The Politics of Islamic Finance

Article excerpt

ECONOMIC CONDITIONS The Politics of Islamic Finance, ed. by Clement M. Henry and Rodney Wilson. New York and Edinburgh: Columbia University Press and Edinburgh University, 2004. 295 pages. Contribs. Index to p. 307. $30.

This collection of articles addresses a number of political aspects surrounding Islamic finance, and whets the reader's appetite for more in-depth treatment of the politics shaping the industry. A common shortcoming of essays collected in a single volume is that some points are treated repeatedly by various authors (albeit from slightly different vantage points and in different contexts), while other important points are not sufficiently addressed.

Most political questions that come to mind today are framed by the post September 11"1 world order. Excluding the editors' introduction and conclusion of the volume, Ibrahim Warde's article is the only one that discusses this issue in some detail, paralleling and updating the analysis in his recent book, also published by Edinburgh University Press, in 2003. This analysis highlights US policy-circles' prior ignorance of the nature of Islamic finance (to the point of confusing two very different institutions: Al-Baraka and Al-Barakaat), but Western governments more generally have since increased their understanding of (and sympathy towards) Islamic finance. Indeed, after the publication of this volume, Britain's Financial Services Authority (FSA) licensed the first Islamic bank in Europe: Islamic Bank of Britain, PIc., and the first Western "Islamic" bonds were issued by the German state of Saxony Anhalt. The US Treasury also created a position of "scholar-in-residence in Islamic finance" to enhance Washington's understanding of the industry.

Most articles in the volume concentrated on domestic and intra-Islamic-regional politics surrounding Islamic finance. In particular, the historical roots of Islamic finance, and the relationship of its financiers, pioneers and clients to Islamist movements, such as the Muslim Brotherhood, are featured in multiple articles. The primary collective contribution of this volume, as summarized clearly in the editors' conclusions, is to highlight which political environments tend to be hospitable or hostile to Islamic financial growth, including relationships between various governments and their Islamist constituencies, be they actively political or otherwise. Particularly interesting are the nuanced analyses of government religious competition with private groups: For instance, the governmental posture in Egypt simultaneously exhibits hostility to Islamic banks through pronouncements and proposed legislation as well as offering Islamic financial services through state-owned banks. This phenomenon is part of larger competitions in most Islamic countries between state and private (grassroots or business-community-financed) domination of the religious scene.

The first article of the volume, by Monzer Kahf, offers a most intriguing history of Islamic finance, from it, germination in the theoretical Islamic economics literature of the 1950s and 1960s, up to its current state. Kahf focuses his article on the alliance between wealthy Arab Muslims, who gave rise to the industry and continued to support it financially through its formative years, and jurist-consults (fuqaha) or scholars ('ulama '), who helped establish the industry's credibility. …