The promise of Islamic finance
The UK government is apparently planning to sell £200 million worth of bonds that are compatible with the rules of Islamic finance. This is symbolic of the growth of so-called sharia compatible investments.
There are high hopes of Islamic finance amongst some of its promoters. For some of those who are trying to create new regimes in the aftermath of the Arab Spring, it appears to offer a new political economy for a new political order. The ban on the charging of interest is supposed to create a market economy without capitalism: giving people freedom to trade without being exploitation by the owners of finance capital.
Why that promise is not delivered on
John Esposito, a professor of Islamic studies, asks rhetorically:
Where are the 10 largest Islamic Finance banks: Saudi Arabia? Kuwait? Qatar? or even Malaysia which has positioned itself to be the global capital for Islamic banking? If you guessed any of these or indeed any country in the Muslim world, you would be wrong. While Islamic banks do exist in many Muslim countries, the 10 largest Islamic finance institutions are European and American banks. UBS, HSBC, Barclays, Deutsche Bank, Standard Chartered, Lloyds, Swiss re, Citigroup, Goldman Sachs and Morgan Stanley are some of the leading Western institutions that have rushed to the Shariah-compliant market. To assure their acceptability, all have Shariah advisory boards, made up of well-credentialed Islamic scholars.
It is often argued that Islam is too inflexible to accommodate itself to modernity, for which the weak economic and social development of much of the Islamic world is often cited as evidence. That Islamic banking has been accommodated into the global financial system in this way is a strong indication that ways can be found to comply with ‘sharia’ law whilst still participating in activities considered essential for living in an advanced economy such as borrowing and saving money.
On the other hand, for those who had hoped that that Islamic finance can provide an alternative to Western capitalism the compatibility of the two must be disturbing. Timur Kuran, a Turkish American professor of economics has branded Islamic banking as “a mighty deceit” because “Islamic banks give and take interest as a matter of course, though under the guise of commissions, fees, penalties or profit shares. The holder of a “halal” credit card pays a penalty on unpaid balances; this penalty is proportionate to the size of the balance, which makes it equivalent to interest. The sharia code was suited to the Middle Ages, when it assumed its classical form. At least on matters of economics and finance, it has not advanced measurably since then. To regain economic usefulness, it would have to be modified so extensively as to make it unrecognisable.”
Why this matters to Christians
I would suggest that this is also relevant to debates within Christianity. What conservative evangelicals are trying to do to Christianity is at a certain level trying to make it more like Islam: a faith centred on an inerrant scripture delivered direct from God that yields a set of binding and inflexible set of moral precepts. They also have a tendency to suggest that Christians who advocate a less legalistic form of the faith are seeking an easier faith. On the contrary as Islamic finance shows it is legalism that is easy. A set of specific rules can either be complied with or not. Hence Islamic theology tends to affirm the possibility of an individual saving themselves from sin. By contrast, it is virtually impossible not to fall short of the command to “love others as we love ourselves” hence the Christian emphasis on us being rescued by God’s grace