s and 1990s (see Development and Growth), the number of banks continued to grow and several support organizations were established. In the first decade of the 21st century, there are about seventy Islamic banks operating in a variety of socioeconomic and political contexts, not including banks in Iran, Sudan, and Pakistan, which officially claim to be fully Islamized. In addition, there are about forty conventional banks with “Islamic windows,” meaning they offer various Islamic financial services. One challenge facing the Islamic finance industry is regulation and corporate governance. There are no independent enforcement mechanisms to ensure that a bank shares profits fairly. Moreover, as a former deputy prime minister of Malaysia recently observed, many Islamic financial products presuppose a culture of transparency within the financial sector that, in turn, depends on a political transparency that is absent in most Muslim countries (Yousef 2004). This is quite a challenge, given the great diversity of Islamic communities, legal schools of thought, and lack of a hierarchal religious structure—at least in the case of Sunni Islam (Henry 2007). Smith 2005 argues that the global economy has created a push toward “Islamic Integration” in the international financial system. The establishment of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) was one of the early moves in this direction.
  379.  
  380. Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI).
  381.  
  382. Save Citation »Export Citation »E-mail Citation »
  383.  
  384. The AAOIFI was established in 1991 in response to the market demand for standardization.
  385.  
  386. Find this resource:
  387.  
  388. Henry, Clement M. “Islamic Finance: From Medieval to Contemporary Globalization.” Paper presented to the Conference on Globalization, State Capacity, and Muslim Movements. Washington, DC, 16–19 March 2007.
  389.  
  390. Save Citation »Export Citation »E-mail Citation »
  391.  
  392. Draft version available online.
  393.  
  394. Find this resource:
  395.  
  396. Smith, Kristin. “Islamic Banking and the Politics of International Financial Harmonization.” In Islamic Finance: Current Legal and Regulatory Issues. Edited by S. Nazim Ali, 108–125. Cambridge, MA: Islamic Legal Studies Program, Harvard Law School, 2005.
  397.  
  398. Save Citation »Export Citation »E-mail Citation »
  399.  
  400. Smith argues that competition in the global economy, which requires standardization and norms, has created a push toward “Islamic Integration” in the international financial system.
  401.  
  402. Find this resource:
  403.  
  404. Yousef, Tarik M. “The Murabaha Syndrome in Islamic Finance: Laws, Institutions, and Politics.” In The Politics of Islamic Finance. Edited by Clement M. Henry and Rodney Wilson, 63–80. Edinburgh: Edinburgh University Press, 2004.
  405.  
  406. Save Citation »Export Citation »E-mail Citation »
  407.  
  408. Argues that much regulation of Islamic financial products presupposes a culture of transparency within the financial sector that, in turn, depends on a political transparency that is absent or denied in most Muslim countries.
  409.  
  410. Find this resource:
  411.  
  412. Standardization
  413. In order to expand market share, standardization is necessary. The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), established in 1991, developed in response to market demand for standardization. Its board of directors is drawn from the consortium of Islamic bankers who founded it. The AAOIFI appoints Islamic scholars, ulema, as consultants to Sharia Supervisory Boards that certify an institution and its practices are Sharia-compliant. It also offers programs of study and has begun issuing licenses for “certified Islamic Accountant” and the like. Encouraged by the International Monetary Fund (IMF), The Islamic Financial Services Board (IFSB), which is based in Kuala Lumpur, was officially inaugurated on 3 November 2002 and started operations on 10 March 2003. It is, in effect, mandated to define the industry by standardizing its products (Archer and Karim 2007, Iqbal and Molyneux 2005). The International Islamic Rating Agency began operations in 2005 and provides credit, corporate governance, and Sharia quality ratings (using a panel of nineteen Islamic scholars) for both Islamic banks and other institutions that produce sukuk (a bond or certificate).
  414.  
  415. Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI).
  416.  
  417. Save Citation »Export Citation »E-mail Citation »
  418.  
  419. The AAOIFI was established in 1991 in response to market demand for standardization.
  420.  
  421. Find this resource:
  422.  
  423. Ali, S. Nazim, ed. Islamic Finance: Current Legal and Regulatory Issues. Cambridge, MA: Islamic Legal Studies Program, Harvard Law School, 2005.
  424.  
  425. Save Citation »Export Citation »E-mail Citation »
  426.  
  427. Nazim's edited collection discusses the industry's current efforts to standardize, regulate, and maintain its distinctive qualities.
  428.  
  429. Find this resource:
  430.  
  431. Archer, Simon, and Rifaat Ahmed Abdel Karim. Islamic Finance: The Regulatory Challenge. Singapore: John Wiley, 2007.
  432.  
  433. Save Citation »Export Citation »E-mail Citation »
  434.  
  435. Discusses the nature of the risks in Islamic banking, securitization, and corporate governance challenges. Archer and Karim have co-authored and edited many works for Euromoney Books.
  436.  
  437. Find this resource:
  438.  
  439. International Islamic Rating Agency.
  440.  
  441. Save Citation »Export Citation »E-mail Citation »
  442.  
  443. Started in July 2005, the IIRA is the sole rating agency for capital markets and the banking sector in predominantly Islamic countries. The IIRA surveys the full array of capital instruments and specialty Islamic financial products in order to enhance the level of analytical expertise in those markets. It also rates the quality of sharia compliance of Islamic financial institutions.
  444.  
  445. Find this resource:
  446.  
  447. Iqbal, Munawar and Philip Molyneux. Thirty Years of Islamic Banking: History, Performance, and Prospects. New York: Palgrave Macmillan, 2005.
  448.  
  449. Save Citation »Export Citation »E-mail Citation »
  450.  
  451. Iqbal and Molyneux explore the development and growth of Islamic banking from the point of view of economists and financiers.
  452.  
  453. Find this resource:
  454.  
  455. Islamic Financial Services Board (IFSB).
  456.  
  457. Save Citation »Export Citation »E-mail Citation »
  458.  
  459. The Islamic Financial Services Board (IFSB) website explores the evolving inventory of standards governing Islamic finance. As of April 2008, the 178 members of the IFSB included 42 regulatory and supervisory authorities, 6 intergovernmental organizations, and 130 market players and professional firms operating in 34 jurisdictions.
  460.  
  461. Find this resource:
  462.  
  463. Globalization
  464. If Islamic financial institutions are to protect and expand their market share, they must maintain the distinctiveness of the “Islamic” brand. Jaffer 2005 and Archer and Karim 2007 present good overviews of the commercial Islamic banking market, its risks, and prospects for growth. Much of the economic and (secular) legal literature on Islamic banking talks about “integrating” the sector into the global market economy (Ebrahim 1999). Yet the more Islamic banks innovate, the more they begin to look like their conventional competitors. This may be advantageous in some markets, such as the United States and Europe, but it is disadvantageous in others (for a case study, see Moghul 2007). There are critics who maintain that there is nothing distinct about the modes of Islamic banking (Addas 2008, Chong and Liu 2009). Others caution that the distinct modes of Islamic banking are structural rather than substantive (el-Gamal 2006, Fadel 2008). As Islamic finance has taken hold in the Western world, secular jurists have begun to challenge both the reality and the legality of Islamic banking products and services, as well as their actual deviation from medieval scholarship.
  465.  
  466. Addas, Waleed A. J. Methodology of Economics: Secular versus Islamic. Kuala Lumpur, Malaysia: International Islamic University of Malaysia, 2008.
  467.  
  468. Save Citation »Export Citation »E-mail Citation »
  469.  
  470. Synthesizes literature on the economic, legal, and religious nature of Islamic economics. Available online.
  471.  
  472. Find this resource:
  473.  
  474. Archer, Simon, and Rifaat Ahmed Abdel Karim. Islamic Finance: The Regulatory Challenge. Singapore: John Wiley, 2007.
  475.  
  476. Save Citation »Export Citation »E-mail Citation »
  477.  
  478. Discusses the nature of the risks in Islamic banking, securitization, and corporate governance challenges. Archer and Karim have co-authored and edited many works for Euromoney Books.
  479.  
  480. Find this resource:
  481.  
  482. Chong, Beng Soon, and Ming-Hua Liu. “Islamic Banking: Interest-Free or Interest-Based?” Pacific Basin Finance Journal 17, no.1 (2009): 125–144.
  483.  
  484. DOI: 10.1016/j.pacfin.2007.12.003Save Citation »Export Citation »E-mail Citation »
  485.  
  486. A good example of how the field has been integrated into Western legal debates.
  487.  
  488. Find this resource:
  489.  
  490. Ebrahim, Muhammad Shaheed. “Integrating Islamic and Conventional Project Finance.” Thunderbird International Business Review 41, no. 4–5 (1999): 583–609.
  491.  
  492. Save Citation »Export Citation »E-mail Citation »
  493.  
  494. This mathematically sophisticated article shows how virtually any conventional financial instrument may be converted into an Islamic one. Available online from Wiley InterScience.
  495.  
  496. Find this resource:
  497.  
  498. el-Gamal, Mahmoud A.. Islamic Finance: Law, Economics, and Practice. Cambridge, UK: Cambridge University Press, 2006.
  499.  
  500. Save Citation »Export Citation »E-mail Citation »
  501.  
  502. Hailed as one of the first books on Islamic finance written in the law and economics tradition. El-Gamal discusses the “substantive spirit of Islamic law.”
  503.  
  504. Find this resource:
  505.  
  506. Fadel, Mohammad. “Riba, Efficiency, and Prudential Regulation: Preliminary Thoughts.” Wisconsin International Law Journal 25, no. 4 (2008): 655–702.
  507.  
  508. Save Citation »Export Citation »E-mail Citation »
  509.  
  510. A good introduction to the study of Islamic finance and Western regulatory institutions. Available online.
  511.  
  512. Find this resource:
  513.  
  514. Jaffer, Sohail, ed. Islamic Retail Banking and Finance: Global Challenges and Opportunities. London: Euromoney Books, 2005.
  515.  
  516. Save Citation »Export Citation »E-mail Citation »
  517.  
  518. A good overview of the commercial Islamic banking market, its risks, and prospects for growth.
  519.  
  520. Find this resource:
  521.  
  522. Moghul, Umar F. “No Pain, No Gain: The State of the Industry in Light of an American Islamic Private Equity Transaction.” Chicago Journal of International Law 7, no. 2 (2007): 469–494.
  523.  
  524. Save Citation »Export Citation »E-mail Citation »
  525.  
  526. Provides a case study of currently implemented Islamic private equity transactions in the United States. Moghul argues that the growth of Islamic banking has allowed the industry to increasingly implement a greater portion of its substantive concepts. Available online from Failaka Advisors.
  527.  
  528. Find this resource:
  529.  
  530. Islamic Banking and the 2008 Credit Freeze
  531. The financial crisis that began in 2008, which appears to be at least partly connected to irresponsible lending and speculation, illustrates some of the strengths and shortcomings of Islamic finance as it is currently practiced around the globe. The increased scrutiny may harm the Islamic sector in particular, because its products and practices are so unfamiliar to Western bankers, yet the industry is trending towards “integration” with global markets (Chong and Liu 2009). Indeed, there are already calls for an examination of the legality of Islamic financial services in the United States (Yerushalmi 2008). On a positive note, the global growth of Islamic banking has sparked a dialogue among lawyers, academics, and Islamic scholars about globalization, money, and values (Sorenson 2008, Tripp 2006). Because Islamic banks use different products and procedures than conventional banks—”we do not rent money, we invest in you”—some expected the sector to fare better in the global financial crisis sparked by the freeze of U.S. credit markets (Ambah 2008). As of May 2009, however, financial observers have been more restrained when assessing the industry's prospects. Because Islamic financial institutions participate in the global economy, some observers have argued that they are not immune to crises like the recent financial pandemic (Richter 2008).
  532.  
  533. Ambah, Faiza Saleh. “Islamic Banking: Steady in Shaky Times.” Washington Post, 31 October 2008.
  534.  
  535. Save Citation »Export Citation »E-mail Citation »
  536.  
  537. Discusses Islamic Banking and the financial crises of 2008. Available online.
  538.  
  539. Find this resource:
  540.  
  541. Chong, Beng Soon, and Ming-Hua Liu. “Islamic Banking: Interest-Free or Interest-Based?” Pacific Basin Finance Journal 17, no.1 (2009): 125–144.
  542.  
  543. DOI: 10.1016/j.pacfin.2007.12.003Save Citation »Export Citation »E-mail Citation »
  544.  
  545. Discusses the status of riba with reference to recent standardization efforts.
  546.  
  547. Find this resource:
  548.  
  549. Islamic Banking Network International (IBNI).
  550.  
  551. Save Citation »Export Citation »E-mail Citation »
  552.  
  553. IBNI is a commercial Islamic bank, and its website provides basic information about Islamic finance.
  554.  
  555. Find this resource:
  556.  
  557. Richter, Frederik. “ANALYSIS—Islamic Finance No Longer Immune to Crisis.” Thomson Reuters, 3 December 2008.
  558.  
  559. Save Citation »Export Citation »E-mail Citation »
  560.  
  561. Newswire article on how the 2008 credit crisis has affected Islamic banks. Available online.
  562.  
  563. Find this resource:
  564.  
  565. Sorenson, Bjorn. “Ethical Money: Financial Growth in the Muslim World.” American University International Law Review 23, no. 4 (2008): 647–659.
  566.  
  567. Save Citation »Export Citation »E-mail Citation »
  568.  
  569. Looks at how Islamic finance has affected the financial growth of the Islamic world. Available online from Social Science Research Network.
  570.  
  571. Find this resource:
  572.  
  573. Tripp, Charles. Islam and the Moral Economy: The Challenge of Capitalism. Cambridge, UK: Cambridge University Press, 2006.
  574.  
  575. Save Citation »Export Citation »E-mail Citation »
  576.  
  577. Tripp's work is more theoretical and deals with the tension between Islamic and free-market economic principles.
  578.  
  579. Find this resource:
  580.  
  581. Yerushalmi, David. “Shariʿah's Black Box: Civil Liability and Criminal Exposure Surrounding Shariʿah-Compliant Finance.” Berkeley, CA: Berkeley Electronic Press, 2008.
  582.  
  583. Save Citation »Export Citation »E-mail Citation »
  584.  
  585. Yerushalmi discusses the legal importance of regulation for the industry. Available online.
  586.  
  587. Find this resource:
  588.  
  589. Egypt
  590. Faisal Islamic Bank of Egypt, established by law in 1977, was one of the first commercial Islamic banks to be established, although Ahmad al-Najjar had pioneered a prototype in the mid-1960s. Henry 1996 and Ray 1995 offer good introductions to official Islamic banking in Egypt (Ray builds on Henry's data set). Egyptian Islamic banks should not be confused, however, with the “Islamic” investment companies formed as pyramidic schemes by black-market money changers in the mid-1980s and discussed in Roussillon 1988 as well as Henry 1996. The Islamic banks attracted nearly 10 percent of the total commercial banking deposits in 1986, but their share has since diminished, even though a number of conventional banks, including Bank Misr, opened Islamic branches. They have lost their novelty, as noted in Soliman 2004, and many scholars still question whether Islam really prohibits interest (Mallat 1988).
  591.  
  592. Galloux, Michel. Finance Islamique et pouvoir politique: Le cas de l'Egypte moderne. Paris: Presses Universitaires de France, 1997.
  593.  
  594. Save Citation »Export Citation »E-mail Citation »
  595.  
  596. This excellent case study of Islamic finance in Egypt was originally a doctoral dissertation at the Institut d'Etudes Politiques de Paris. It documents the subtle conflict between Egypt's Islamic financiers and the government.
  597.  
  598. Find this resource:
  599.  
  600. Henry, Clement M. The Mediterranean Debt Crescent: Money and Power in Algeria, Egypt, Morocco, Tunisia, and Turkey. Gainesville: University Press of Florida, 1996.
  601.  
  602. Save Citation »Export Citation »E-mail Citation »
  603.  
  604. Analyzes both the Islamic and conventional components of Egyptian banking, showing how the Islamic banking establishment rejected the ostensibly “Islamic” investment companies that flourished in the mid-1980s and then collapsed, once official exchange rates were liberalized.
  605.  
  606. Find this resource:
  607.  
  608. Mallat, Chibli. “The Debate on Riba and Interest in Twentieth-Century Jurisprudence.” In Islamic Law and Finance. Edited by Chibli Mallat, 69–88. London: Graham and Trotman, 1988.
  609.  
  610. Save Citation »Export Citation »E-mail Citation »
  611.  
  612. Documents the debate that raged in Egypt and elsewhere concerning the meaning of riba: whether it refers to usury or all fixed-interest charges.
  613.  
  614. Find this resource:
  615.  
  616. Ray, Nicholas. Arab Islamic Banking and the Renewal of Islamic Law. London: Graham and Trotman, 1995.
  617.  
  618. Save Citation »Export Citation »E-mail Citation »
  619.  
  620. Includes a case study of Faisal Islamic Bank of Egypt (FIBE).
  621.  
  622. Find this resource:
  623.  
  624. Roussillon, Alain. Sociétés islamiques de placement de fonds et “ouverture économique.” Cairo, Egypt: CEDEJ, 1988.
  625.  
  626. Save Citation »Export Citation »E-mail Citation »
  627.  
  628. Examines the relationship between ostensibly “Islamic” investment companies and Egypt's economic opening. The companies were never recognized as Islamic banks by the official Islamic banking community, although they recruited some religious scholars.
  629.  
  630. Find this resource:
  631.  
  632. Soliman, Samer. “The Rise and Decline of the Islamic Banking Model in Egypt.” In The Politics of Islamic Finance. Edited by Clement M. Henry and Rodney Wilson, 265–285. Edinburgh: Edinburgh University Press, 2004.
  633.  
  634. Save Citation »Export Citation »E-mail Citation »
  635.  
  636. Presents a balanced political appraisal of the Islamic finance phenomenon in Egypt and concludes that it has become a mundane part of the public landscape, much like ladies' head scarves.
  637.  
  638. Find this resource:
  639.  
  640. Gulf Principalities
  641. Islamic banking has been a growth industry, especially in the Gulf. Abdi 2005 and Ebrahim 2008 focus on real estate opportunities.
  642.  
  643. Abdi, Sameer. “Survival of the Fittest: The Future of Shariʿa-compliant Retail Banking in the GCC.” In Islamic Retail Banking and Finance: Global Challenges and Opportunities. Edited by Jaffer, Sohail, 49–71. London: Euromoney Books, 2005.
  644.  
  645. Save Citation »Export Citation »E-mail Citation »
  646.  
  647. Provides an overview of the growth of Islamic mortgages within the Gulf Cooperation Council.
  648.  
  649. Find this resource:
  650.  
  651. Ebrahim, M. Shahid. “Can an Islamic Model of Housing Finance Cooperative Elevate the Economic Status of the Underprivileged?” Research Paper No. 2008-04. Nottingham, UK: Nottingham University Business School, 2008.
  652.  
  653. Save Citation »Export Citation »E-mail Citation »
  654.  
  655. Investigates Islamic cooperative mortgage financing in Oman. Available online from Social Science Research Network.
  656.  
  657. Find this resource:
  658.  
  659. Iran
  660. In theory, all of the banks in Iran have been nationalized and Islamized, but legislation in 2000 has enabled the development of a private sector that may further extend Islamic finance practices. Two of the state banks are observers of the Islamic Financial Services Board; only the Central Bank of Iran is a full member. Islamic finance is, of course, perfectly compatible with stock markets, as Eslamloueyan 2005 observes, and its Iranian variant is integrated into IMF working papers, as illustrated by Haque and Mirakhor 1998 and Sundararajan, et al. 1998.
  661.  
  662. Eslamloueyan, Karim. “Stock Market Operation and Equity Price Determination in an Economy with an Interest-free Banking System: The Case of Iran.” In Islamic Perspectives on Wealth Creation. Edited by Munawar Iqbal and Rodney Wilson, 205–216. Edinburgh: Edinburgh University Press, 2005.
  663.  
  664. Save Citation »Export Citation »E-mail Citation »
  665.  
  666. Documents the growth of the Tehran Stock Exchange (TSE) after the banks were nationalized and finance was Islamized. Bonds could no longer be traded on the TSE, but the stock market flourished, and it is analyzed here by applying conventional econometric techniques.
  667.  
  668. Find this resource:
  669.  
  670. Haque, Nadeem Ul, and Abbas Mirakhor. “The Design of Instruments for Government Finance in an Islamic Economy.” IMF Working Paper No. 98/54. Washington, DC: International Monetary Fund, 1998.
  671.  
  672. Save Citation »Export Citation »E-mail Citation »
  673.  
  674. Discusses applications for public finance accepted by the Islamic Republic of Iran. Available online from Social Science Research Network.
  675.  
  676. Find this resource:
  677.  
  678. Sundararajan, V., David Marston, and Ghiath Shabsigh. “Monetary Operations and Government Debt Management.” IMF Working Paper No. 98/144. Washington, DC: International Monetary Fund, 1998.
  679.  
  680. Save Citation »Export Citation »E-mail Citation »
  681.  
  682. This paper shows how Islamic financial instruments have been able to manage monetary policy and public borrowing requirements, and it provides details on the new instruments currently being developed in both the Islamic Republic of Iran and Sudan. Available online from Social Science Research Network.
  683.  
  684. Find this resource:
  685.  
  686. Jordan
  687. Established in 1978, the Jordan Islamic Bank for Finance and Investment had acquired almost 9 percent of the total commercial banking deposits by the mid-1990s (al-Omar and Abdel-Haq 1996). The much larger Arab Bank, originally established in 1930, opened the Islamic International Arab Bank in 1997. The two Islamic banks accumulated well over 10 percent of the total deposits in the nation over the ensuing decade. Malley 2004 discusses the political implications of Islamic finance for Jordan.
  688.  
  689. al-Omar, Fuad, and Mohammad Abdel-Haq. “The Jordan Islamic Bank for Finance and Investment (JIB): The Experience of an Islamic Bank in Jordan.” In Islamic Banking: Theory, Practice, and Challenges. Edited by Fuad al-Omar and Mohammad Abdel-Haq, 48–62. Atlantic Highlands, NJ: Zed Books, 1996.
  690.  
  691. Save Citation »Export Citation »E-mail Citation »
  692.  
  693. Offers a useful profile of the evolution of the Jordan Islamic Bank, supported by balance sheets and income statements of the bank.
  694.  
  695. Find this resource:
  696.  
  697. Malley, Mohammed. “Jordan: A Case Study of the Relationship between Islamic Finance and Islamist Politics.” In The Politics of Islamic Finance. Edited by Clement M. Henry and Rodney Wilson, 191–215. Edinburgh: Edinburgh University Press, 2004.
  698.  
  699. Save Citation »Export Citation »E-mail Citation »
  700.  
  701. Examines the complex relationships between Islamic bankers and Islamist politicians, raising the possibility that bankers encourage the political actors to work constructively for change within the system.
  702.  
  703. Find this resource:
  704.  
  705. Pakistan
  706. Despite official orders in 1984 to transform all commercial banks into Islamic financial institutions (al-Omar and Abdel-Haq 1996), real Islamic banking came to Pakistan only in 2002, with the establishment of Meezan Bank, a full-fledged private-sector Islamic commercial bank. Others followed, increasing the Islamic share of commercial banking to 1 percent in the 2000s. Ayub 2002 and Hassan and Azfar 2001 describe the prior gaps between theory and practice. As of mid–2008, there were five full-fledged Islamic banks in Pakistan, together with four public sector banks and twenty additional conventional private-sector banks, not to mention foreign banks with local presences. The largest of the Islamic banks, Meezan, has more than 160 branches in 40 cities.
  707.  
  708. Ayub, Muhammad. Islamic Banking and Finance: Theory and Practice. Karachi, Pakistan: State Bank of Pakistan, 2002.
  709.  
  710. Save Citation »Export Citation »E-mail Citation »
  711.  
  712. Discusses the gaps between theory and practice in Islamic financial institutions.
  713.  
  714. Find this resource:
  715.  
  716. Hassan, Parvez, and Azim Azfar. Moving Toward an Islamic Financial Regime in Pakistan. Cambridge, MA: Islamic Legal Studies Program, Harvard Law School, 2001.
  717.  
  718. Save Citation »Export Citation »E-mail Citation »
  719.  
  720. Discusses the gaps between theory and practice in Islamic financial institutions. Available online.
  721.  
  722. Find this resource:
  723.  
  724. Meezan Bank.
  725.  
  726. Save Citation »Export Citation »E-mail Citation »
  727.  
  728. Meezan is the largest Islamic bank in Pakistan.
  729.  
  730. Find this resource:
  731.  
  732. al-Omar, Fuad, and Mohammad Abdel-Haq. “Islamic Banking in Pakistan.” In Islamic Banking: Theory, Practice, and Challenges. Edited by Fuad al-Omar and Mohammad Abdel-Haq, 96–103. Atlantic Highlands, NJ: Zed Books, 1996.
  733.  
  734. Save Citation »Export Citation »E-mail Citation »
  735.  
  736. This chapter offers a readable account of the early evolution of Islamic banking in Pakistan. The book also covers a number of other countries and analyzes the practical, philosophical, and religious aspects of Islamic banking practice from a devout Muslim perspective.
  737.  
  738. Find this resource:
  739.  
  740. Saudi Arabia
  741. The Kingdom of Saudi Arabia has never recognized distinctly Islamic banks, lest others be viewed as less than Islamic, and hence contrary to the regime's tenets of faith. Saudi Arabia is host, however, to the Islamic Development Bank (see Billah 2007) and to two principal international holding companies of Islamic banks, the Dar al Mal al Islami (Mohammed al-Faisal's group) and Al-Baraka Group. Since the mid-1990s, moreover, the other commercial banks have developed windows for Islamic financial instruments, and a leading one, Al Rajhi Bank, claims to be entirely Islamic and pays no interest on deposits. This bank had almost 14 percent of Saudi Arabia's commercial banking deposits in 2000. In addition, Islamic finance had a much larger share of the total market by the end of the decade. The Saudi American Bank also markets Islamic financial instruments, although it is the kingdom's leading conventional bank, originally managed by Citibank.
  742.  
  743. Al Rajhi Bank.
  744.  
  745. Save Citation »Export Citation »E-mail Citation »
  746.  
  747. The website of the Al Rajhi Bank includes a page introducing “a new Islamic credit card called ‘Qassit’ which has been added to [their] family of cards. The Qassit credit card gives you the purchasing power to shop, withdraw cash and repay in monthly installments to meet your needs. You only need to pay 5% of the amount owed or SR 100, whichever is greater without any additional cost and of course like all of our products the card is fully Sharia compliant.”
  748.  
  749. Find this resource:
  750.  
  751. Billah, Mohd Maʾsum. Applied Islamic Law of Trade and Finance: A Selection of Contemporary Practical Issues, 3d ed. Selangor, Malaysia: Sweet and Maxwell Asia, 2007.
  752.  
  753. Save Citation »Export Citation »E-mail Citation »
  754.  
  755. An expert on Islamic Finance, Billah is the director of Global Trade and Investment Cooperation of OIC countries at the Islamic Chamber of Commerce and Industry (ICCI), Jeddah. He is also the founder of the Global Centre for Applied Islamic Finance.
  756.  
  757. Find this resource:
  758.  
  759. Saudi American Bank.
  760.  
  761. Save Citation »Export Citation »E-mail Citation »
  762.  
  763. This bank has a rich website, including a News page, which contains reports on the Saudi budget and economy, as well as information about Islamic investment opportunities through the bank.
  764.  
  765. Find this resource:
  766.  
  767. Southeast Asia
  768. Tabung Haji (Pilgrim Fund Board of Malaysia) was founded in 1963 to finance prospective Malaysian Muslim pilgrims, but the first Islamic bank in Southeast Asia was Bank Islam Malaysia (BIM), founded in 1983. The Islamic banking sector is highly developed in Malaysia, but less so in Indonesia, where there is a vast potential clientele, or in Thailand and the Philippines, where there are small Muslim minorities. Venardos 2005 also includes Brunei in his overview of Islamic finance in the region. Hefner 2006 discusses Indonesia, while the other works cited below all focus on the more developed Islamic financial system of Malaysia.
  769.  
  770. Haneef, Mohamed Aslam. “The Development and Impact of Islamic Economic Institutions: The Malaysian Experience.” In Islam in Southeast Asia: Political, Social, and Strategic Challenges for the 21st Century. Edited by K. S. Nathan and Mohammad Hashim Kamali, 82–102. Singapore: Institute of Southeast Asian Studies, 2005.
  771.  
  772. Save Citation »Export Citation »E-mail Citation »
  773.  
  774. Presents a lucid summary of the evolution of Islamic finance in Malaysia.
  775.  
  776. Find this resource:
  777.  
  778. Haron, Sudin, and Badrul H. Kamaruddin. “Wealth Mobilization by Islamic Banks: The Malaysian Case.” In Islamic Perspectives on Wealth Creation. Edited by Munawar Iqbal and Rodney Wilson, 49–68. Edinburgh: Edinburgh University Press, 2005.
  779.  
  780. Save Citation »Export Citation »E-mail Citation »
  781.  
  782. Compares the financial performances and practices of two Islamic banks in Malaysia, a leading cooperative bank that gradually converted to exclusively Islamic financial activities in the mid-1990s, and Bank Islam Malaysia, the country's first Islamic bank, founded in 1983.
  783.  
  784. Find this resource:
  785.  
  786. Hefner, Robert. “Islamic Economics and Global Capitalism.” Society 44, no. 1 (2006): 16–22.
  787.  
  788. DOI: 10.1007/BF02690463Save Citation »Export Citation »E-mail Citation »
  789.  
  790. Hefner's work focuses on Southeast Asia, especially Indonesia.
  791.  
  792. Find this resource:
  793.  
  794. Kuwait High Consultative Council for the Completion of the Implementation of the Islamic Shariʿa. Proceedings of the Symposium of the Malaysian Experience in Islamic Banking, 9–12 March 1996. Kuwait: High Consultative Council for the Completion of the Implementation of the Islamic Shariʿa, 1996.
  795.  
  796. Save Citation »Export Citation »E-mail Citation »
  797.  
  798. Articles summarize the evolution of Islamic finance in Malaysia until the mid-1990s, including a discussion of Islamic capital markets as well as banks.
  799.  
  800. Find this resource:
  801.  
  802. Venardos, Angelo M. Islamic Banking and Finance in South-East Asia: Its Development and Future. Hackensack, NJ: World Scientific Publishing, 2005.
  803.  
  804. Save Citation »Export Citation »E-mail Citation »
  805.  
  806. The author, a non-Muslim specialist in international finance, offers a useful overview of the history, methods, and rules of Islamic finances in Southeast Asia (i.e., the Philippines, Indonesia, Malaysia, and Brunei).
  807.  
  808. Find this resource:
  809.  
  810. Sudan
  811. Although president Jaafar Nimeiri (r. 1969–1985) decreed all Sudanese banks to be Islamic in 1983, Sudan still has distinctively Islamic banks coexisting with a conventional banking system. The Islamic family of banks constituted over one-quarter of the entire commercial banking system in 2000, but Stiansen 2004 and Saaid 2005 underline its weaknesses. The stock market also suffers (Hearn 2008), but more because of being located in an underdeveloped market and the existence of international sanctions than for reasons that can be attributed to Islamic finance.
  812.  
  813. Hearn, Bruce. “An Emerging Islamic Financial Market: A Case Study of the Sudanese Stock Market.” Working Paper Series. London: City University London, Sir John Cass Business School, 2008.
  814.  
  815. Save Citation »Export Citation »E-mail Citation »
  816.  
  817. This article examines a uniquely Sharia-compliant stock exchange facing serious issues of international sanctions and an underdeveloped economy, while arguing that stock exchanges remain a less expensive means of raising capital than banks. Available online from Social Science Research Network.
  818.  
  819. Find this resource:
  820.  
  821. Saaid, Abd Elrahman E. “Allocative and Technical Inefficiency in Sudanese Islamic Banks: An Empirical Investigation.” In Islamic Perspectives on Wealth Creation. Edited by Munawar Iqbal and Rodney Wilson, 142–152. Edinburgh: Edinburgh University Press, 2005.
  822.  
  823. Save Citation »Export Citation »E-mail Citation »
  824.  
  825. This chapter presents an econometric analysis showing how inefficiently six Sundanese Islamic banks allocate their resources. They tend to have diverted capital to unproductive fixed assets in less profitable branches rather than investing in new technologies, partly due to economic sanctions precluding the latter.
  826.  
  827. Find this resource:
  828.  
  829. Stiansen, Endre. “Interest Politics: Islamic Finance in the Sudan, 1977–2001.” In The Politics of Islamic Finance. Edited by Clement M. Henry and Rodney Wilson, 155–167. Edinburgh: Edinburgh University Press, 2004.
  830.  
  831. Save Citation »Export Citation »E-mail Citation »
  832.  
  833. Examines political as well economic criteria for evaluating Islamic finance in Sudan. Stiansen concludes that while the banks were an economic failure, they were successful in empowering new business constituencies.
  834.  
  835. Find this resource:
  836.  
  837. Sundararajan, V., David Marston, and Ghiath Shabsigh. “Monetary Operations and Government Debt Management.” IMF Working Paper No. 98/144. Washington, DC: International Monetary Fund, 1998.
  838.  
  839. Save Citation »Export Citation »E-mail Citation »
  840.  
  841. This paper shows how Islamic financial instruments have been able to manage monetary policy and public borrowing requirements, and it provides details on the new instruments currently being developed in both the Islamic Republic of Iran and Sudan. Available online from Social Science Research Network.
  842.  
  843. Find this resource:
  844.  
  845. Turkey
  846. Prime Minister Turkut Özal (r. 1989–1993) enabled leading Saudi financiers to introduce “special finance houses” to secular Turkey after 1983 (al-Omar and Abdel-Haq 1996). They constituted 4.4 percent of the commercial banking market for deposits in 2008 and were growing more rapidly than the system as a whole under Turkey's moderately Islamist political leadership. Baskan 2004 discusses one of the most interesting of these finance houses, and Inanoglu and el-Gamal 2005 presents an econometric analysis of the Turkish banking system, including the special finance houses.
  847.  
  848. Baskan, Filiz. “The Political Economy of Islamic Finance in Turkey: The Role of Fethullah Gülen and Asya Finans.” In The Politics of Islamic Finance. Edited by Clement M. Henry and Rodney Wilson, 216–239. Edinburgh: Edinburgh University Press, 2004.
  849.  
  850. Save Citation »Export Citation »E-mail Citation »
  851.  
  852. Discusses the Fethullah Gülen social movement and its relationships with Asya Finans during a critical period of tension between secular and Islamist politicians in Turkey.
  853.  
  854. Find this resource:
  855.  
  856. Inanoglu, Hulusi, and Mahmoud A. el-Gamal. “Inefficiency and Heterogeneity in Turkish Banking: 1990–2000.” Journal of Applied Econometrics 20, no. 5 (2005): 641–664.
  857.  
  858. DOI: 10.1002/jae.835Save Citation »Export Citation »E-mail Citation »
  859.  
  860. Examines the variety and respective performances of financial establishments in Turkey.
  861.  
  862. Find this resource:
  863.  
  864. al-Omar, Fuad, and Mohammad Abdel-Haq. “Special Finance Houses in Turkey, with Emphasis on (Al-Baraka Turk) Al-Baraka Turkish Finance House.” In Islamic Banking: Theory, Practice, and Challenges. Edited by Fuad al-Omar and Mohammad Abdel-Haq, 63–83. Atlantic Highlands, NJ: Zed Books, 1996.
  865.  
  866. Save Citation »Export Citation »E-mail Citation »
  867.  
  868. This chapter discusses how the Saudi Islamic financiers introduced Islamic banking to secular Turkey in the form of “special finance houses.”
  869.  
  870. Find this resource:
  871.  
  872. The West (EU and US)
  873. As Islamic finance has taken hold in the Western world, secular jurists have begun to challenge both the reality and the legality of Islamic banking products and services (Yerushalmi 2008) or their actual deviation from medieval scholarship (Hamoudi 2007b). There are a number of works on Islamic banks in Europe (al-Omar and Abdel-Haq 1996, Aquil 2005, Bälz 2007, Wilson 1999), especially in Britain. There are critics who maintain that there is nothing distinct about the modes of Islamic banking (Chong and Lui 2009). Others caution that the distinct modes of Islamic banking are structural rather than substantive (Hamoudi 2007b).
  874.  
  875. Aquil, Bilal. “Takaful: Models and Markets in the United Kingdom and Europe.” In Islamic Retail Banking and Finance: Global Challenges and Opportunities. Edited by Sohail Jaffer, 131–138. London: Euromoney Books, 2005.
  876.  
  877. Save Citation »Export Citation »E-mail Citation »
  878.  
  879. Gives an overview of Islamic banking and insurance from an industry point of view.
  880.  
  881. Find this resource:
  882.  
  883. Bälz, Kilian. “Islamic Finance for European Muslims: The Diversity of Shariʿah-Compliant Transactions.” Chicago Journal of International Law 7, no. 2 (2007): 551–568.
  884.  
  885. Save Citation »Export Citation »E-mail Citation »
  886.  
  887. Bälz argues that the British common law tradition seems more consonant with the legal needs of Islamic finance than Continental European statutory codes.
  888.  
  889. Find this resource:
  890.  
  891. Chong, Beng Soon and Ming-Hua Liu. “Islamic Banking: Interest-Free or Interest-Based?” Pacific Basin Finance Journal 17, no.1 (2009): 125–144.
  892.  
  893. DOI: 10.1016/j.pacfin.2007.12.003Save Citation »Export Citation »E-mail Citation »
  894.  
  895. Case study of Malaysia and the Islamic profit-and-loss sharing (PLS) paradigm. The authors find that only a negligible portion of Islamic bank financing is strictly PLS-based and that Islamic deposits are not interest free. Concludes that Islamic banks should be regulated like their conventional counterparts.
  896.  
  897. Find this resource:
  898.  
  899. Hamoudi, Haider Ala. “Jurisprudential Schizophrenia: On Form and Function in Islamic Finance.” Chicago Journal of International Law 7, no. 2 (2007a): 605–622.
  900.  
  901. Save Citation »Export Citation »E-mail Citation »
  902.  
  903. Argues that current Islamic financial practices are entirely “formal in their structure and are equivalent to conventional structures both legally and economically.” Hamoudi suggests that “the practice needs to reinvent itself, focusing less on mimicking conventional alternatives and more on achieving at least to some degree the ends of social justice and fairness.” Available online from Social Science Research Network.
  904.  
  905. Find this resource:
  906.  
  907. Hamoudi, Haider Ala. “Muhammad's Social Justice or Muslim Cant?: Langdellianism and the Failures of Islamic Finance.” Cornell International Law Journal 40, no. 1 (2007b): 89–135.
  908.  
  909. Save Citation »Export Citation »E-mail Citation »
  910.  
  911. Discusses the history and growth of Islamic finance and provides a contrast to the interpretation of the reasons for the industry's expansion presented in Vogel and Hayes 1998 (see Development and Growth or Riba). Available online.
  912.  
  913. Find this resource:
  914.  
  915. Hamoudi, Haider Ala. “You Say You Want a Revolution: Interpretative Communities and the Origins of Islamic Finance.” Virginia Journal of International Law 48 (2007c).
  916.  
  917. Save Citation »Export Citation »E-mail Citation »
  918.  
  919. Discusses Islamic consumer finance and the experience of enforcing Islamic financial transactions in European courts. Available online from Social Science Research Network and from bepress's SelectedWorks.
  920.  
  921. Find this resource:
  922.  
  923. Hamoudi, Haider Ala. “The Muezzin's Call and the Dow Jones Bell: On the Necessity of Realism in the Study of Islamic Law.” American Journal of Comparative Law 56, no. 2 (2008): 423–499.
  924.  
  925. Save Citation »Export Citation »E-mail Citation »
  926.  
  927. Discusses the “central flaw in the current approach to shariʿa in the American legal academy” and “the reliance on the false assumption that contemporary Islamic rules are derived from classical doctrine.” Available online from Social Science Research Network and from bepress's SelectedWorks.
  928.  
  929. Find this resource:
  930.  
  931. al-Omar, Fuad, and Abdel-Haq, Mohammad. “Al-Baraka International Bank Limited (AIBL): The Experience of an Islamic Bank in England.” In Islamic Banking: Theory, Practice, and ChallengesEdited by Fuad al-Omar and Mohammad Abdel-Haq, 21–33. Atlantic Highlands, NJ: Zed Books, 1996.
  932.  
  933. Save Citation »Export Citation »E-mail Citation »
  934.  
  935. Case study of the relationship of one Islamic bank to the social, cultural, and economic context.
  936.  
  937. Find this resource:
  938.  
  939. Wilson, Rodney. “Challenges and Opportunities for Islamic Banking and Finance in the West: The United Kingdom Experience.” Thunderbird International Business Review 41, no. 4–5 (1999): 421–444.
  940.  
  941. Save Citation »Export Citation »E-mail Citation »
  942.  
  943. Examines the characteristics of the British market for Islamic banking and financial services and analyzes the activities of the major institutions involved.
  944.  
  945. Find this resource:
  946.  
  947. Yerushalmi, David. “Shariʿah's Black Box: Civil Liability and Criminal Exposure Surrounding Shariʿah-Compliant Finance.” Berkeley, CA: Berkeley Electronic Press, 2008.
  948.  
  949. Save Citation »Export Citation »E-mail Citation »
  950.  
  951. Yerushalmi discusses the legal importance of regulation for the industry and, as it is currently practiced, some potential conflicts with American law. Available online.
  952.  
  953. Find this resource:
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