out(19)

THE UNIVERSITY OF CHICAGO

THE “BUSINESS” OF CULTURE: MORALITY AND PRACTICE

IN ISLAMIC FINANCE

A DISSERTATION SUBMITTED TO

THE FACULTY OF THE DIVISION OF THE SOCIAL SCIENCES

IN CANDIDACY FOR THE DEGREE OF

DOCTOR OF PHILOSOPHY

DEPARTMENT OF PSYCHOLOGY: HUMAN DEVELOPMENT

BY

KAREN HUNT AHMED

CHICAGO, ILLINOIS

AUGUST 2007

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TABLE OF CONTENTS

LIST OF TABLES................................................................................................. viLIST OF FIGURES.............................................................................................. viiACKNOWLEDEGMENTS..................................................................................viiiABSTRACT.......................................................................................................... xi

ChapterI. INTRODUCTION: ISLAMIC FINANCE IN THE WORLD

ECONOMY.......................................................................................... 1The Islamic Finance Industry......................................................3

Growth industry..................................................................... 3Islamic financial institutions (IFIs).........................................3A contemporary industry....................................................... 4

Globalization and Muslim subjectivity......................................... 6Islamic law and authority............................................................ 8Islamic economic theory........................................................... 10Basics of conventional finance: credit and risk........................ 16Objections to conventional finance...........................................22

Specific products.............................................................. 23Gambling and uncertainty................................................ 25General business ethics................................................... 27

Prohibition of riba..................................................................... 29Definitions of riba..............................................................29

Riba in sales.............................................................29Riba in loans.............................................................31

Usury and the Abrahamic religions.................................. 32Objections to riba......................................................................36

Classical objections.......................................................... 37Tawhid and adalah........................................................... 39Equality and social justice................................................ 40

Islamic banking in Dubai.......................................................... 43Dubai: the city................................................................. 45

Methods................................................................................... 48Institutional affiliations.......................................................51Respondents.................................................................... 52Interview Protocol............................................................. 53

Chapter summaries.................................................................. 54

II. GLOBALIZATION: FLOWS AND CONSCIOUSNESS...................... 56Globalization theories...............................................................57Global flows.............................................................................. 58

World systems: Wallerstein and Wolf.............................. 59Globalization and flows: Appadurai.................................61


Financescapes: capital flows........................................... 63Ethnoscapes and deterritorialization................................64

Global consciousness...............................................................66Problems caused by globalization..........................................70

Problem #1: Self and identity...................................70Problem #2: Self and community.............................72Problem #3: Self and divinity................................... 74

Big Three moral discourse: Shweder...................................... 76Discourse..................................................................................81

Speech genres................................................................. 82Conclusion................................................................................85

III. DISCOURSE OF THE SELF: INTEGRATING WORLDVIEWSTHROUGH PRACTICE......................................................................86

Mediating globalization............................................................. 87“I am a citizen of the world”.............................................. 89Muslim subjectivity: Peter Mandaville............................. 91Interpellating the Islamic banker: Althusser.................... 93

Morality, institutions and self-identity........................................ 95IBF as a culture broker......................................................96

Evidence of moral discourse....................................................98Deterritorialization and identity........................................100Islamic finance as a bridge............................................. 102A bridge within Islam.......................................................103

Practices and the individual.................................................... 105Building a better self: Tripp............................................106(In)formal training........................................................... 110Financial transactions and partnership values............... 112Making a customer......................................................... 115

Reinforcing gender roles.........................................................116Peer pressure..........................................................................118Conclusion.............................................................................. 119

IV. DISCOURSE OF COMMUNITY: THE TRANSNATIONAL UMMA..\2\Transnational umma............................................................... 121

Deterritorialized community base................................... 124Community financial transactions................................... 125Salaam and Istisna.........................................................127Sukuk............................................................................. 129Takaful........................................................................... 130

Financial institutions and community welfare.........................135Shari’a Standards Board.................................................136Community and trust...................................................... 137

Gender and banking in Dubai.................................................139Gender segregation in Islam...........................................142

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Gender segregation in practice.......................................142Conclusion...............................................................................145

V. DISCOURSE OF DIVINITY: SPIRITUAL BELIEFS AND FINANCIAL PRACTICES..................................................................................... 147

Language and IBF...................................................................148Arabic: the divine language............................................152The language of riba....................................................... 157

Purity and piety........................................................................160Kosher products.............................................................. 160Mixing money and genders.............................................162

Purity, gender and Islamic banking......................................... 166T extual justification......................................................... 169Segregation in practice................................................... 170Gender and banking in Dubai......................................... 171

Ethical investing...................................................................... 176Corporate social responsibility........................................ 177Socially responsible investing......................................... 179Green funds.................................................................... 180IBF as ethical investing?................................................. 181Does ethical = religious investing?..................................184

Conclusion.............................................................................. 186

VI. CONCLUSION: THE “BUSINESS” OF CULTURE..........................187Does IBF work as a culture broker?........................................188How does IBF work as a culture broker?................................ 192

Nostalgia......................................................................... 192Interpellation................................................................... 193A balanced culture.......................................................... 196

A business of finance or a business of culture?......................198Contributions of this study.......................................................200Limitations of this study...........................................................203Future directions..................................................................... 205

APPENDICESA. Institutional Affiliations............................................................................ 207B. Interview Protocol................................................................................... 216

BIBLIOGRAPHY................................................................................................219

v


LIST OF TABLES

TABLE 1: Dubai Demographics..........................................................................47TABLE 2: Respondent Profiles........................................................................... 90

vi


FIGURE 1:

LIST OF FIGURES

Gendered Entrances........................................................... 168

vii


ACKNOWLEDGEMENTS

One of the greatest pleasures of the process of completing this

dissertation is the reflection upon all of the people who have encouraged and

supported me along the way. I am especially grateful to my Committee

members: Rick Shweder, the Chairman of my Committee, who has been my

inspiration and guide since the first day I walked into his Cultural Psychology

course. Many times, after I had struggled with an idea or its expression, one

short question from Rick would be all I needed to clear my thoughts and move

ahead. Richard Taub kept me on track throughout preparations for fieldwork and

encouraged me via e-mail through the trials and tribulations of that experience.

His influence permeates my field notes, as I constantly heard his admonitions

from afar to notice ever more detail about my surroundings. Once I was home

again, his words encouraged me never to give up. John Lucy is my “real life”

advisor. Not only could he keep my focus on the big picture of my project, he

has advised me patiently and ad nauseum (to him, I am certain, but not to me)

about what it really means to be a graduate student and budding professional

with a personal life as well. The occasional car ride home from Hyde Park can

never repay his support and faith in me. Wadad Kadi, in whose class I wrote my

first paper on riba, has kept me grounded in Islamic law and teachings as well as

in the experience of real Muslims living in the world today. It was always

encouraging to hear her support my observations with evidence from her vast

viii


knowledge of Islamic teachings. I feel honored that she has remained by my

side despite her overwhelming professional commitments.

Other members of the University of Chicago community have also

provided valuable support. Jennifer Cole and William Mazzarella introduced me

to contemporary and globalization theories, which have become my passion and

have added depth to my research. Their support was invaluable during the

conception of this project. Tanya Luhrmann, Saskia Sassen, Karin Knorr-Cetina,

Joe Tobin, Shinobu Kitayama, McKim Marriott and Leslie Salzinger have all

provided listening ears and insightful comments throughout the various stages of

my work. My classmates, of course, have provided intellectual challenges, moral

support, and just plain fun as we worked together. If I have overlooked anyone, it

is unintentional, and I apologize.

I would also like to acknowledge and thank the organizations that have

supported my research financially. The Social Science Research Council’s

“Corporation as Social Institution” fellowship program provided not only financial

support for my fieldwork, but an atmosphere of critical inquiry at its Berkeley

meeting in June 2002. The Markovitz Dissertation Fellowship for social and

economic behavior research helped me to do the bulk of the write-up.

I would especially like to acknowledge and thank the Islamic finance

professionals residing in and traveling to Dubai who gave so much of their time

and support to this project. Their true identities have remained anonymous in

this written document, but I am eternally grateful to them. Without them, this

project would not have been possible.

ix


Last, but certainly most importantly, I would like to thank my family. My

parents, Tom and Martha Hunt, instilled in me the importance of a good

education and an open mind about the world. My husband, Omer, has the

patience of a saint. He has been my guide and support throughout this journey

of graduate school. He has given his unwavering moral support and

encouragement and complained no more than absolutely necessary about its

inconveniences. My daughters, Ozakh and Hazar, have never known me as

anything other than a graduate student. They were especially understanding

during the last few months of writing the dissertation and I thank them for their

patience and understanding of the time I have spent away from them.


ABSTRACT

Islamic financial institutions (IFIs) are late twentieth century institutions

designed to help Muslims conduct business internationally while simultaneously

upholding traditional Islamic values related to trade finance and currency

movement. The basis for their existence is the Islamic moral prohibition on

charging interest—interest is a central component of capitalist banking—yet IFIs

conduct billions of dollars of business annually in the world economy and the de

facto Islamic banking transaction is—in most cases—virtually identical to a

capitalist banking transaction.

In this dissertation, I outline some of Islamic finance’s objections to

conventional finance. Then I discuss some of the external forces of globalization

that have impacted Muslims in the world today. I posit that the formation of the

industry is a response of Muslims to the impact of these forces upon their lives.

Technological advances and the relative ease of human and capital migration are

the primary factors in the formation of this condition of globalization. As a result

of these movements, traditional relationships of the self to various aspects of the

world must be mediated. Definitions of self, community and divinity in particular

are transformed and individuals turn to specific discourses to describe their

experiences of such relationships. There is a need for people to develop a global

consciousness to cope with the forces of globalization. I look to the industry’s

discourse of morality and daily practices to find evidence for the industry’s claim

xi


that Islamic finance offers the benefits of conventional finance without the

immorality.

My findings contribute to the knowledge of how globalization impacts

individuals and their daily lives. Existing globalization literature concentrates on

describing the effects of globalization on a large scale but it is necessary to

examine its impact on people affected by globalization in order to get a complete

picture of how the world has been transformed by migration and technological

advances. My findings also contribute to the field of cultural psychology by

redefining culture in terms of shared experiences based upon a person’s

identification with a global culture that includes a balanced view of capitalism and

a Muslim subjectivity.

xii


CHAPTER I

INTRODUCTION: ISLAMIC FINANCE IN THE WORLDECONOMY

Islamic banks are late twentieth century institutions designed, against the

backdrop of a global economy dominated by capitalist business practices, to help

Muslims conduct business internationally while simultaneously upholding

traditional Islamic values related to trade finance and currency movement. The

basis for their existence is the Islamic moral prohibition on charging interest—

interest is a central component of capitalist banking—yet Islamic banks conduct

billions of dollars of business annually in the world economy and the de facto

Islamic banking transaction is—in most cases—virtually identical to a capitalist

banking transaction. The industry of Islamic Banking and Finance (IBF)1 is the

manifestation of attempts to apply Islamic law and Islamic economic theory to

financial dealings.

This study will situate the industry and its practitioners in terms of global

capitalism and Islam by examining the external forces of globalization leading to

11 will follow Maurer (2005) and shorten the reference to ‘IBF’ throughout this dissertation.

1


the creation of such an industry. Next it will consider how the every day practices

of individuals are related to participation in the particular ideology of that

institution. This project will illuminate the processes by which the industry and its

professionals produce and reproduce the discourse and practices that support

the existence of Islamic banks. Through participant observation and semi

structured interviews with IBF professionals in Dubai, United Arab Emirates

(UAE), I examined the reasons people give for participating in IBF, the extent to

which there exists a distinct moral discourse surrounding participation in Islamic

Banking and ways in which this moral discourse and practice shapes

participants’ involvement in global economic activities.

Armed with the understanding that “it all began in Dubai,” I chose to do

fieldwork in the United Arab Emirates. After ten months of ethnographic

observations and in-depth interviews, and almost twenty years of traveling to

and/or living in the UAE, I now conceive of IBF as a particularized industry highly

relevant to the plight of Muslims in the context of contemporary globalization. The

existence of this industry is a partial answer to the question: “How can Muslims

living in the diaspora integrate their identities as Muslims with identities as global

citizens?” In my dissertation research, I address this question as it relates to

three areas of the human experience: the individual Muslim, to the Muslim

community (umma) and to ideas about purity in the Islamic divine belief system.

In a sense, the existence of IBF is an answer to the question of what happens

when Muslims—and Islam—travel and live around the globe.

2


The Islamic finance industry

Growth industry

The industry of Islamic banking and finance is growing daily. As of 1997,

more than $70 billion was being invested into the global economy by Muslim

investors (Wilson 1997): when I began my fieldwork in 2002, Islamic assets were

estimated to be around USD$200-300 billion. In 2006, the Islamic Development

Bank in Saudi Arabia estimates that Islamic financial institutions, manage more

than USD$800 billion

(http://www.reuters.com/article/MiddleEastlnvestment07/idUSL21479542007032

1?paqeNumber=2; accessed 4/3/07). There are approximately 250 - 300 Islamic

financial institutions worldwide and the world’s potential market for Islamic

finance consists of more than one billion Muslims, in addition to non-Muslims,

who are welcome to participate in Islamic finance. In the UAE alone, retail

deposits to Islamic banks grew 29% annually from 2001 - 2004, as opposed to a

15% annual growth rate for conventional banks (www.zawya.com). There are no

official figures for worldwide industry growth, but it is evident from the increased

number of conferences and seminars being offered through the various Islamic

finance websites that interest in the industry is growing rapidly around the world.

Islamic financial institutions (IFI)

An Islamic Financial Institution (IFI) refers to any financial institution that

performs Islamic transactions derived from either Islamic law or Islamic economic

theory. An Islamic Bank is an institution that performs “conventional” banking

3


http://www.reuters.com/article/MiddleEastlnvestment07/idUSL21479542007032

http://www.zawya.com

services2 (or their Islamic equivalent) such as checking accounts, savings

accounts, “loans,” etc. An IFI may or may not be a “bank” but an Islamic bank is

always an IFI. Islamic financial institutions include venture capital firms and

insurance companies, and may be distinguished from conventional banks by

three primary elements (Bahrain Monetary Agency 2002):

1. Prohibition of prohibited financing arrangements and business practices. The most important prohibition in Islamic finance is the prohibition of riba (interest or usury). This means not only that financing transactions are structured differently than in conventional finance, but also that the asset structure of the institution is based entirely upon tangible assets and partnership arrangements instead of on interest-based financial assets. Gharar (speculation) and maysir (gambling) are prohibited, as well as trading in haram (forbidden) goods such as alcohol, pork, and owning equity in riba-based institutions (Lewis and Algaoud 2001).

2. Integration of religious practices into daily life by governing business under Islamic law.

3. Existence of a Shari’a Standards Board (SSB) composed of Islamic scholars. The SSB’s purpose is to insure that Islamic law is being followed accurately in the business practices and financial arrangements of the IFI. A member of the SSB (called a “Shari’a Scholar”) has been trained formally in Islamic law, but has not necessarily been trained in finance. A separate financial standards board evaluates the efficacy of financial transactions, just as it does in a conventional institution, and the two boards often work together.

Ideally, an IFI should combine the elements of Islamic financial practices with

some effort to uphold Islamic daily life practices (Lewis and Algaoud 2001).

A contemporary industry

The religion of Islam has existed for 1400 years but Islamic economic

theory and its financial institutions as an industry emerged only in the 1970s.

Trade and finance have always been part of Islam’s history: the Prophet

2 A conventional bank will be defined in more detail in a later section of this chapter.4


Mohammed,3 the founder of Islam, was a businessman in the seventh century of

the Christian era, as was his wife Khadijah. Nonetheless, there was no such

thing as an Islamic bank until the late twentieth century. Classical Islamic

jurisprudence has always been concerned with regulating trade and financial

transactions between individuals and has produced a large body of rules on the

subject; however, those rules did not give rise to an Islamic financial system until

the 1970s (Kuran 2001). Udovitch (1979) points out that trade finance was

always prevalent in Muslim societies, just that merchants would provide financing

instead of financial institutions. This arrangement is similar to the function of

merchant lending in Europe at the same time (Udovitch 1979). For example,

bancherius institutions in Venice were not specialized and were usually part of

larger business operations, like cloth merchants. In the mid-twentieth century, a

few individual Islamic banks were started in Egypt and Turkey, but they either

failed on financial terms or were folded into the national banking system and

converted to conventional banks (Kuran 2004, 2001). A corporation founded in

Malaysia in 1963 eventually evolved into the Bank Islam Malaysia, incorporated

in 1983 (Maurer 2001).

Contemporary Islamic banks were formed in the 1970s when considerable

oil wealth became available in the Arabian Gulf States (Ali 2002). Muslim

populations in other parts of the world—notably Indonesia, Pakistan and

Malaysia—have since generated sufficient steady income growth to develop a

31 will follow El Gamal (2006) and forego “terms of reverence” after the name of theProphet Mohammed in favor of smoother reading for non-Muslims. I honor the religious context while at the same time adhere to a more academic style of writing (El Gamal 2006).

5


network of Islamic financial institutions that strive to integrate themselves into the

global financial system. Growing Muslim populations in the United States and

Great Britain have very recently begun to contribute to the Islamic financial

network both institutionally and intellectually.

Globalization and Muslim subjectivity

It is a major argument of this project that world conditions due to

globalization have contributed to the formation of the industry of Islamic finance.

Geographic mobility and technological advances made possible (and desirable)

by globalization have profoundly changed definitions of personal, community and

religious identities of humankind. Islamic law does not allow for individuals or

institutions that lend money to charge interest on that money. Muslims who

locate themselves according to Islamic practices would be acting against their

moral constitutions to participate in transactions that involve the charging of

interest. Yet in the late twentieth and early twenty-first century global economy,

trade finance and other crucial banking transactions are clearly dominated by

capitalist financial institutions whose return on investment is based upon

charging interest. Heretofore, a Muslim wishing to participate in the global

economy has had to invest in capitalist institutions and act in opposition to his or

her religious and moral belief system. As financial resources in the Islamic world

have grown over the past three decades, Muslims have increasingly sought

alternatives to capitalist investment that are more in keeping with Islamic

practice. Islamic banks provide a framework for Muslims to invest their money

“morally,” in accordance with Islamic law, while at the same time they do not miss

6


out on profit opportunities provided by the global form of capitalist exchange.

Islamic banking must locate itself as a Muslim institution in the world economy,

yet it is also an industry that explicitly engages with the capitalist institution of

banking and as such must be studied in the context of globalization and its

relation to capitalism.

Throughout history, Jewish and Christian religious doctrines have objected

to what they defined as unsavory business practices, including the practice of

usurious loans. De Roover (1974) emphasizes that usury at that time in history

referred to any increase over principle and that usury was prohibited;

consequently, any increase was considered excessive. Christianity and Judaism

resolved this moral problematic in a way that advances capitalist enterprise—by

declaring loans at interest as acceptable transactions as long as they are not

usurious whereas Islam seems to be engaging with capitalism in a way that

critiques capitalism while at the same time advances it. The industry and its

resultant institutional structure act as a culture broker (cf. Mazzarella 2004),

providing a bridge between capitalist business practices and a competing Muslim

subjectivity for its practitioners, who are comfortable in both cultural systems.

Furthermore, IBF acts as a bridge between competing subjectivities—or

practices of Islam—within Islam itself. Throughout this study, and especially in

chapter 2 ,1 will explain what existential problems globalization has caused for

humankind in general and how responses to globalization are invoked in the

discourse and practices of the Islamic finance community in particular.

7


Islamic law and authority

In order to understand how Islamic law informs Islamic finance, it is

necessary to know something about how law and authority are positioned in

Islamic thought. The tenets of IBF are derived from Islamic legal thought;

however, as we will see, not every aspect of Islamic finance is found in classical

Islamic sources. Although practitioners assert that IBF is banking (or finance)

following the manner set forth by the Prophet Mohammed, it is more realistic to

think of Islamic finance and business as encompassing some basic codes from

classical sources enhanced by needs and realities of life in the twenty-first

century. It is extremely important to note that in Islam there is no single human

who has been granted the authority to make decisions about religious matters.

Islamic law (also called Shari’a law or fiqh) is the source of authority designed to

guide Muslims in their daily practices, according to Allah’s (God’s) will. Allah

holds the ultimate authority in Islam, and His word is manifest in all of the texts

and traditions. Textual and traditional authority in Islam is derived from one of

three sources. First, the Qur’an is the holy text of Islam. Its words are believed

to be the exact words that Allah revealed to the Prophet Mohammed. Many of

the stories and ideas in the Qur’an are recognizable as the traditions of the other

two Abrahamic religions: Judaism and Christianity. For example, the Qur’an

includes the stories of Noah and Moses, as well as the story of Jesus’ birth.

The second source of Islamic authority is the sunna. The sunna are

collections of stories called ahaditha (singular, hadith) attributed to the Prophet

Mohammed and recorded by trusted sources close to him. Ahaditha are

8


parables meant to clarify or supplement the teachings of the Qur’an and are

based on real life situations from the life of the Prophet. The third source of

authority is a set of rulings made as results of qiyas, or analogical interpretations

of Islamic laws (Shari’a) in all areas of life. Expert jurists (mujtahid) make rulings

on matters of Islamic law using the intellectual process known as ijtihad. It is

preferable that a community of scholars come to a consensus (ijma) on legal

rulings, but ijma’ is not required for people to use that ruling to make decisions

(Waines 1995).

Individual jurists or other learned people can offer opinions on a given

situation, but it is always preferable to have a consensus of scholars. Some

individuals appear to have more authority than others; however, that is due to the

reality of human society and power structures, and is not built into the religion

itself. When a moral decision arises, it is incumbent on each individual Muslim to

think through the situation in his or her own personal process of ijtihad and to

come to a conclusion that is consistent with his or her understanding of the

religion. Many of the debates about financial matters happen because of

different interpretations of central ideas and the meaning of specific practices.

By the middle of the tenth century, interpretations of Shari’a law were

variable enough to have spawned four recognized schools of thought, or

madhhabs, each named for the man associated with their establishment: the

Hanafi, Maliki, Shafii and Hanbali schools. These schools of thought remain

active today. Each school varies in its interpretations of certain laws or practices

within the broader scope of Islam. All schools are considered equally valid—in

9


keeping with the general Islamic focus on egalitarianism and the individual is free

to choose which one to follow. In practice, people choose the school most

prevalent locally (Armstrong 2000). Predictably, there are differences in

interpretations of business law in Islam, and those differences present some

interesting challenges, as we will see throughout this study.

In particular, the Hanafi school is thought to be the madhhab most

amenable to interpreting modem life situations: it is notable that the Hanafi

school is prevalent in South Asia (India, Pakistan), among other places. Later

sections will show the tremendous influence South Asian/India scholars have had

on the formation of contemporary Islamic economic thought. Differences, when

discussed in the industry, are referred to as geographical differences (e.g.,

Malaysia vs. the Arabian Gulf). The reference to “geography” is in fact a proxy

for differences in schools, but respondents do not speak of them in this way.

Therefore, for the purposes of this study I will not focus on any specific madhhab,

except when my source of information specifically does so. My respondents

never made reference to particular schools and with very few exceptions; Islamic

finance texts rarely refer to individual legal schools.4

Islamic economic theory

Islamic finance is a subcategory of the discipline of Islamic economics.

Islamic economic theory, like neoclassical or capitalist economic theory, makes

both positive and normative statements about a wide array of opinions about how

4 Vogel and Hayes (1998) refer to legal schools when discussing the specifics of Shari’a law, and note that the Hanafi school is the most liberal, and more amenable to modernization processes. It is important to notice that the Hanafi school is prevalent in India, where lies, I will argue below, the theoretical origins of Islamic economics.

10


society should allocate scare resources and how to organize production,

distribution and consumption of those resources. Portions of economic theories

cover the structure and operations of financial institutions; however, its scope

extends beyond the details of financial activity. Therefore, its concerns are more

extensive than those covered in a study of Islamic banking and finance.

Economic theory is important because it provides a foundation for determining

some of the concerns of financial activity, but financial activity is only part of an

economic system. Because Islamic economic theory outlines some of the values

of the system that will be important to understanding financial guidelines, I will

briefly introduce the general theory of Islamic economics, including the conditions

of its origins, in this section.

Whereas textual and traditional sources of Islamic law date to the time of

the Prophet Mohammed and the ensuing three hundred years or so, Islamic

economic theory is a contemporary theory. It has its roots in postcolonial India

and its tenets have been widely debated since the middle of the twentieth

century. Islamic economics is always written about with reference to classical

economic theories that form the basis of capitalism. Early writings about Islamic

economics were often presented as critiques of one or more economic theories

prevalent in the world, such as communism, socialism or capitalism (cf.. Chapra

1976; Zarqa 1981; Siddiqui 1981). Since the fall of the Soviet Union and the

apparent victory of capitalist economics over other forms of economic structures,

critiques of communism and socialism are no longer at issue, so most of the

contemporary critiques are direct reactions to capitalist economic values. Timur

11


Kuran, in his book Islam & Mammon, recognizes the emphasis of values in the

theory of Islamic economics: “at least initially, the economics of ‘Islamic

economics’ was merely incidental to its Islamic character.” (Italics in original;

Kuran 2004:82)

The framework of Islamic economic theory was developed in India in the

early 20th century by Islamic scholar Mawlana Mawdudi (1903-1979) and

expounded upon by one of his students, economist Khurshid Ahmad. Indian

Muslims as a group were relatively disadvantaged economically compared with

the majority population of Hindus. The British Raj had provided some economic

protections to Muslims, farmers in particular, but it was unclear how or if a Hindu-

led government would provide the same protection (Kuran 2004). Mawdudi

believed that economic activity and technology were crucial to the success in the

modern world, and he was dedicated to providing Muslims in India with economic

opportunities that allowed them both to function in the modern world and to retain

their Muslim identity. Many Muslims did not participate in conventional banking

activities because of the prohibition against riba. Mawdudi himself adhered to

this belief, as we learn from reading the notes to his own translation of the

Qur’an. In particular, Mawdudi stresses different ways in which loaning at

interest can erode communal bonds between men (1988). Nonetheless,

Mawdudi believed it was detrimental to the Muslim community in India to abstain

from banking activities. He and Ahmad believed that it was possible and

desirable for Indian Muslims to embrace systems and institutions of Western

modernity while at the same time adhering to the teachings and practices of

12


Islam (Mawdudi, 1980; Ahmad and Ansari, 1979). One goal of Mawdudi was to

redefine Islamic practices to conform to economic changes. He felt that Muslims

in India could use practices to retain their Muslim identity in the face of the

postcolonial Indian modernization project. In one of his last books, a short

history of the founding of Islam, Mawdudi wrote (1974:11):

The Islamic way of life can be revived and reconstructed again and again with the help of the Qur’an and the traditions if ever, God forbid, the freshness of its true spirit wanes. The world no longer requires any new Prophet to revive Islam to its pristine glory. It is enough to have among us the learned people who know the Qur’an and the traditions of the Prophet and who are able to apply their teachings to their own lives and stimulate others to adopt and apply them in their lives as well. This is how the stream of Islam will continue to flow, refreshing the eternal thirst of mankind.

Khurshid Ahmad argued that economic systems are value-based systems; even

the capitalist economic system was founded on certain cultural values, which are

reflected in that system. This belief is not unlike Max Weber’s assertion that

Calvinist religious practices served to advance capitalism. Therefore, if Muslims

are to be economically empowered, a theory of Islamic economics is necessary

(Ahmad 1976). Other theorists took up that line of thought, such as Umer

Chapra, who states: “Virtue lies...not in shunning the bounties of God, but in

enjoying them within the framework of the values for ‘righteous living’ through

which Islam seeks to promote human welfare” (Chapra 1976:173). In Islam, all

fields of life are interrelated. Goals and values of each segment of life should be

aligned, so economic system’s values are aligned with those of society.

13


Kuran (2004) asserts that the emergence of the industry grew out of the

debate on whether or not Muslims in India should have a separate homeland or

remain part of a greater India after the Partition of 1947. Mawdudi favored the

latter proposition—cultural reassertion—and contended that a separate

homeland was unnecessary because if Muslims practiced their religious duties

faithfully, the matter of a national homeland would be irrelevant. In this view,

group solidarity depends more on shared beliefs and practices instead of on

shared geographical territory. This principle foreshadows many of the basic

principles of globalization, namely the belief that group solidarity or identity can

be based on something other than geographical place (cf. Gupta and Ferguson

1997; Gupta, 1997; Appadurai, 1996; Hannerz, 1990).

Mawdudi favored thinking of an Islam as a way of life, rather than as a

system of faith. In a treatise of his interpretation of the Qur’an published

immediately after his death (1980), Mawdudi asserts that the kalimah5 affirms

that there is one God, Allah, and Mohammed is his Prophet. Mawdudi considers

this to be the primary doctrine of Islam: the real difference between believers

and unbelievers “lies in the acceptance of this doctrine and complete adherence

to it in practical life.” (Mawdudi 1980:62) An emphasis of the connection between

belief and practice is the foundation for Mawdudi’s entire project of strengthening

Islam worldwide. A Muslim must not only believe in the doctrine of Islam, but

internalize and incorporate its practices in everyday life. It is only in this way that

Islam (and Muslims) will survive in a world that is increasingly influenced by

5 La ilaha illallah, Mohammed ur-Rasulallah (There is only one God and Mohammed is his prophet). This is also called the Shahadah.

14


modern inventions and systems. We can see this idea at work in the thinking of

contemporary scholars of Islam. It had particular relevance in the anxious times

of postcolonial India, and has gained relevance in a globalized and post-9/11

world in which Islam has frequently come under attack from the prevailing world

order.

In contrast to politicians who wanted a territorial solution for Muslim

independence (Pakistan), Mawdudi sought to keep Islam salient in the minds of

its practitioners without necessitating a territorial division. He fully recognized the

prudence of tying economic behavior to religious beliefs. According to Kuran

(2004), a technologically advanced world requires complicated economic

decisions. In the dominant world economic order, those decisions are thought of

as secular decisions. If Muslim traders and customers were making daily

economic choices based on religious thought instead of on secular economic

principles, the average person could think of business activities as religious

activities. Therefore, religion would always be prominent in their minds (Kuran

2004). In this way, Muslims would remain politically visible despite their minority

status. In this sense, Mawdudi advocated the creation of an Islamic economic

actor in the sense I will explore in chapter 3.

According to a comprehensive survey of Islamic economic literature,

Professor Muhammad Siddiqui—a professor at Aligargh University in India who

has written extensively on Islamic finance from the 1970s to the present—has

outlined some of the key philosophical underpinnings of Islamic economic

theories. The practitioner is meant to use these philosophical points as a

15


guideline for developing practices in an (theoretical) Islamic economic system.

Of course, no purely Islamic economic system exists in the world today, but it is

held up as a goal to which Muslims should strive. Some of the major Islamic

economic values are (Siddiqui 1981):

• A person should be a “God-conscious” human being. He or she should practice tawhicP, or unity, at all times. This means that all earthly actions must be pleasing to the will of Allah.

• Economic enterprise is encouraged, as long as moderation is practiced and special attention is paid to social justice.

• Ownership has both an individual and communal component. Private property ownership is encouraged but it is a human responsibility to make sure that all humans have their basic needs met.

• Humans are encouraged to cooperate with each other in production relations, rather than to compete (i.e., as in capitalism).

• Economic development is a necessary human condition and must be undertaken in the spirit of social justice.

Throughout this research project, we will see much evidence that Islamic finance

practitioners pay particular attention to these principles of Islamic economics in

discourse and practice.

Basics of conventional finance: credit and risk

IBF claims to be different from conventional finance but most of the

financial transactions look the same. Islamic finance professionals explain

Islamic finance to me with reference to conventional finance. Most Islamic

financiers claim that Islamic finance provides the benefits of conventional finance

without the immorality. This formulation presumes that the audience is familiar

6 The concept of tawhid will be discussed later in this chapter.16


with conventional finance, so in this section I will introduce the basic concepts of

conventional (capitalist) financial thought. The term “finance” generally refers to

the management of money (http://dictionary.reference.com/browse/finance; last

accessed 7/11/07). Thus, the study or practice of finance may incorporate the

study and management of money and other assets (such as stocks, bonds, real

estate, and many other money-making projects) and the provision of funds for

business or personal financial activities. Most of the management and provision

of funds is done through an institution called a “bank.” According to a Banking

and Finance textbook, a bank is a “business whose main goal is to achieve profit

by lending and investing the funds placed at its disposal” (Moss 2004). A bank’s

activities include:

• Receive and hold funds deposits

• Make loans/extend credit and

• T ransfer funds

A large part of a bank’s income “is in the form of interest on the claims it holds”

(usually loans) (Moss, 2004). Islamic finance began as a response to the needs

of corporate finance professional, although more recent attempts have focused

on retail banking, or personal finance. For this project, I interviewed

professionals from a commercial bank with retail operations, a commercial

finance company and a retail bank with commercial lending capabilities.

Just as Jews and Christians found trade to be impossible without some

kind of financing situation, Muslims recognize the necessity of finance. As with

conventional finance, Islamic finance falls under two types: equity financing and

17


http://dictionary.reference.com/browse/finance

debt financing. Equity financing means, generally, that the financier and the

manager of a business are partners. There are different ways to structure a

partnership, but the implication of an equity partnership is that each partner will

receive a return (or profit) proportionate to the amount of the investment. Debt

financing simply means that one party (the financier) provides money for a

business venture. The financier expects to make a profit on the investment

whether or not the business is successful. Islamic law allows most types of

equity financing, but debt is problematic. Lending can occur, technically, but it

must be interest-free, a so-called benevolent loan. The industry of Islamic

finance was formed to address the prohibition of interest-bearing debt finance.

As we will see below there are other ways to finance trade using debt

instruments, but we must begin with a discussion of credit and risk, and why

interest is prohibited under Islamic law.

Some standard definitions of credit are as follows (quotes from

dictionary.com):

• Trustworthiness; credibility...

• Confidence in a purchaser’s ability and intention to pay, displayed by entrusting the buyer with goods or services without immediate payment;

• Reputation of solvency and probity, entitling a person to be trusted in buying or borrowing: Your credit is good.

• Influence or authority resulting from the confidence of others or from one’s reputation.

• Time allowed for payment for goods or services obtained on trust: 90 days’ credit

18


• Repute: reputation; esteem;

• A sum of money due to a person; anything valuable standing on the credit side of an account: He has an outstanding credit of $50.

The definitions of credit listed above are seven of the ten definitions found on

dictionary.com. The extension of credit can potentially lead to something called

usury. The Islamic finance industry is premised on one concept: avoidance of

riba, which is often translated to English as usury. This translation is disputed, as

we will learn throughout this study, but IBF practitioners generally agree that the

prohibition of something called “riba” is the basis for the industry. Usury is

defined in today’s terminology as the “lending of money...at an exorbitant rate” or

at a rate higher than the legal rate (Oxford American Dictionary 1999); however,

usury at one time referred to any increase over the amount of money lent.

The definition of credit, as we can see, encompasses concepts such as

trustworthiness, repute, or confidence. These are not merely descriptions of a

transaction, but meanings embedded in the concept of credit that speak to how

humans relate to one another. For this reason, participation in a credit

transaction is a situation in which people make judgments about one another.

Credit, and by extension usury, becomes a symbol or metaphor of certain

aspects of the human existence. Credit speaks to the temporal aspects of

economic life. Credit provides a way to deal with the future in the present.

Wilson (1997) describes the theory of interest in capitalist terms. In

capitalist transactions, interest justifies the payment of return to investors (which

Wilson calls savers) on the basis of compensation for:

19


1. Time: Money consumed in the future is worth less than if it is consumed today. The investor sacrifices present opportunities to use the money and should be compensated.

2. Opportunity cost: Similar to loss of time, money invested now is unavailable for use, and this inconvenience should be recognized.

3. Risk: Investors incur some degree of risk whether investing in a risky transaction or putting money in a bank savings account.

Depending on one’s perspective, credit can either be a source of anxiety or a

way to control for anxiety based on the unknown. Credit—or its manifestation in

the form of usury—has provided a catalyst for discussions of many aspects of the

human experience, including ideas about the individual, community, and divinity

in the Jewish and Christian traditions, as well as in Islam (El Gamal 2002). Due

to the symbolic nature of credit and risk, their definitions and views about them

are subject to human variations and interpretations. As such, there will be

cultural differences between interpretations of credit. For example, usury can be

used as a way to work out uncertainty about definitions of the self vs. the “other*

(cf. Nelson 1969/1949), the sociocultural institution’s obligations for the well

being of individuals (cf. Tawney 1962/1926; Hobson 1931), and the extent to

which divine morality is encoded in secular law (cf. Moore, Jr. 1998; Jones 1989

on the English Usury Statutes of 1571 and 1624). Credit, in the sense of loaning

money for a definite period of time and for a specific purpose, has been seen as

both necessary and somehow sinister.

Weber presents us with a different, positive understanding of credit as a

way to control anxiety. According to the doctrine of predestination, the fate of

individual Calvinists had already been divinely decided. There was nothing they

20


could do to change the future, and they had no way of knowing what their

personal outcome would be. In the face of an uncertain future out of their

control, Weber contends that Calvinists made a specific attempt to control the

present. This, of course, led to the rise of rational thinking and capitalism.

There are two institutional sources of credit: (1) Bank credit and (2)

Investment credit. Bank credit is usually considered to be a more stable source

of credit. Ideally, a bank provides a loan with fixed terms (or at least predictably

variable). In return, the customer repays the loan according to a fixed schedule

and provides an asset as collateral in the event of default. This type of

transaction, in capitalist institutions, is based on trust. If the banker and

customer are unfamiliar to one another, that trust may be encoded in the form of

a written contract. On the other hand, investment credit is often highly

speculative and the only contract is agreement on price. This kind of credit

transaction has only been made possible with the advent of financial markets:

the question of which one came first, financial markets or investment financing, is

beyond the scope of this study. Nonetheless, credit related to financial markets

has a very specific character that is markedly different from bank or trade credit,

which both have long and established histories (Knorr-Cetina and Preda 2005).

Another crucial difference between bank credit and financial markets is the

concept of risk. Bank credit evolved as a way to mitigate risk. Future uncertainty

is embodied in the calculation of interest and part of the function of interest is to

reimburse the lender for potential future losses and for the lost opportunity to use

that money in the present. Risk in this case is a negative concept, one that must

21


be eliminated as much as possible from the equation. On the contrary, risk has a

very different meaning in financial markets. Investment risk is a positive concept,

one without which financial markets would not even exist (cf. Knorr-Cetina and

Preda 2005). In this case, risk means the opportunity for gain. The Islamic

finance industry was created to address matters of bank and investment credit

for institutional and large investors, not the credit needs of small investors. Credit

is the crucial way by which investments and trade are facilitated. The prohibition

of usury creates a special circumstance for the Muslim investor that distances

him or her from international financial markets. As a result, matters of risk

management are salient topics in the discourse of Islamic finance professionals.

My data will repeatedly illustrate the importance of this topic, and show how

anxieties about the extension of credit and risk management inform the evolution

of the individuals and the industry.

Objections to conventional finance

When asked to compare and contrast with conventional finance, most

Islamic finance professionals I talk to concede that Islamic finance is just like

conventional finance, but without the immorality. “Immorality” in this case is

related to both business practices (specific and general) and to the details of

financial transactions. When asked, most Islamic bankers will tell you that the

most immoral financial practice is charging interest on loans. Of course, this is a

highly debated issue and I will discuss it in depth below and throughout this

study. However, there are other categories of objections to conventional

banking, which I will examine first.

22


Specific products

A main objection to conventional finance involves the prohibition of trading

in specific goods forbidden under Islamic law such as pork, alcohol and tobacco

(El Gamal 2000). Conventional finance generally has no problem with trading

these goods, although many of the forbidden goods would be considered

unacceptable in conventional finance as well, including illegal drugs and illicit

arms trade. Regarding legal products, Islamic law is fairly specific about what

constitutes permissible trade behavior. This way of thinking is straightforward

and is easily understood by both Muslim and non-Muslims alike. This way of

thinking allows practitioners to apply rules derived from Quranic verses to daily

practice. It is the one most often invoked in conversations about Islamic finance.

For example, Anwar Ahmad Qadri describes a potential sale (bai) as

being of three kinds: 1) a sale of something which is seen as lawful, 2) a sale of

something which matches the description given by the vendor and 3) an unlawful

sale (i.e., prohibited, and therefore will not take place) (Qadri 1984). Ahmad ibn

Naqib al-Misri (1994) expands the definition of a bai to include six integral parts:

seller, buyer, price, item for purchase, spoken offer and spoken acceptance.

There are five conditions that must exist in any trade, referring to both

merchandise traded and its price:

1. The article traded must by purified or capable of being purified by washing.

2. The article must be useful.

3. The article must be deliverable (i.e., the buyer must be able to take possession of it from the seller.

23


4. The article must be the property of the seller. The seller may authorize an agent to represent him in the transaction.

5. Both seller and buyer must know what the particular item is and its price.

Capitalism offers comparable obligations and remedies in trade. Both

buyer and seller have responsibilities toward each other and the merchandise.

Furthermore, capitalism offers various sorts of possibilities for taking care of the

goods until they reach the buyer. Arrangements such as a pricing method called

FOB (free on board) buyers location allow that the seller has financial

responsibility for the goods until they reach the buyer (Berkowitz, Kerin and

Rudelius 1986). There are other pricing methods that distribute responsibility

variably between seller and buyer, but a capitalist and Muslim negotiating the

transfer of goods can easily stipulate FOB buyer’s location, which is essentially

identical to the appropriation of responsibility outlined by the Islamic tradition.

In sum, Islamic law does not object to trade in general or to trading with

non-Muslims: its position on trading goods relates to the purity of the goods

themselves. The intention of trade regulation is to ensure the fair trade of items.

Both buyer and seller have responsibilities in any transaction to take care of

goods to be traded. It is the seller’s responsibility to take care of merchandise

before the sale, and if the seller destroys it, that seller must assume the risk and

pay to the buyer the price of the destroyed merchandise. Likewise, the buyer

assumes responsibility for the merchandise once he has paid the price for it (al-

Misri 1994). Islamic law also provides for the possibility of goods being

destroyed by a third party outside the control of both seller and buyer. In such a

24


case, the deal is not necessarily canceled; instead, the buyer is given the choice

of two remedies. First, the buyer can cancel the agreement, and make the value

of the goods a debt to the seller from that third party. Alternatively, the buyer can

opt to pay the seller and make the third party liable to pay the price to the buyer

(Ibid). As long as the good traded are permissible under Islamic law, the trade is

permissible.

Gambling and uncertainty

The second objection to conventional finance involves the prohibition of

taking unnecessary risks. Gharar refers to a concept closely akin to dealing in

risk (El Gamal 2000). Gambling (maysit) falls under this category, although

moral opposition to gambling is clearly not an exclusively Muslim belief.

According to several ahaditha, gambling (maysit) is forbidden because it distracts

the faithful from their worship. Gharar is not gambling, but any activity that

involves risks (Vogel and Hayes 1998). Al-Misri refers to the hadith related by

Muslim that states:

The Messenger of Allah (Allah bless him and give him peace) prohibited sales of whatever a pebble thrown by the seller hits, and sales in which there is chance or risk (gharat). (Al-Misri 1994)

In the case of exchanging merchandise, the buyer should not speculate by

selling the goods before he has actually taken possession of them. Similarly, the

seller should not spend the price of the goods before receiving it. A related, but

not identical, situation of buying in advance is acceptable under certain

conditions, including the requirement that the transaction not be particularly risky

25


(Al-Misri 1994). Speculation is acceptable under capitalism, most notably in the

trading of futures and options, but it is not necessary for a Muslim to participate in

this activity to make money. The New York Stock Exchange (NYSE) has made

recent efforts to reconcile the issue of speculation, as will be discussed in the

section on contemporary trends in finance. Tradition does allow that a price

stated as a financial obligation may be substituted with a different sort of

payment such as gold or cloth (Al-Misri 1994), but this problem is rarely found in

business practice today.

Several types of transactions are prohibited, primarily because of their

uncertain nature. For example, selling offspring of expected offspring, as in the

case of a camel (Al-Misri 1994:387). Today’s equivalent would be buying or

selling futures, or the selling of a com crop or cattle herd expected in the future, a

common transaction in Chicago. An interesting prohibition is the admonishment

not to undercut another’s deal, which applies to Muslims and non-Muslims

because these are not differentiated in commercial dealings. Further prohibited

transactions include: either-or sales, which do not stipulate terms, bidding up

merchandise, or joining two transactions in one contract (Al-Misri 1994).

One contemporary financial transaction involving an element of risk is

currently being debated in the IBF industry: the “derivative” transaction

discussed by anthropologist Bill Maurer (2001). The most common derivative

transactions are options, futures and swaps, in which a contract is traded that

agrees to buy or sell certain goods or financial instruments (such as stocks) at a

future date (Kolb 1993). These transactions are thought to be extremely risky

26


because the buyer and seller are hedging the value of the contract against an

unknown point in the future. The acceptability of engaging in derivatives

transactions is a topic of debate among Islamic bankers (Maurer 2001). Maurer

(2002) further argues that derivatives provide a moral problematic to all

financiers—not only Muslim financiers—but that only Islamic bankers take explicit

mathematical steps to “purify” these transactions and try to develop a sustainable

moral ground for their inclusion in financial exchange.

Although objections to gambling and speculation are by no means

exclusively Muslim beliefs, Islamic law does provide guidance for avoiding those

sins. Vogel and Hayes attribute the prohibition of gharar and maysir to the desire

for moral purity in business dealings. Contemporary financial markets, however,

include elements of risk that are addressed by IBF. In the early days of IBF

formation, practitioners purified profits made from those risky elements by

donating the proceeds to charity or just accepting a return of capital, not of the

portion of the profits made from risk (determined mathematically, according to

Maurer). Contemporary financial structures, however, build in this attention to

risk in a way that has been accepted by Shari’a scholars as adhering to Islamic

law.

General business ethics

In addition to specific prohibitions and requirements of an Islamic bank

and its financial transactions, an Islamic financial institution encourages

adherence to general Islamic behavioral ethics. Lewis and Algaoud (2001)

27


consider this increased attention to business ethics to be an important part of the

corporate culture of an Islamic financial institution. They state that, ideally:

[T]he corporate culture of an Islamic bank should be one in which Islamic values are reflected in all facets of behaviour ranging from internal relations, dealings with customers and other banks, policies and procedures, business practices through to dress, decor, image, and son on consistent with Islam as a complete way of life. The purpose is to create a collective morality and spirituality which, when combined with the production of goods and services, sustains the growth and advancement of the Islamic way of life. (Lewis and Algaoud 2001: 165)

I FIs do take seriously the commitment to providing an Islamic environment, and

this commitment is illustrated both in the literature and in my observations. For

example, in a chapter of the book entitled The Politics of Islamic Finance (Henry

and Wilson 2004), Kristen Smith of Harvard’s Kennedy School of Government

illustrates how Kuwait Finance House (KFH) takes public steps to foster a

religious environment by organizing communal prayer in the office, showing a

hiring preference for men who have demonstrated their devotion to Islam and by

conducting non-banking business in a recognizably “Islamic” manner (Smith

2004). Islamic practices include providing a prayer room and encouraging prayer

breaks, striving to maintain ethical business practices, structuring financial

transactions to conform to Islamic law, maintaining gender segregation, and any

other activity that falls under the jurisdiction of Islamic law.

Professor Rafik Beekum, a business professor and frequent speaker at

Islamic Finance conferences around the world, has written a book entitled Islamic

Business Ethics (1997), in which he outlines an ethical system for business

28


based on the teachings of Islam. His overview includes not only specific

behaviors considered to be halal (preferred) and haram (forbidden), but

considers the attributes of Islamic ethical philosophy underlying those actions. In

addition, Professor Beekum gives suggestions for how to develop and maintain

an ethical, Islamic organization, including consequences for unethical behavior.

These two examples show a growing concern with not only the implications of

actual financial dealings but also with the impact of business practices on both

the individual and society. I will discuss this concept and its implications for

Islamic finance professionals in more detail in later chapters with supporting data

from fieldwork.

Prohibition of riba

“O you who believe! Be afraid of Allah and give up what remains...from riba...if you are (really) believers.” (Qur’an 2:278)

Definitions of riba7

Riba in sales

In general, riba is interpreted to mean any increase of money over the

original amount. Islam delineates two forms of riba: riba al-buyu (usury involving

trade) and riba al-qarud (usury involving loans). Usury in trade can be further

broken down into two prohibitions, both of which can be found in this often-cited

hadith:

7 Except where it is otherwise noted, I have drawn the discussion of riba and objections to riba from two primary sources: Lewis and Algaoud’s Islamic Banking (2001) and Vogel and Hayes’ Islamic Law and Finance: Religion, Risk and Return (1998). Vogel and Hayes are noted scholars of Islamic finance at Harvard and their book is considered the premier authority on Islamic business law (cf. Maurer 2001). Lewis and Algaoud are practicing Islamic bankers in Bahrain. Their interpretations of riba and its prohibitions are generally in agreement. Please note that in this discussion of “definitions of riba”, I have consolidated information from these two sources. I will only cite these two texts if they disagree on an interpretation.

29


Gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates, salt for salt, like for like, equal for equal, hand to hand.8 If these types differ, then sell as you wish if it is hand to hand (Vogel and Hayes 1998: 73; also cited in El Gamal 1999)

First, it is forbidden to trade goods in unequal amounts or qualities (riba al-fadf).

Vogel and Hayes provide a detailed description of different interpretations of how

to measure goods (i.e., by volume or weight), but the important point is that

traded goods should be equivalent in value. A prohibition of this type of riba

serves to ensure that one party does not receive more or less for his goods than

is to be expected by their value.

The second part of the hadith refers to a delay in paying for goods (riba al-

nasi’a) to ensure that one person does not receive unfair advantage in using the

goods before paying for them. Credit transactions are permitted under Islamic

law: there is evidence that the Prophet (PBUH) traded on credit. As a practical

matter, it is sometimes impossible for two items to be traded at exactly the same

time. Using money alleviates this problem, by selling one set of goods for money

and using that money to purchase others; however, that still leaves the problem

of a merchant needing payment before delivering the goods, as in the case with

agricultural products. The prohibition, then, seems to have the intention of

mitigating the inequalities of a delayed payment by limiting circumstances under

which credit can be extended.

8 “Hand to hand” means payment should occur without delay.30


Riba in loans

Riba al-qarud is simply the excess charged on a loan. Another often-cited

verse states: “Allah has ...forbidden riba.” (Qur’an 2:275). Any amount of money

borrowed from an entity should be repaid based on its principal amount and a fee

for assuming risk, not on the basis of a fixed percentage of the principal amount.

In earlier writings on Islamic finance, (cf. Wilson 1997), it was asserted that the

primary Islamic objection to interest lies in a theological interpretation of the

difference between the material and spiritual. This line of thought was based on

the Christian theological objection to valuing time as a material entity. Time is, it

is argued, is a gift from God; therefore, there should not be any reward for it.

Furthermore, each person’s time on earth is different, and if a value were placed

on time, that value would differ between individuals. This variance in time value

is not knowable - no one knows how long s/he is to live - so treating the

uncertainty as material could lead to uncertain moral outcomes. Many Christian

theologians - and many, especially Weber, contend that capitalism is in essence

a Christian system - have argued along similar lines, but contemporary western

economists tend to perceive interest as a method of covering investment costs

and negate this spiritual interpretation of time. The spiritual aspect of time was

integral in the early days of the formation of Islam; therefore, the spiritual value of

time is relevant to the perception of ones duty in Islam. In formative Islamic

thought, time was a measurement of the life cycle and was not to be confused

with material activities (Bamyeh 1999), so it is a logical step to assume that Islam

31


makes the same arguments. However, there is evidence that it is not the time

value of money that is at issue in this type of prohibition of riba in loans.

More recent interpretations of the intentions of Islamic finance do not

oppose compensation for taking risk. For example, Maurer (2001) disputes the

assertion that the Islamic finance objection to riba is based on conceptions of

time. He believes that the Jewish and Christian traditions objected to usury on

the basis of the materiality of time, like Wilson argued. Maurer asserts that

Islamic bankers to not deny the time value of money, but merely make different

assumptions about it (2001: 9). In other words, whereas early Jewish and

Christian theologians objected to the sale of “time” Muslim scholars include time

in the valuation of an object. As a quality of the object, time is subject to

valuation. In my experience and in conversations with Islamic bankers, I have

found that the valuation of ‘lime” itself is not a daily concern. Of more concern is

the issue of risk. Insofar as risk is the uncertainty of events caused by the

passing of time, valuation of financial transactions is premised on the risk

associated with the passing of time, not with time itself. Thus, the concept of

usury could be applied to both monetary and material goods and serves a major

purpose of keeping relations among businesspeople equitable.

Usury and the Abrahamic religions

In order to understand Islamic finance’s objections to charging or paying

riba, which is arguable translated as “usury” or “interest,” we must first place the

debate within the context of Jewish and Christian theological objections to what

is essentially the same concept. As we shall see throughout this study, Islamic

32


finance professionals express most of their critiques of conventional banking in

terms of the concept of usury, much as Jewish and Christian jurists have

expressed their critiques of avarice and related sins in terms of usury throughout

history (Kuran 2004). I make the comparison to Judaism and Christianity

because they are the two monotheistic religions considered by Muslims and non-

Muslims to be theological ancestors to Islam (Armstrong, 1993). Moreover, Jews

and Christians are considered by Muslims to be “People of the Book,” meaning

that despite diversity in religious practices, their textual origins can be traced to

the same source (Bamyeh 1999:215); therefore, their debates on the same

issues are immediately relevant to the debate within Islam. Many present-day

conversations of Islamic bankers correspond to historical Jewish and Christian

attitudes toward usury. At times throughout this dissertation, some of my

interviewees or I will point out these similarities.

Both capitalism (and by extension conventional banking) and Islamic

banking have both been specifically linked with religion, we must turn to the

history books to understand what has been the relationship between religious

and economic thought in the historical record. One of the goals of my project is

to show how this dialogue is being continued and reworked in the field of Islamic

finance. Do the claims of Islamic banking about morality and business practice

have antecedents in the traditions of the Abrahamic religions whose texts are

precursors to Islamic texts and thought? If so, how do the discussions within

contemporary Islamic banking compare with historical accounts of discussions

33


within Judaism and Christianity? Do contemporary discussions of religion and

economic activity address issues familiar to us from our study of history?

Throughout history, the relationship between religion and the economy

has been fraught with debates, contradictions and even collaboration. Because

economic activity is the means by which humans survive in a material sense, it is

one of the most important areas of human activity. Concerns about the ethics of

economic activity have been voiced by philosophers, moralists, clergy and

laypeople and reinforced by secular laws. Religion and economics are closely

linked in opposition largely because they represent opposing forms of claims to

knowledge and power over society. In the twenty-first century economists, as

well as the public, generally assume that economics will always prevail in this

conflict, but Islamic banking and finance challenges this assumption by seeming

to place religious concerns above economic concerns. Nevertheless, this

reversal of accepted norms may not be the straightforward turnaround that it

appears to be.

Most debates between religious morality and business practice in the

Abrahamic religions have been articulated with reference to usury, which is a

concept that encompasses both credit and risk concerns. In practice, usury has

been used as a metaphor for any business practice deemed to be immoral.

Aristotle espoused what is probably the first recorded objection to usury in the 4th

century B.C.E., but the issue of whether or not—and in which form(s)—usury is

acceptable in financial dealings is still being debated today. In contemporary

business practice, it is normally taken for granted that any money will be lent with

34


the expectation of recovering that money plus compensation for the use of that

money or for the risk taken by then lender in advancing that money to another

party. Compensation is based on a “market interest rate” generally considered to

be fair, i.e. acceptable to participants in the market based on supply and demand

for money. Whereas there is no objection to profit making in Islamic finance, the

means by which that profit is made is heavily debated.

In medieval Europe, there were similar debates over the permissibility of

charging interest or usury in economic life. It was also becoming clear to

everyone that 1) usury was being practiced and 2) usury was a necessary

component of business. There was no question of making usury acceptable to

the public at large, but instead the clergy put forth varying interpretations of

usury. For example, usury was sometimes interpreted as a minimal

administrative charge and was used by both the Jews and non-Jewish

Europeans to justify the presence of Jewish bankers in medieval Europe.

Maimonides, the twelfth century Jewish philosopher and legal scholar,

interpreted usury laws to apply to excessive rates of interest and allowed the

charging of moderate interest in cases of loans of necessity (El Gamal 2002).

Another transaction that was common in Europe and in the Islamic world in

medieval times was the quotation of two separate prices: a lower price for cash

payment and a higher price for a credit transaction. This operation was

expressed by granting the buyer a discount (between 2% and 4%) for immediate

cash payment (Udovitch 1979: 265). This situation does not appear to have

35


been considered usurious, as the Jewish scholar Maimonides accepted this

transaction as an “accepted custom” (Udovitch 1979).

From the beginning of European historical references to the problem of

usury through the Middle Ages, most of the terms of the usury debate were

characterized by a concern with membership of an individual within (or outside

of) a certain cultural group. Group members were treated as kin, and outsiders

were allowed to adhere to different rules. However, the boundaries of the “in”

group were changing and it was becoming increasingly difficult to determine the

boundaries of certain groups. As a result, the definition of an individual as part of

a group was becoming blurred; or, rather, it was becoming possible for the

individual to see himself (or herself) as belonging to a network outside of the

immediate kin group. This was not only a theological dilemma (who is part of the

“universal” Christian brotherhood?) but a practical one as well. If the concept of

belonging were expanded, to what extent could the rules of interpersonal conduct

be amended? As this question became more complex, social institutions

interested in preserving personal well being accepted more responsibility for

finding a solution to business problems rooted in theological doctrine.

Objections to riba

The stated and most obvious raison d’etre for Islamic finance is the

prohibition of riba. There are two financial objections to how conventional

finance operates: the objection to interest and the objection to inequalities

perceived to he inherent in a conventional loan transaction. Although the

prohibition in the Qur’an alone is enough to prevent most Muslims from avoiding

36


interest transactions, there is further support for the prohibition in the Islamic

tradition, including arguments of Al-Ghazali, Ibn Tamiyah and Ibn Khaldun

(Wilson 1997). Unfortunately, the Prophet Mohammed (PBUH) did not provide a

concrete definition of riba during his lifetime so Muslims still debate its exact

meaning. Below, I will provide a standard definition of riba and outline some of

the standard objections Islamic financiers have against riba. Later, in chapter 5

(Divinity), I will delve further into the debate by showing how language use and

translation can impact the discussion.

Classical objections

Islamic finance scholars have identified additional specific objections to

riba found in classical writings. In compiling the list below, I have consolidated all

of the objections found in the most reputable contemporary books on Islamic

finance like I did in the previous section. For their discussion of objections to riba,

Lewis and Algaoud rely on the original texts of Fakr al-Din al-Razi, a 12th century

Persian philosopher. Vogel and Hayes also cite Razi, as well as Averroes/lbn

Rushd, the 12th century Andalusian-Arab philosopher and Ibn al-Qayyim, a 14th

century Syrian Islamic scholar. Three of the six objections (objections 4-6

below) are common to arguments in both texts. The objections to riba are:

1. The Qur’an says there should be no riba (Razi). According to Razi, this injunction should be enough so that no other reason is needed. However, there is no consensus on the meaning of riba so other reasons must be put forth.

2. Treating money as a source of profit prevents men from taking part in active professions that contribute to a civilization’s progress (Razi). Razi is basically saying that if a man can make money from money, he becomes lazy and does not contribute productively to society.

37


3. Money is not a commodity and cannot be traded as such (Ibn al-Qayyim). A commodity is something that fulfills basic needs of mankind, or at least it was in the 14th century. Money (gold or silver) is a neutral measure of value meant to stabilize the value of commodities. If money became a commodity, it would destabilize the value of goods that fulfill basic human needs. Therefore, money should not be allowed to be a part of the commodity trading system.

4. Property being traded should be of equivalent value (Razi and Averroes/lbn Rush). The hadith cited in the previous section emphasizes the importance of trading like goods. This prohibition upholds the intention of keeping commercial relations equitable.

5. Riba promotes commercial exploitation (Razi and Ibn al-Qayyim). This prohibition is another attempt to keep human relations equitable. The rich usually give loans to the poor. It is tempting to use this power difference to exploit the poor, or a person in need of money. A prohibition of riba is intended to minimize the power differential.

6. Monetary gains should be linked to risk-taking (Ibn al-Qayyim and Razi). This prohibition is based on the idea that a conventional loan shields the lender from risk. The lender of an interest bearing loan gets repaid even if the borrower defaults or something happens to the underlying asset, e.g. if a crop fails. In this example, the lender would extract repayment from the borrower, even if the borrower did not get the benefit of selling the asset to repay the loan and make a profit. In an Islamic transaction, risk is shared so that both lender and borrower profit or absorb a loss.

In general, objections to riba revolve around maintaining the egalitarian

principles of the ideal Islamic society. The rich should not take advantage of the

poor and lender and borrower should share in the profits or losses of a business

venture. Whereas it is not problematic for an individual to make a profit or to be

wealthy in Islam, that wealth should be distributed in such a way that no person

wants for basic human needs. Many Islamic scholars interpret the prohibition on

riba as a means by which to minimize exploitation and inequality in society.

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Another objection to riba arises from the interpretation of two theological

principles of tawhid and adalah, both of which refer to the ideal society in which

humans cooperate instead of compete in order to survive. Before I discuss the

specifics of the social justice argument, I will digress briefly to introduce the

concepts of tawhid and adalah and to explain why they are important to the study

of Islamic finance.

Tawhid and adalah

All actions governed by Islamic law are based upon two important

theological concepts: 1) Tawhid (Unity): the relationship between humans and

Allah and 2) Adalah (Justice): the relationship of humans with each other.

Duties, or practices, relating to the concept of unity are spiritual duties called

‘ibadat; duties; practices relating to justice, or normative human relations, are

called mu’amalat (Waines 1995).

Unity refers to the unity of God, who is the source of all authority and is

signified by the term tawhid (Esposito & Voll 2001). The shahadah—the phrase

that opened this section—is one that Muslims remember five times a day, at

prayer time, and confirm countless times throughout their lives: “There is only

one God and Mohammed is his prophet.” Indeed, repeating the shahadah

provides sufficient evidence that a non-Muslim has converted to Islam. Chapra

(1992) asserts that every thought and action of a Muslim emanates from this

worldview. One implication of the principle of tawhid is that human beings exist in

unity with Allah and with each other. Therefore, tawhid establishes the goal of

human development as being directed toward a “God-conscious human being.”

39


Several people I interviewed stressed the desirability of working in an Islamic

finance environment because that environment allowed them to balance their

lives and fulfill all of their obligations, not just their work goals. Esposito and Voll

(2001) confirm the importance of tawhid to those Islamic financiers who take a

“holistic” approach to Islamic finance.

Equality and social justice

Whereas tawhid refers primarily to the relationship between humans and

Allah, the second important theological concept of Islam—adalah—refers

primarily to the relationship of humans with each other. Humans are considered

to be vicegerent (khilafah) of Allah on earth, and must cooperate instead of

compete with each other in order to survive (Waines 1995; Chapra 1992).

Chapra contends that adalah encompasses “socio-economic justice” (Chapra

1992:209). Muslims are required to structure society so that each human is able

to earn respectable living and that wealth and income are fairly distributed. If an

Islamic economic system is properly implemented, Chapra asserts, there should

be no extreme inequalities of wealth in that system. Kuran (2004) points out that

in reality, societies that practice Islamic economics do not achieve the goal of

equal wealth distribution. In fact, Muslim societies do a particularly bad job of

economic development according to United Nations criteria of economic and

human development (Arab Human Development Reports 2003 and 2004). We

may counter this argument by saying that no society adheres to a pure Islamic

economic system; therefore, we do not actually know if equal wealth distribution

is possible in practice. What is more important to this study is that there is an

40


ideal of equality and, more importantly for the practice of Islamic finance, the

ideal of fairness and justice under Islamic economics. Those ideals are

important to Islamic financiers when they think about their participation in IBF.

Some Islamic bankers, like M. Umer Chapra (1992), a researcher at the

International Institute of Islamic Thought and an advisor to the Islamic

Development Bank in the early 1990s, contrast the focus on cooperation among

individual actors with the objective of a capitalist economic system, which

encourages individuals to compete for scarce resources. Since the time of Adam

Smith, economics has viewed the individual’s “greed” as the driving force behind

societal cohesiveness. Developments in mainstream economics such as Game

Theory explicitly investigate the implications of having players choose from

different alternatives in order to maximize their own outcomes. Islamic

economics, in contrast, is designed to encourage cooperation.9 Islamic

economics subverts the neoclassical economic model by asserting that

individuals are (or should be) driven to cooperate for the good of society. This is

a very important difference between conventional finance and Islamic finance,

and one that is mentioned regularly in conversations with Islamic financiers. We

will see many examples of how these significantly contrasting viewpoints play out

in everyday practice. For example, most financial transactions are structured as

partnerships, so that both financier and manager share the economic success or

failure of the venture.

9 Game theory was designed, though, to test economic theories by placing actors in competition with each other. Interestingly enough, game theorists often find that individuals’ (or corporations’) outcomes are maximized when players cooperate. (Pindyck and Rubinfeld 2005).

41


Along with reaffirming social equality and dignity of each person, tawhid

requires that humans view themselves as part of a greater universal brotherhood.

Allah has entrusted material resources to humans, who are his khilafah on earth

and who must work together for the good of humankind. Note that this concept of

a universal brotherhood based on religious affiliation is analogous to a stance

promulgated by early Christians in their efforts to differentiate themselves from

their Jewish predecessors. The idea of universal brotherhood prohibits one

person, and Chapra extends the idea of “person” to “state,” from taking the

freedoms of another. In economic terms, this means that both parties to a

contract are free to enter into and leave the contract as long as they fulfill their

own obligations under the contract. Some Islamic financiers interpret the

conventional loan contract as a form of enslavement, as the borrower must

subordinate its interests to the lender.

Davis and Robinson (2006) have explored what they call the “egalitarian

face of Islamic orthodoxy” by looking at theories of how religion and economic

beliefs are linked in seven Muslim societies. They conclude that a Muslim “Moral

Cosmology” is related to the other two Abrahamic religions in that, in each of the

religions—Judaism, Christianity and Islam—religious beliefs are closely linked to

beliefs about economic behavior. The authors conclude that, in a Muslim moral

cosmology in particular, the more religious a person it, the more he or she is

concerned with egalitarianism in economic life. Attention to egalitarian economic

principles provides the foundation for many of the debates within Islam about the

permissibility of usury in IBF. Davis and Robinson point out that both Judaism

42


and Christianity do emphasize communitarianism but that the more orthodox

Muslims are relatively more concerned with social justice.

According to many Islamic finance professionals, a conventional loan

arrangement introduces an unfair power advantage into society. The bank, or

lender, holds too much power over the borrower by virtue of charging interest. In

conventional finance, if something happens that makes the borrower unable to

repay a loan, the bank that issued the loan will rarely suffer the consequences. A

loan contract stipulates that in case of default the bank should be repaid from the

borrower’s assets. As long as the borrower has enough assets, the bank will

lose none (or little) of its investment, whereas the borrower could lose

considerable assets. Islamic finance arrangements, therefore, are almost always

structured as partnership arrangements, in which the borrower and lender share

in the profits when the venture is successful and share the losses if it is not.

Conventional finance provides for a similar arrangement: it is called venture

capital, or a joint venture partnership. Islamic finance addresses the inequalities

inherent in the loan contract by mandating that all financing arrangements be

structured such that both lender and borrower share in profits and losses. Below,

Islamic banking in Dubai

Whereas the theory of Islamic economics was never actually enacted

systematically in Mawdudi’s India, it was put into practice in the Arabian Gulf.

The first successful Islamic bank—Dubai Islamic Bank—opened in Dubai, United

43


Arab Emirates in 1975.10 Until this time, Muslims had been carrying on their

business activities in one of two ways: either they used conventional banks or

they just used other, private methods of financing outside of the capitalist

banking system. Islamic financing was originally part of interpersonal business

dealings and not meant to be an institutional function (Udovitch 1979). But by

the late 20th century, if Muslims wanted to participate in the world economy, they

would have to engage in some way with the capitalist banking system. In

particular, the Arabian Gulf of the 1970s was undergoing tremendous and rapid

changes as significant cash poured into the region from recently discovered oil

(Ali 2002). Businessmen sought to use their newly acquired oil wealth to put into

practice an idea that was theoretically conceived to solidify Muslim identity. The

formation of Islamic banking was introduced as a practical solution to this

problem.

There were several political developments in the Arab world around the

same time that contributed to heightened sense of urgency about asserting pan-

Islamism. In an article written on September 9, 2001 in the online version of Le

Monde, Ibrahim Warde, a researcher of Islamic finance and adjunct professor at

Tufts’ Fletcher School of Business, reminds us that in 1967 Arab losses in the Six

Day War had given birth to Nasser’s secular pan-Arabism as well as to Saudi

Arabia’s Islamist domination in the Arabian Gulf region. These political

developments in addition to the inflow of cash into the Gulf provided the impetus

10 The Islamic Development Bank was begun in Saudi Arabia in 1975 as well (Al Jassar2000).

44


for the establishment of the Organization of Islamic States (OIS) in 1970.

Banking reform quickly made its way onto the OIS agenda (Warde 2001).

Dubai Islamic Bank was the first Islamic bank in the context of the

contemporary Islamic banking industry formation (Henry and Wilson 2004).

There has always been considerable trade between the Indian subcontinent,

especially in the late twentieth century, when large numbers of Indians/Pakistanis

migrated to the Gulf as guest workers. It is highly likely that ideas like the theory

of Islamic economics accompanied the people and goods that have always been

traded between these places. In addition, Gulf Arabs also go to India or Pakistan

for an education and must have been exposed to theories such as Mawdudi’s

during their stay. I consider it a natural extension of the theoretical origins of

Islamic banking that its practice was taken up in the Gulf: material prosperity

enabled the theory to be enacted. This origin story seems to be important to

bankers in Dubai, at least, and at any rate DIB is one of the most active of the

purely Islamic banks. For example, the largest single sukuk issuance on record

to date was just issued by Dubai Islamic Bank on December 10, 2006 in the sum

of $3.52 billion (www.zawva.com).

Dubai: the city

The present study takes place in Dubai because the Islamic banking

industry grew out of the unique religious, ethnic and cultural mix of the city itself.

Before the 1930s, when oil was discovered in the region, the area of land now

called the United Arab Emirates was a harsh place to live. Most of the

inhabitants were nomads (Bedouins), and moved frequently throughout the

45


http://www.zawva.com

desert as the availability of water changed (Thesiger 1991). A few residents lived

permanently near the towns, especially near what is now Dubai. They made a

living by diving for pearls, which was a very dangerous profession given that it

was done without diving equipment. The only native foods in the area were

dates, fish and camel meat. All other food was imported from India and Africa,

when it was available. Rice, especially, was a precious commodity. It was a

dangerous and unforgiving place to live. Now, the region has been completely

transformed by oil and tourism into one of the richest and most luxurious places

on earth.

I have lived in Dubai twice: first, for five years from 1991 until 1996 and

later to do field research during the academic year 2002-2003. I also make

annual trips to the region. With its distinctive ethnic composition illustrated in

Table 1: Dubai Demographics, liberal business legislation and orientation, and

relatively free media, Dubai is the epitome of a global city.

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TABLE 1: DUBAI DEMOGRAPHICS

Ethnic and religious composition of Dubai:

Population: 1,040,000 (est. 2004)

Emirati 25%,Other Arab and Iranian 12%,South Asian (Indian, Pakistani, Bangladeshi) 60%,Other expatriates (includes Westerners and East Asians) 3%

Religions:

Muslim 57%Hindu 20%Catholic [sic] 20%Other 3%

(Information from www.ameinfo.com/dubai statistics: accessed 11/26/05)_______________________________________________

Dubai is a new city, compared with the cities we generally think of as

established global centers: New York, London, Frankfurt, Tokyo, and Hong

Kong. For centuries Dubai has been the center of trade activity in the Arabian

Gulf, the meeting place for ocean going traders and their goods traveling

between Europe, Africa, the Indian subcontinent and the Far East (Owen and

Pamuk 1998; Al-Fahim 1995; Thesiger 1991). Until the 1960s, after the

discovery of oil in the region, Dubai consisted of no more than a few buildings on

the Dubai Creek and a port on the Arabian Gulf. It grew steadily for the next

three decades, but since the 1990s its growth has exploded exponentially in

terms of population, business activity and tourism. Residents and visitors alike

regularly describe Dubai as “the Hong Kong of the Middle East,” linking it

discursively with the network of global cities and international flows of people,

47


http://www.ameinfo.com/dubai

capital and ideas. It seems only natural that the industry of Islamic finance—with

its synthesis of global capitalism and Islamic business practices—began in

Dubai.

The UAE was never a British colony despite a strong British presence and

partial administration of the region. Because there was always a parallel legal

and administrative system—for example, Shari’a courts and English law courts

still exist side by side—the local population maintained a high degree of

autonomy and control over its own institutions and identity. Dubai Islamic Bank

is considered a local institution and, even though it is necessarily linked to the

international financial system, its internal culture remains strongly Emirati.

Methods

The discipline of cultural psychology—the research approach used in this

study—is built upon an examination of the relationship between an individual and

society. This concept will be discussed more thoroughly in chapter 2. In saying

that symbols can be found in culture, cultural psychologists seek to demonstrate

that people are formed by interaction with these symbols. In turn, people

reinforce or change these symbols according to their perceptions and

experiences (cf. Shwederand Bourne 1984, Shweder 1991, Menon and

Shweder 1998). This is another way of saying that the self and culture cannot be

separated from one another. It is a recurring theme in this dissertation that

individuals and their environments mutually constitute one another. In order to

study IBF in context, I had to study both the society in which it was formed and

operates as well as the individuals involved in the industry.

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With the partial support of a fellowship from the Social Science Research

Council’s “Corporation as Social Institution” fellows group, I was able to spend

ten months (August 2002 - June 2003) doing an ethnographic study of the

Islamic banking and finance industry in Dubai. I had previously lived in Dubai for

five years, from 1991-1996 and I have traveled to the region annually since 1988.

When I lived in Dubai the first time, I had worked as a credit analyst with a private

equity investment firm. I had business contacts in the region, both from my own

work experience and from family contacts. Because of these close ties, I was

already intimately familiar with the region, including its business environment and

daily life practices.

Most Americans who have never traveled to the Gulf region assume that I

would be at a disadvantage in an Arab country because I am a woman. I have

always found the opposite to be true. The first time I lived there (from 1991-

1996), I already held a Masters degree in Business Administration (MBA) from

Washington University, a highly ranked American business school. I had also

worked in a reputable commercial bank in Chicago, Illinois, American National

Bank, before moving to Dubai the first time. Those credentials alone gave me

credibility in the workplace despite my young age at the time. Within a few

months of moving to Dubai, I began working for an investment company called

Arabian General Investment Corporation (AGICO).11 In my job as a credit

analyst, I was given much more responsibility and respect than I had been given

11 AGICO managed about USD300 million in 1992. Its office personnel included about 15 professionals and 15 back office staff members in 1992, when I began working there. Now, the company is one of the largest publicly traded companies in the Gulf region. It has since changed its name to “SHUAA Capital” and has an asset base of about USD14 billion.

49


at my banking job in Chicago. I was, in fact, the only analyst at the company and

I worked closely with department heads to analyze and make investment

decisions. My assessments were taken seriously at AGICO, whereas in the

Chicago bank I was considered to be too young to make business decisions. At

AGICO, I interacted with Board members, who came from all over the Gulf

region, was sent to Italy to evaluate a potential investment and was entrusted to

communicate with the associates of a client in Spain because I could speak

Spanish better than the clients could speak English.

When I returned to Dubai for fieldwork in 2002-2003,1 had the advantage

of having traveled there annually since 1996. In addition, I returned as a doctoral

student from the University of Chicago working on a PhD about Islamic finance.

Those who had known me before assumed that I was competent because they

already knew me, and my work. I was able to build upon these contacts but my

credentials also allowed me entrance to new environments. In a place where

personal introductions and credentials are crucial, I was able to build

relationships based on those introductions and credentials.

Finally, my gender actually helped me to gain access to situations from

which I would otherwise have been excluded. In particular, I was able to build

relationships with the women’s Islamic bank in which I did interviews and

observations. A man would not have been able to sit in a room full of ladies,

ever. I found that the business environment in Dubai does not make distinctions

on the basis of gender as much as it does on the basis of credentials. In the

Chicago bank, I felt that there was always an unspoken divide between men and

50


women in the workplace: in Dubai I felt none of that. If anything, my credentials

as an educated American were more important than my gender. I will concede

that I probably gained entry into some workplaces because of the novelty of my

being an American woman interested in Islamic banking. I want to point out that I

would not have possessed that “novelty factor” had I been a man.

Institutional affiliations

I gathered information about the industry and its professionals using two

primary methods: participant observation (in I FIs and industry conferences) and

semi-structured interviews. I spent time observing Islamic finance practices in

three companies. I chose these companies particularly because they provided

me with three very different working environments for observing different kinds of

Islamic finance practices. I was introduced to the General Manager at each of

the companies by personal contacts in Dubai: therefore, I entered into each of

them via top management. Throughout the fieldwork, I was clearly identified as

being affiliated with top management, and my interviews took place only with

managers.

Although I was allowed to sit and observe daily practices at two of the

companies, I was never employed by any of them. I was almost an intern at the

conventional bank, and I will explain that situation in Appendix A when I describe

that bank. It is important to remember that, in addition to my observations from

this period of fieldwork in 2002-2003,1 had actually worked in a financial

institution in Dubai that dealt with Islamic transactions. Although that period of

employment was in 1992-1993,1 have firsthand experience of how financial

51


institutions operate in Dubai and how Islamic finance transactions are

incorporated into conventional institutions. I was not, obviously, looking at that

experience through the eyes of a researcher, but that experience certainly has

had an effect on what I was looking for in my observations and how I viewed the

financial services industry in Dubai ten years later. In Appendix A, I will describe

the three companies with whom I was most closely affiliated.

Respondents

During the course of my research, I interviewed twenty-six people formally

and spoken to many others informally, mostly at conferences. This number is

greater than my goal of between ten and twenty interviews. Individual

occupations break down as follows:

Banker/finance professional 17Customer 1Accountant 2Attorney 3Shari’a Scholar _1_

Total 24

I found that the personal characteristics and histories of these interviewees

provide crucial information about the reasons for and goals for the existence of

the IBF industry.

Originally, I had intended to interview only Islamic finance practitioners,

customers, or Shari’a scholars, when I could get to them. As I spoke to

practitioners, many of them noted how important attorneys and accountants were

to the industry. In particular, documentation is a key component of many of the

transactions so many lawyers are intimately involved in the process of structuring

52


both the companies themselves and the individual transactions. As such, I made

an effort to talk to both attorneys and accountants in hopes of getting an account

of the industry and its practices from different perspectives and to provide context

for what I was hearing from the practitioners.

Also during the course of my research, I realized that interviewing

customers was not only very difficult—companies were reluctant to give out their

client lists—but that my research would benefit more from having a clear picture

of the practitioner side before moving on to the customer interviews. As such,

the next phase of my research (after the dissertation) will be to include customer

data in my overview of the industry. The one customer I did interview is a friend

of the family. His viewpoint was fascinating but I will only touch upon his

comments briefly during this write up.

Interview protocol

I based the semi-structured interviews on a questionnaire that I devised

before going to the field. The full questionnaire can be seen in Appendix B. In

general, I asked about career history and for respondents to compare

conventional and Islamic finance. Because I ultimately interviewed Islamic

finance professionals who were not bankers (e.g. accountants, lawyers, Shari’a

Scholars, financial regulators) I varied some of the questions to conform more to

their professional orientations. Nonetheless, the basic idea of the questions was

to elicit comments about how Islamic finance fit into the international financial

system and into personal experiences of both Islam and of finance. I did not ask

questions specifically about gender; however, I did interview female employees

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of a women’s only bank. Instead of writing a separate chapter dealing with

gender issues, I have included any data on gender within the relevant chapter as

evidence of the applicability of my claims.

Chapter summaries

One of the primary goals of this project is to situate the Islamic banking

and finance industry and its practitioners in terms of global capitalism and Islam

by examining the external forces of globalization leading to the creation of such

an industry. In the first part of chapter 2 ,1 will review some of the globalization

literature in the social sciences, especially as it relates to capitalism. In the

second part of the chapter, I will examine some of the existential problems

presented to the human experience by globalization and suggest how looking at

the industry of Islamic banking and finance can help us understand Muslim

solutions to those problems.

Each of the next three chapters address one of the existential problems

Islamic finance professionals face under conditions of globalization. In chapter 3,

I explore the question of self-identity in the context of IBF by examining how its

practitioners use the discourse of autonomy, or self, to answer that question for

themselves. I argue that Islamic finance incorporates elements of global

capitalism and Muslim identity and repackages them so that each is

understandable and appealing to the other. I argue that IBF is crucial to the

formation of a particular kind of self vis-a-vis its relationship to an environment

specifically designed to mediate between conflicting worldviews.

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In chapter 4 ,1 show how Islamic financiers view themselves as part of a

transnational community, or umma. Many of the people I interviewed joined the

industry specifically so they could contribute to the Muslim community in some

way. Because of the association of IBF with diasporic Muslims, the industry

reinforces ideas about community that are not linked to territory or state

boundaries. Furthermore, ideas of community are encoded into the financial

transactions themselves, which are then imbued with ideas of trust related to

being part of the community.

In chapter 5 ,1 explain how the industry of Islamic finance provides some

answers to the question of how spiritual beliefs may be encoded into everyday

economic practices. From use of a divine language of Arabic, to addressing

concerns of financial and bodily purity and piety, to joining the discourse of

ethical investing movements, IBF attempts to infuse a sense of the divine into the

economic practices of the industry.

In chapter 6, I will address the question of whether or not the industry of

Islamic finance is working to solve the problems of globalization for its

practitioners. I conclude that the characteristics of IBF I had discussed within the

text of the study contribute to the success of the industry in addressing those

problems, and I discuss how those processes work. Finally, I point out some

limitations of the study and offer suggestions for how I can further this research in

the future.

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CHAPTER II

GLOBALIZATION: FLOWS AND CONSCIOUSNESS

I argue that Islamic banking was made possible by the conditions of

globalization. Globalization is an expansive topic and one that has different

meanings in different contexts. Therefore, I use the term globalization in this

dissertation as a heuristic model for thinking about my project, the industry, and

how the people I interviewed experience their world through contact with Islamic

finance. Both the industry’s rhetoric and its participants place themselves at the

crossroads between capitalist business practices and a transnational Muslim

identity. I have found two sets of ideas to be particularly helpful in thinking about

what aspects of globalization are most relevant to my project. Each set of

literature contributes an idea about the world that was reinforced by the

observations I made during my fieldwork experience and responses to interview

questions by Islamic finance professionals. I designate these two categories of

globalization literature global flows and global consciousness and I will review

that literature in the first part of this chapter. In the second part of the chapter, I

will examine some of the existential problems presented to the human

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experience by globalization and suggest how looking at the industry of Islamic

banking and finance can help us understand Muslim solutions to those problems.

Globalization theories

Globalization theories grew to prominence in the 1990s (see especially

Appadurai 2000, 1996; Sassen 1998; Jameson & Miyoshi 1998; Hannerz 1996;

Scholte 2000) and are still flourishing, both in social science theories and in the

public’s imagination. In the public imagination and on the nightly news, the term

globalization is particularly linked to the effects of population growth and capital

migration across borders in search of cheap labor. Events such as the World

Trade Organization (WTO) and the protests associated with its annual meetings

feed the anxiety that there will not be enough food to feed the world or enough

jobs left, especially in the United States and other developed countries, as a

result of the destructive force of globalization. Health, the environment, human

rights (especially women’s rights) and the outsourcing of jobs from wealthy to

developing countries all fall under this category. As we may surmise from a vivid

imagery of machines and factory workers, this form of globalization theory is

mostly concerned with industrial production and particularly how workers are

treated during the production process. This “industrial” approach is often more

amenable to media images and easily translatable to the general public because

it speaks directly to employment matters and draws upon Marxist imagery and

terminology familiar to critics of capitalism.

Social science theories of globalization are also concerned with

movements and images. Such theories of globalization can have several

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different meanings, depending on the context of its specific subject matter. Jan

Aart Scholte is a reader in international studies at the University of Warwick. He

has written one of the only textbooks on globalization and in the book connects

globalization with five broad definitions (Scholte 2000): internationalization,

liberalization, universalization, modernization and deterritorialization. Reading

about these categories has been helpful to me in organizing my thoughts about

globalization theories, but they do not exactly capture what I discovered from

talking to IBF practitioners in Dubai. Although I will draw upon Scholte’s

categories, I will introduce my own categories of globalization theories in order to

highlight those I consider most important to my own understanding of IBF and its

practitioners’ experiences.

Global flows

Based on a review of the globalization literature, I conceive of two basic

ideas that are important to the understanding of globalization. The first consists

of what I call global flow theories of globalization and builds upon world systems

theories and images of flow and motion. Owing to technological advances of the

twenty first century, people, things and ideas move around the world more

quickly and easily than at any time throughout history. Technologies such as the

Internet, cell phone access (even in remote parts of the world) and the relative

ease and safety of global travel make the world we live in today something

unique and immensely unlike times past. Some people argue that there is

nothing unique about the concept of “globalization” that appeared in the 1990s.

For example, Anderson (1991) argues that the invention of the printing press

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altered the public imagination in a way that set up globalization; Thomas

Friedman (2005) argues that the arrival of Columbus in the New World launched

the age of globalization. Globalization is a process that has roots in these sorts of

technological and migratory advances; however, my argument is that the specific

time and space compressions due to the rapidity with which people, things and

ideas can move is something different and unique to the present period in

history, which began in the middle of the twentieth century and rapidly picked up

momentum. The concept of global flows has its roots in world systems theories;

as such, I will provide a brief introduction to those theories before exploring the

idea of global flows in more detail.

World systems: Wallerstein and Wolf

Immanuel Wallerstein (1974) introduced a way to look at the world in

terms of interconnected systems via his world systems theory. Wallerstein

recognized that the world is not composed of an infinite number of separate

cultural, social, political and economic communities. Rather, the world is a

totality of interconnected systems that must be studied both historically and in

relation to one another. His systems theory provided a basic analytical tool for

social historians to build upon, both to explore systems theory and in later

formulations and critiques of globalization.

Eric Wolf is an anthropologist who builds upon Wallerstein’s systems

theory to show how the social sciences could do a better job of taking into

account not only social relations between individuals and societies, but also how

the “economic, political and ideological context” in which they were formed

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played a role in that formation. In a comprehensive volume called Europe and

the Peoples Without History (1997), Wolf analyzes societies by studying the

ways that humans have produced—that is, organized their material world in order

to survive—throughout history. In his Marxian reading of global progress, Wolf

contends that we should be able to see connections and differences between

societies throughout history. He critiques that way of looking at the world that he

contends has been historically espoused by traders and missionaries and, finally,

anthropologists: Essentially the view was that so-called “primitive societies” had

no past before contact with the ‘West” or, maybe even worse, that their past was

seen as so unchanging that something called “progress” would be impossible for

them, regardless of whether these civilizations wanted progress or not. If we read

a traditional history of the world, we might get the impression that “primitive”

civilizations changed only by force of contact with the West and we might

overlook the fact that they were already dynamic entities. They were already

making “progress” without contact with the West. We might also overlook the

fact that these traders, missionaries and anthropologists who brought their

histories back home were themselves products of a complicated and dynamic

historical process.

There are two points in Wolf’s book that I want to expand upon and clarify.

Like Anderson and Friedman, Wolf makes the argument that globalization is not

a new phenomenon because societies have always exchanged information,

people and goods. I do not dispute that these types of exchanges have

happened throughout history; however, I want to emphasize that I believe that

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the speed with which these exchanges happen now makes today’s world a

different place and opens possibilities of connections not available throughout

human history until today. Wallerstein and Wolf are important to the study of

globalization because their works dispute the notion of bounded societies and

introduce the notion of interconnectedness to social theories of culture and

society. This viewpoint sets up my later argument that geographic boundaries

play an uneasy role in identity formation in the world today.

Secondly, Wolf looks at the world through the Marxian lens of production.

I contend that a Marxian analysis is not the way to approach Islamic finance due

to the emphasis of that industry on financial markets and not production.

Nonetheless, I find Wolf’s reading of the ways in which societies are and always

have been interconnected to be highly relevant to the ways in which Islamic

finance professionals view their global connections. Like Scholte’s definition of

globalization as internationalization, world systems theories emphasize the idea

that people and countries are becoming more interdependent. Trade and capital

investment, movements of people, messages and ideas are more prevalent now

than ever before.

Globalization and flows: Appadurai

Anthropologist Arjun Appadurai (1996) provides one of the earliest and

most organized ways of looking at globalization in its sense of global flows. He

begins his inquiry by asking: Why is globalization something new and different

from historical interactive world systems? His answer is that technology and

innovation led to colonialism, whose systems and subsequent collapse paved the

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way for individuals to begin to look at themselves in ways they had never before

envisioned their lives, in great part because of media images made possible by

technology and innovation. He contends that the old model of nation-states is not

adequate for analyzing the present-day global situation because the global

economy is so complex now that we need a new way of looking at the

relationship between economy, culture and politics. Things—objects, persons,

images and discourses—are in constant motion, which he illustrates using an

imagery of flows. He suggests a framework that we can use to organize our

thoughts about this idea of movement. He divides areas of life into five

categories that are particularly affected by the new forms of technology and

innovation typical of globalization and calls these categories “-scapes”

(Appadurai 1996:33). Each category refers to a specific category of flows:

• Ethnoscape: movement of people (migration)

• Mediascape: movement of media images

• Financescape: movement of capital across borders

• Technoscapes: movement of technology, but technology makes all flows possible

• Ideoscape: movement of ideas and knowledge

I use the idea of scapes as a guide to visualizing how people, ideas and things

move around the world. Two of these categories are particularly important to the

present study and will be discussed below.

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Financescapes: Capital flows

Because this project is an ethnography of financial institutions, it is

pertinent to point out some of the more important ways in which capital flows

have been liberalized in the late twentieth century. Two important pieces of

legislation have been important both to international financial systems in general

and IBF in particular. The first is the Bretton-Woods Act, an international

agreement made at the end of World War II. The Act set forth guidelines for how

to manage international commercial and financial relations and also provided for

the creation of the World Bank and International Monetary Fund. The result of

this Act was that financial dealings became more interdependent worldwide while

being controlled through fixed currency exchange rates. The system’s collapse in

the early 1970s opened up space for variable exchange rates that reduced

barriers to commerce and capital movement (Downes and Goodman 1990). One

result of this liberalization movement was the tremendous amount of cash that

flowed into the Arabian Gulf’s oil states, which in turn were the driving force

behind the creation of IBF. A more recent piece of legislation that has had a

significant impact on IBF was the repeal of the Glass-Steagall Act (Maurer n.d.).

This Act had separated investment banking from consumer banking activities in

the United States. Under pressure from the world financial system’s more liberal

regulations the Act was repealed in 1999, providing an opportunity for Islamic

financial services to expand in the United States, which has become an important

source of innovation in the industry.

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Ethnoscapes and deterritorialization

Viewing the world through metaphors of movement and flow opens up a

space for us to think about how individuals and communities of people envision

their relationships to one another. As citizens of the world become more

interdependent, networks take on a supranational quality, which Scholte and

others (cf. Gupta and Ferguson 1997) call deterritorialization. It is easier for

people to travel and to communicate with family and friends around the globe

than ever before, so it is not necessary or even desirable to identify so closely

with other people from a particular geographic area. Aihwa Ong takes this

situation a step further when she questions the relationship between the nation

state and globalization in her book Flexible Citizenship: The Cultural Logics of

Transnationality (1999). In her study, uses an imagery of flows to show how

individual Asian investors blend strategies of migration and capital accumulation

as they form ambivalent relationships with the nation-state in a globalized world.

Hence, state affiliation—in this case to China—takes a secondary position to

individual agency in a tension between national and personal identities and

citizenship or cultural affiliation has little to do with the passport one carries. I

found that in my study as well, both individual agency and identification with a

Muslim umma were more important to respondents than state affiliations.

Olivier Roy (2004) also found this to be true in his study of Globalized Islam.

This is an important concept, and one that I think is crucial to understand when

thinking about IBF.

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Group identity is formed by an individual’s relationship to a cultural

community. Historically, geographic territory defined cultural groups but that is

no longer the criteria on which many people build their communities (Gupta and

Ferguson 1997; Ong 1999). Instead, people more often turn to the media and

technology to define their communities in the world. For example, Benedict

Anderson (1991) described the relationship of the Indonesian diaspora in Holland

with their compatriots “back home” in Indonesia. The involvement of diasporic

Indonesians with politics in their homeland is made possible in large part by

media technologies. Anderson formulated a model of “imagined communities,”

wherein the community a migrant remembers is no longer the community that

exists, as a result of both the community and the migrant’s changes over time

and space.

Like Gupta and Ferguson, Appadurai asserts that as a result of migration

and media images, people no longer live in stable, geographically bounded

communities throughout the world. Instead, he believes that “an important fact of

the world we live in today is that many persons on the globe live in...imagined

worlds.” (Appadurai 1996:33) In the same way that Anderson’s communities

“imagined” their relationship to others in a close community, Appadurai’s global

subjects build a cultural world based on how they perceive like-minded people to

be living. The crucial difference between Anderson and Appadurai is that

Anderson’s Indonesian diaspora envisioned its imaginary community through the

lens of nation-state politics, whereas Appadurai’s conception of imagined

communities leaves open the possibility for communities to be based on mutual

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ideological membership without specific reference to geographic territory. Of

course, every person lives his or her life embodied in some kind of territorial

relationship. However, media and technology make it possible and easy for a

person to live in one place and imagine himself or herself to be associated with

people all over the world, without the constraints of space and time.

Global consciousness

A particular kind of spatial orientation is a result of flows of globalization,

but also has a direct bearing on the next category of thought about globalization,

global consciousness. Therefore, the second heuristic category of globalization

literature refers less to systems and movement and more to the mental state

accompanying these structural features. Sociologist and globalization theorist

Roland Robertson also uses the world systems theory as a basis for his thoughts

on globalization. He defines globalization as follows:

Globalization as a concept refers both to the compression of the world and the intensification of consciousness of the world as a whole. The processes and actions to which the concept of globalization now refers have been proceeding, with some interruptions, for many centuries, but the main focus of the discussion of globalization is on relatively recent times (1992:8).

Like Wallerstein and Wolf, Robertson believes the historical aspects of societal

relations are important to our understanding of both 1) the ways in which the

world has always been interconnected and 2) the newness of the concept of

globalization. Unlike Wolf, Robertson rejects the “economism” of the systems

theory and prefers to concentrate on the cultural and religious aspects of

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globalization (Robertson 1990). In fact, Robertson believes that Wolf’s study

does not emphasize enough the contemporary nature of the condition of

globalization. Robertson believes that the historical roots of globalization have

been ignored in favor of peripheral concerns, such as the ways in which

economic matters have been privileged in an analysis of relations between

societies. Whereas economic matters are tremendously important, Robertson

considers them to be subject to cultural coding and therefore declares that we

must pay attention to the cultural aspects of societies as well as to their material

structures (Robertson 1992). IBF professionals are embedded in both the

economic and cultural/religious implications of globalization; therefore, it helpful

for us to look at both material flows and consciousness and, more importantly,

how they interact.

Although Robertson concedes that the definition of globalization can be a

contested field, he recognizes that certain relationships are to be privileged in a

globalized world. In particular, he sees the individual as having various relations

with different aspects of the world: society, the state, international system of

states and humankind in general. These relationships must be mediated, and

that causes the main problematic of the age of globalization. Individuals who

must negotiate the set of circumstances related to globalization develop a

consciousness that sees the world in terms of a myriad of relationships, many of

them based on shared cultural or religious symbols instead of on a relationship

with a state or ethnic group. In other words, we must think of the world as a

“global whole” (1992:5; emphasis added). This focus on consciousness is well

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suited to the current project because it is my contention that IBF exists in order to

help mediate these types of relations. Therefore, I believe that globalization

gives rise to a certain kind of global consciousness that we can find in places like

the industry of IBF.

How an individual thinks about his or her relation to a culture of

globalization affects the way he or she thinks about his or her relationship to

society and culture. Because of the movements involved in globalization,

individuals regularly come into contact with, and live in geographical proximity to,

people who may adhere to vastly different worldviews from their own. It

becomes necessary to negotiate relations among people vis-a-vis the differences

(Shweder, Minow and Markus 2002).

Traditionally, there have been only two ways to think about culture and

globalization: culture either becomes universal or irreparably split apart. The

former view suggests that the effects of worldwide interdependence will eradicate

differences between cultures and make a stale, universal culture. Popular books

entitled The End of History and the Last Man (Fukuyama 1992), The World is

Flat (Friedman 2005), and The Corporation: The Pathological Pursuit of Profit

and Power (Bakan 2004) feed the imagination with images of globalization as a

faceless machine that takes the form of corporations and it poised to flatten the

world and remold it into its own form. The opposing image of a world being torn

apart is contained in books like Jihad vs. MacWorld (Barber 1995) and

Huntington’s Clash of Civilizations (1998). Either view—a flattened world or a

world ripped apart—follows closely the vision Marx had of capitalism wreaking

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destruction upon humanity. Each critique makes a valid point, but I have found in

my research that people who experience the effects of globalization in their daily

lives do not usually see its relationship to culture as being so extreme. Indeed,

most people find a way to incorporate the many elements of culture they

encounter into a notion of culture that is more reflective of their own lives and

identities.

For example, people have found ways to mediate cultural differences and

pressures to conform under conditions of globalization. Ulf Hannerz uses the

term “cosmopolitan” to describe a person with this “state of mind” or “mode of

managing meaning” (Hannerz 1990). Cosmopolitanism describes one way to

mediate diverse cultural experiences and incorporate them into one’s own

personal perspective (Hannerz 1996; 1990). In a more recent book, Kwame

Anthony Appiah frames his view of cosmopolitanism specifically in terms of moral

focus (2007). Islamic finance provides a particularly good example of how this

framing of consciousness works: the identities of Islamic finance professionals

are inseparable from their participation in that industry. Business practices within

the industry reflect its practitioners’ cosmopolitan perspectives even as their

embodied experiences remain chiefly local. For the purposes of this dissertation,

I assume that under conditions of globalization, the “global” is the culture to

which I am arguing that the cosmopolitan self anchors, particularly because there

is already a discourse available in Islam for a transnational, deterritorialized

community.

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Problems caused by globalization

According to Robertson, a key problematic of globalization is that an

individual must develop a consciousness that sees itself as part of a myriad of

relationships. For the purposes of this project, I have chosen to look at three

types of relationships and the symbol systems, discourses and practices that IBF

practitioners use to mediate those relationships. I will draw upon Shweder’s

concept of the Big Three (1997) moral discourses, which are ways of describing

the human experience, to look at the was in which individuals conceptualize their

relationships to self or identity (Self), members of a reference society

(Community) and divine religious beliefs (Divinity). I will argue that the industry

of Islamic banking and finance solves certain problems of mediation in these

three categories. For the remainder of this chapter, I will outline the tensions

faced by individuals in mediating three kinds of relationships in a globalized

world. Then, I will introduce the Big Three theory of moral discourse as it relates

to these three types of relationships. Finally, I will explain in more detail what I

mean when I talk about discourse.

Problem #1: Self and identity

The first of these existential problems addressed by IBF is the question of

identity, or “Who am I?” in relation to the environment around me. Philosopher

Charles Taylor (1989) explores the development of the modern self in terms of

morality and associated lifestyle choices. According to Taylor, moral values are

fundamental elements of worldview. He thinks about the modern self as a moral

agent that locates itself in terms of “the good,” which is a notion about morality

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and the proper way to live one’s life. The world into which the self is born

provides a metanarrative about “the good” and we locate our selves within this

narrative. This relationship or dialogue between the preexisting metanarrative

and the individual self is constitutive, that is, they “make each other up” (Shweder

1991). Taylor considers lifestyle—or the choices about how we live life every

day—to be central to the construction of modern identity. Economic activity is

one of the most important areas of human activity: therefore, making moral

choices in a business setting contributes significantly to a person’s self

representation.

Anthony Giddens, like Taylor, considers lifestyle choices to be very

important in the construction of the modern self-identity. Under conditions of

modernity, construction of self-identity is an ongoing process, which sociologist

Giddens calls the “reflexive project of the self” (1991:5). This reflexive project

involves continuously revising personal biographical narratives, as new lifestyle

choices become known. Exposure to alternative lifestyles often poses moral or

existential dilemmas for the modern self. In the past, close-knit communities

may have provided guidance in solving these dilemmas, for example, through

initiation rituals or familial involvement in marriage choices; however, the erosion

of the modern community has left the individual alone to contemplate moral

issues without the support of community traditions. Because there are so many

different lifestyles from which to choose the individual often turns to expert

knowledge to filter information about daily life. The institution becomes like a

community, in that it acts as a central organizing mechanism for lifestyle choices.

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I will argue throughout this dissertation that Islamic bankers have made career

choices in response to their understandings of morality. Career choice, by virtue

of the community function of the institution, becomes a way in which the Islamic

banker can address questions of self, community and religious belief vis-a-vis a

cultural and religious metanarrative.

Problem #2: Self and community

The second existential problem for Islamic financiers is the question of

community: how does a person transcend definitions of community based on

geographical references to form a community based on the universal facets of a

transnational Muslim belief system? Because of global flows, people moving

around the world with relative ease have presented individuals with the problem

of how to identify with a community of people who may use different symbol

systems to understand the world or whose worldview is vastly different from their

own. Muslims have been particularly affected by negative portrayals of their

culture and belief system in the media and are struggling to maintain their beliefs

while attempting to interact with sometimes opposing belief systems. Muslims

who wish to participate in the world economy while trying to adhere to standards

prescribed by Islamic law regarding business and financial practices have a

particular problem (Tripp 2006; Kuran 2004; Mirza and Halabi 2003). The

problem occurs whether the individual Muslim is a member of a minority Muslim

community in the West or a citizen in a Muslim country receiving media images

of a negative nature (cf. Said 1997; Said 1994).

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During the 1980s and 1990s Muslim populations around the world—in

Muslim countries like Indonesia, Pakistan and Malaysia and in countries where

Muslims live in the diaspora—generated enough steady income growth to

develop a network of Islamic financial institutions. Innovations in institutional

structures and products have encouraged growing Muslim populations to

contribute to the Islamic financial network both institutionally and intellectually,

especially in the United States and Great Britain. Many authors contend that in

this manner, attempts to create an Islamic environment are an effect of

globalization rather than a reaction against it (Roy 2004; Mamdani 2004; Gray

2003). To support this argument, I note that the language of business as well as

of theoretical writings is English, tying the industry both to its roots in the Anglo-

American business model and mode of knowledge dissemination.

In contrast to IBF’s close association with the conventional banking

institutional structure, many authors assert that IBF is a financial system that

places more emphasis on the community and social justice concerns than

conventional finance places on those same concerns. This idea has its roots in

the spiritual concept of adalah introduced in chapter 1. For example, Mirza and

Halabi (2003) contend that the Islamic banking in Australia’s minority Muslim

community has responded exceptionally well to the community focus and

participate in Islamic banking partly to strengthen community ties. Kuran (2004)

also asserts that IBF is primarily a vehicle through which to call attention to a

unique Muslim identity. I witnessed some of this kind of thinking amongst my

respondents, most of who appeared to identify strongly with the idea that IBF

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offers more equitable means of distributing wealth than conventional finance.

Rather than seeing this difference as an irreconcilable problem, however, many

practitioners agree with the contention of one author that the goal of those

engaged in Islamic finance is to “increase competition within the world economic

system rather than creating competition to it...” (Al Saud 1999:xiii). This is not to

suggest that Islamic bankers do not critique capitalism but merely to point out

that the relationship is more complicated than a straightforward rejection of

capitalist ideology or institutions. Islamic banking is not an alternative to

capitalism, but an improvement upon it. In chapter 4, I will explore some ways in

which Islamic financiers conceive of their community affiliations and which

aspects of IBF contribute to this understanding.

Problem #3: Self and divinity

Finally, I propose that the industry of IBF addresses a third question for its

practitioners: ‘To what extent can divine beliefs be encoded in daily life?” Islam

as a religious belief system is particularly amenable to the examination of daily

practices as they relate to spiritual beliefs. In the Introduction, I talked about

sources of authority in Islam and introduced the concept of orthopraxy, or the

importance of daily practices. In this chapter I will explain those practices in

more detail. It is extremely important to note that in Islam there is no single

human who has been granted the authority to make decisions about religious

matters. Individual jurists or other learned people can offer opinions on a given

situation, but it is always preferable to have a consensus of scholars. Some

individuals appear to have more authority than others; however, that is due to the

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reality of human society and power structures, and is not built into the religion

itself. When a moral decision arises, it is incumbent on each individual Muslim to

think through the situation in his or her own personal process of ijtihad and to

come to a conclusion that is consistent with his or her understanding of the

religion. Many of the debates about financial matters happen because of

different interpretations of central ideas and the meaning of specific practices.

The Qur’an sets forth certain obligations in all areas of life that each

Muslim of sound mind must adhere to, regardless of gender, economic

circumstances or any other earthly differentiated status. Those obligations are

often called the “five pillars of Islam” (from Waines 1995):

1. Shahadah (affirmation of faith): A Muslim must affirm that there is only one God, Allah, and that Mohammed is His Prophet.

2. Ritual Salat (Prayer): A Muslim must pray five times daily, at the times and in a manner prescribed in the Qur’an.

3. Zakat (Alms): A Muslim must give a portion of his or her wealth to less fortunate people. This is not meant as charity, but as purification and to take care of community needs.

4. Fasting: Every adult Muslim whose health permits it must fast from sunrise to sunset during the month of Ramadan, according to the Muslim calendar.

5. Hajj: Finally, every Muslim must make a pilgrimage, once in a lifetime, to the holy city of Mecca, located in Saudi Arabia.

Every human practice fits into a hierarchical category of actions. Islamic

tradition has categorized the degree of lawfulness or unlawfulness of each action

and each action is judged on the basis of the following criteria (from Beekum

1997):

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1. Fard. These actions are required for every Muslim. The “five pillars” of Islam fall under this category.

2. Mustahabb: These actions are highly encouraged but not required. An example would be not only fasting during Ramadan but saying extra prayers during the month as well.

3. Mubah: These actions are neutral. For example, one person may prefer to cook and another may prefer to garden.

4. Makruh: These actions are not expressly forbidden but it is considered odious to do them. Smoking, for example, is not a forbidden act but it is not encouraged.

5. Haranrr. These actions are expressly prohibited under Islamic law and they are considered to be major sins. There is a wide range of haram actions, including murder, adultery, drinking alcohol and charging riba.

It is evident that certain practices are absolutely crucial to perform if a person is

to be considered a Muslim. Other practices are also afforded a place in a

hierarchy of beliefs about proper behavior. Divine beliefs are encoded into daily

practices so it is a logical extension to examine business practices for what they

might tell us about how an individual’s relationship to divine beliefs is mediated. It

does not matter whether or not that transaction is, in fact, not much different from

a conventional transaction; what matters is how that transaction reinforces his or

her belief that Islamic practices are being upheld. In chapter 5 I will examine how

IBF practitioners create an environment that supports these spiritual concerns.

Big Three moral discourse: Shweder

There is evidence in cultural psychology literature that moral discourses

are used to make sense of life experiences and to mediate relationships in the

world. Richard Shweder and his colleagues have identified some ways in which

moral discourses come together to solve moral dilemmas in the context of an

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Oriya Hindu community in Orissa, India (Shweder et al. 1997). In their study

“The ‘Big Three’ of Morality (Autonomy, Community, Divinity) and the ‘Big Three’

Explanations of Suffering” the authors sought to explain ways in which members

of a Hindu community account for the experience of suffering through the use of

moral metaphors, or moral discourses. The researchers developed an interview

protocol, based on extensive ethnographic research, which included references

to thirty-nine culturally specific behavioral occurrences that would cause a

member of that community to experience an opinion about the ethical nature of

that incident. Informants were presented with these problems1 and asked to

explain the incidents.

Analyses of the moral themes provided by subjects as ways to think about

the occurrences yielded three groups of “moral discourse” that the authors posit

as metaphors for how members of this community organize and categorize life

experiences. Specifically, these three discourses fall into groupings of

“Autonomy”, “Community” and “Divinity.” Each group of discourses represents a

domain of goods related to the well being of an individual’s development.

Although no one person operates exclusively according to only one discourse,

Shweder and his colleagues do hypothesize that various cultural communities

may privilege some metaphors over others. Therefore, different communities

may have institutionalized how they think about moral goods in different ways. In

1 For a detailed explanation of the interview protocol, please see Shweder, Much, Mahapatra and Park (1997). One example of a behavioral occurrence is the following: “A widow and an unmarried man loved each other. The widow asked him to marry her.” (Shweder et al. 1997:133) The informant was asked to comment upon what, if anything was morally wrong with this situation and why.

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turn, individuals would have differential access to ways in which to conceptualize

thoughts about moral issues. I will discuss each domain below and then give an

example of how Oriya and Americans might differentially privilege separate

domains.

The first domain of moral thought is “Autonomy.” This cluster of discourses

includes discourses about “individual interests, desires, and preferences of the

person.” (Ibid: 143) In an American context, autonomy would include an

emphasis on the individual self and its self-interested right to noninterference. In

an Oriya context, however, autonomy is linked to a person’s embodied soul. This

conception of the individual implies interpersonal and divine obligations not

conceived of in an American context. Though both conceptions ultimately lead to

the idea of an autonomous person, I point out these differences in order to show

the potential breadth of meaning this category can encompass.

The second domain of moral thought is “Community.” This cluster of

discourses includes discourses about the individual’s “roles and statuses and

obligations in relation to other members of [a] community.” (Ibid: 144) A moral

discourse about community will include, then, judgments about the proper

relationship between an individual and his or her community and the rights and

responsibilities of each toward the other. For example, in the Oriya context of the

Big Three study, themes of hierarchy, duty and interdependence are invoked to

illustrate the proper relationship between the individual and community.

Participation in other communities will likely invoke other themes.

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A third domain of moral thought is “Divinity.” This cluster of discourses

refers to a belief in a sacred order of the world. These discourses encompass

ideas—variably expressed—that humans have some kind of relationship with the

divine world, and that some (or all of) this-worldly activities support this

relationship. Divine this-worldly activities may include special rituals or traditions,

following sacred laws, domestic activities or—with a nod to Weber—work or

economic activities.

The three moral discourses discussed above represent ways in which a

particular group of people in Orissa, India thinks about the relationship of the

individual with him- or herself, his or her community and with the divine world.

Shweder and his colleagues have determined that community members

collectively and individually value moralities based on community and divinity

over a morality of autonomy. Autonomy is used as a category in the community,

but it is not as prevalent as the others. On the other hand, the authors suggest

that American moral discourse would favor a morality of autonomy over one of

community or divinity, although the latter groups would certainly be invoked.

Each category may be characterized according to specific principles found in that

community; however, each category is also broad enough to include

interpretations from persons of different communities. Because it is possible for

each cluster to be broadly conceptualized, this way of looking at moral discourse

provides a strong base from which to examine morality in other cultural

communities, such as the Islamic finance community.

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I believe that conditions of globalization present numerous existential

problems for people living in the world today. A global consciousness requires

that mediation between the individual and certain relations occur in order for

these problems to be addressed. For the purposes of this project, I have looked

at the Big Three areas of discourse in order to examine the Islamic finance

industry and how these categories might help us to learn how an industry might

work to mediate relations between people, their self-identities, their communities

and their divine belief systems. The primary difference between individuals in

Shweder et al.’s study and the present one is the geographic and conscious

location of the individual in question. In Shweder et al., respondents were

relatively restricted geographically, and oriented to a local consciousness about

the world. This is not to suggest in any way that the respondents had no contact

with a globalized world; indeed, residents of both Orissa and Hyde Park have

images and experiences of globalization available to them and are fully

conversant with its effects. However, the study was constructed to elicit

responses that speak to a more localized worldview based on traditional

discourses from within the respective communities. In contrast, the individuals in

my respondent group have explicitly constructed their lives with reference to a

global consciousness and have cultivated a work environment based on that

consciousness. As such, I began with the assumption that a global

consciousness plays a crucial role in the way they both respond to and, in turn,

advance industry practices and discourses.

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Discourse

When we speak of “discourses” we are speaking of ways in which people

communicate with each other. Speaking to each other—dialogue—may take

place face-to-face in a conversation or in a less interactive way, through the use

of a speech act intended to address a particular audience. Speech need not be

verbal and, indeed, many speech genres are in written form (cf. Bakhtin 1990). I

argue that the industry of IBF has arisen from some unique social and historical

human conditions. The discourse used by participants in the industry to describe

what they do and with whom they intend to communicate is an important

component of the industry.

Any area of human experience may be represented by a discourse, or

symbol system, for describing that experience. A discourse is a way of thinking

about and/or communicating with other people that helps a person to interpret a

situation in a particular way or to solve a problem according to a given set of

guidelines. A discourse may be applied to any area of experience, be it

psychological development, health, morality, religion, education or whatnot.

Moreover, the complexity of the human experience makes it possible for an

individual to possess multiple discourses for interpreting various areas of life. It

is not necessary for a person to select only one discourse (Shweder et al.

1997:140), and we expect that a person will retain multiple discourses to

represent his or her life experience.

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Speech genres

Bakhtin looks at “speech genres” to analyze the role of language in human

communications. Language is used in each various area of human activity in the

form of individual utterances. He contends that participants in each sphere of

language uses these utterances to collectively develop a sphere of

communication that reflect “the specific conditions and goals of each such area”

of human activity (Bakhtin 1990: 60). Each sphere of communication has its own

goals of communication and, to this end each sphere develops its own “relatively

stable types of these utterances.” (Bakhtin 1990:60; italics in original) In his

essay “The Problem of Speech Genres,” Bakhtin is concerned mostly with the

function of secondary—or ideological—speech genres.2 He defines ideology not

in the political sense, but to mean “any system of ideas.” Ideology requires that

humans exchange signs both within society and throughout history (1990:101, n.

3); therefore, it is important to study speech acts in order to study the problems of

“the interrelations among language, ideology, and world view.” (1990:62) The

ability of language to contribute to thought categories is explored in depth by

John Lucy (1992). Lucy finds that speakers of American English and Yucatec

Maya memorize and classify patterns in different ways, consistent with the

grammatical structures of the two languages. This study is the first empirical

support for the Sapir-Whorf hypothesis that language categories and

psychological processes are related. It is to this end that I examine ways in

2 A primary speech genre refers to “simple” forms of unmediated speech communications, i.e. an everyday conversation between two or more people. A secondary speech genre reflects the more complex, highly developed and more organized areas of novels, drama, scientific research, etc.

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which Islamic bankers speak about their industry to reveal what ideological

concepts they are trying to impart to the world through a particular kind of

discourse.

One way to determine the ideological aims of a speech community is to

observe how members of that community speak to each other and to potential

members of that community. Czech linguist Bohuslav Havranek (1964) looked at

the use of standard language in different functional areas. In a chapter entitled

“The functional differentiation of the standard language,” he contends that

standard language used by members of a shared functional community—

lawyers, journalists, diplomats, scientists—contains linguistic devices not meant

to be shared with the general population. Those devices are meant to facilitate

communication within those communities and the language will be more or less

accurate depending on the needs of the community. Havranek cites the

“language of business correspondence” (page 13; italics in original) as an

example of specialized speech forms used in an industry. By analyzing words or

phrases unique to an industry’s discourse, we may gain a better understanding of

the community’s ideological orientation.

In the present study, I included questions designed to elicit answers about

how Islamic financiers explain their industry and financial activities to

conventional bankers and to prospective participants in the industry. In these

explanations, I found that participants in the industry of Islamic banking and

finance make certain claims about the ideological aims of their industry. IBF

participants use terms familiar to conventional bankers to describe their activities.

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Moreover, certain words (in Arabic, no matter what is the speaker’s native

language) and phrases impart a selection of information to the public and to each

other about the ideological aims of the industry. Taken together, the discourse

and specialized business terminology are powerful ways to impart knowledge

about the IBF industry to both members and nonmembers of the IBF community.

One aim of this study to look at the specialized discourse of the IBF industry in

order to assess how well the industry lives up to some of its ideological claims.

Naturally, we may also expect to find people using at least one discourse

to describe and categorize the area of human experience pertaining to economic

activity. A major assumption of this study is that economic activities are

embedded in psychological development, as well as in social and political life (cf

Polanyi 1944); therefore, any discourse about economic activity will be shaped

by input from other discourses of life experience. Because a person can access

multiple discourses from many areas of experience, economic discourses will

likely include references to personal histories, educational experiences, work

histories, migration histories, social and political histories, and moral and

religious world views. It is particularly likely that the latter category of discourses

will have a great influence on individuals who participate in IBF because the

industry is explicitly built upon references to Islamic morality. Of course the

weight given to each realm of experience will be different for different people, but

we may expect an array of discourses to be present in any description of

economic life. In this study, IBF practitioners speak about their industry in terms

of morality, but also in terms of flow and a global consciousness, while

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simultaneously upholding the practices they associate with an immoral industry—

conventional finance.

Conclusion

In this chapter, I have reviewed some of the social science literature on

globalization. I found that the understandings most related to my conception and

to the conceptions of globalization as understood by my respondents fall into two

general, but related, categories: global flows and global consciousness. Both

categories build upon an imagery of flows of people, images, capital and

technology to create a consciousness about the world and relationships within it.

Next, I looked at some of those relationships to ask what existential problems

might be presented to a person in a globalized environment. Using Shweder et

al.’s conceptualization of the Big Three categories of moral discourse, I divided

those questions into categories of self, community and divinity so that in

subsequent chapters I can examine more closely the discourse and practices

within IBF that render it a place that is at once created by individuals in search of

a mediating environment and a tool through which IBF practitioners can negotiate

relationships in a globalized world.

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CHAPTER III

DISCOURSE OF THE SELF: INTEGRATING WORLDVIEWS THROUGH PRACTICE

The goal of this project is to look at how the industry of IBF solves certain

existential problems for its practitioners. The first of these problems is the

question of identity, or “Who am I?” This is a particularly important worry today

because modernity has been linked with a ubiquitous institutional intrusion into

the minute details of every day life, which philosophers of modernity and the self,

like Taylor and Giddens, consider to be crucial to the formation of a modern

identity. Although both interpretations draw upon ideas about morality to make

their arguments, they differ in that Taylor recognizes the opportunity to use moral

discourse to explore the dialogic nature of this relationship and Giddens explores

the relationship between the individual and institutions. Taken together, these

two theories complement each other to support my contention that IBF plays the

role of a culture broker in relationships between the individual and multiple facets

of society. In this chapter, I explore the question of ‘Who am I?” in the context of

IBF by examining how its practitioners use the discourse of autonomy, or self, to

answer that question for themselves. In chapter 2 ,1 established some ways in86


which the individual and his or her environment are mutually constituted,

especially through discourse. I am arguing here that IBF is crucial to the

formation of a particular kind of self vis-a-vis its relationship to an environment

specifically designed to mediate between conflicting worldviews. I argue that

Islamic finance incorporates elements of global capitalism and Muslim identity

and repackages them so that each is understandable and appealing to the other.

This is not to suggest that Islamic bankers do not critique capitalism but merely to

point out that the relationship is more complicated than a straightforward

rejection of capitalist ideology or capitalist institutions.

I investigate individual experiences of combining individual morality with

global business practices by considering two questions: First, how do

practitioners of Islamic finance negotiate modern globalizing processes? I will

discuss the role of Islamic banks as spaces—culture brokers—in which people

enact practices that mediate between global and local processes. Second, how

are personal identifications formed and negotiated through modern globalizing

processes? I will explore how Islamic banking discourse and practices support

the construction of personal identity in an institutional setting.

Mediating globalization

The question we begin with is: How do IBF practitioners negotiate modern

globalizing processes? The answer is that they associate with Islamic financial

institutions, which provide a mediating space between multiple identities. As we

saw in chapter 1, one of the two principles of Islamic thought is tawhid, or the

idea of unity between the individual and Allah. One implication of the principle of

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tawhid is that human beings exist in unity with Allah and with each other.

Therefore, tawhid establishes the goal of human development as being directed

toward a “God-conscious human being.” Several people I interviewed stressed

the desirability of working in an Islamic finance environment because that

environment allowed them to balance their lives and fulfill all of their obligations,

not just their work goals.

There is evidence from the field of cultural psychology that humans

organize and categorize life experiences in terms of moral discourses that lead to

identity formation. In other words, if we examine how people talk about their

everyday life in moral terms, we may gain insight into how those discourses

shape and are shaped by the people most affected by them. Shweder et al.

(1997) have identified the question of “Autonomy”1 as one of the three primary

domains of metaphors by which people evaluate their life experiences and

individual development. Because this domain of moral thought includes ideas

about “individual interests, desires, and preferences of the person,” (p. 143), I will

use it as a way to talk about how moral discourse is deployed as personal

identifications are formed and negotiated through modern globalizing processes

in an economic setting. I will also change the terminology to use “self” instead of

“autonomy” so that I can interface more readily with the theories of Taylor and

Giddens. In this project, I assume that the culture of globalization provides the

metanarrative (in Taylor’s terminology) upon which Islamic financiers draw to

think about their identities. This metanarrative provides a discourse by which

1 For the purposes of this project, I will designate this category as “self” in order to connect the concept with more general theories of the self.

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Islamic bankers think about the question “Who am I?” Evidence for this

metanarrative can be found not only in what people say but in what they do in

their daily lives.

“I am a citizen of the world.”

The notion of self and personhood recognizes that "all instantiations of

identity take shape within the context of shared humanity" (Colbert 2007,

forthcoming). Any person living in the world today, but particularly a person who

possess a global consciousness as described by Robertson (1992), has a

multitude of potential discourses from which to draw upon when asking of him- or

herself: ‘Who am I?” Islamic bankers see themselves as active participants in

the process of forming a new identity associated with the institution of Islamic

banking; an identity that is superior to both “homo economicud' and “homo

Islamicud’ (cf. Tripp 2006). I will discuss Tripp’s idea of identity in more detail in

the second part of this chapter, but for now I contend that the institution of Islamic

banking and finance solves the problem of “Who am I?” by providing a venue in

which Islamic bankers may take the best and discard the worst qualities of both

capitalist and Islamic business practices.

As I began my fieldwork, I started to wonder why I had bothered to go to

Dubai at all. Each and every office I went to looked and felt almost exactly like

conventional banks I was accustomed to in the US. Nationalities and ethnicities

were so varied that there was no point in trying to find the “ideal type” Islamic

banker, or so I thought. When I asked a simple question like: Where are you

from?” the most common response was: “I am a citizen of the world” followed by

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a self-conscious laugh. Table 2: Respondent Profiles shows the answers that

followed the laughter.

TABLE 2: RESPONDENT PROFILES

Background* Count % Total

(Key: "born inVraised in")

Lebanon/UK or Canada 2 8%

Saudi/Lebanese 1 4%

Subcontinent/UAE 4 17%

Subcontinent/UK or USA 7 29%

UK, USA, Europe/working in UAE 4 17%

UAE or Bahrain national (3 male, 3 female) 6 25%

Total UAE respondents n=24

% Living in diaspora 75%

*AII males attended universities in the USA, UK, or Canada. All

females attended universities in UAE.


As you can see, 75% of the Islamic bankers I interviewed live and work in a place

other than where they were born. Most of the rest spent significant formative

years outside of their home territory. Like Ong’s Chinese individuals for whom a

passport is merely a legal document and not necessarily a statement about

cultural affiliation, the people I interviewed were often ambivalent about their

state and cultural ties. It turns out that that ambivalence about state affiliation is

the ideal type for an Islamic finance professional.

Muslim subjectivity: Peter Mandaville

Throughout the formulation of this project and during my fieldwork, I

struggled with how to describe how contemporary Muslims think about their

relationship with Islam. Most accounts begin with a monolithic definition of Islam

and do not account for different voices found among practitioners themselves.

Or others, such as Olivier Roy (2004) or Mahmood Mamdani (2004) recognize

that there are multiple voices within Islam but still tend to provide the reader with

a few big narratives that still do not necessarily reflect the complexity of the

individual’s experience of Islam. Nonetheless, one cannot deny that there are

some universal concepts of Islamic teachings that serve to organize a Muslim

subjectivity both recognizable to Muslims yet flexible enough to allow for

individual interpretation (see also Eickelman and Piscatori 2004).

Peter Mandaville is an international relations theorist at Georgetown

informed by anthropology and sociology literature. He provides what I think is

the best method for describing Muslim subjectivity. Mandaville is British, but

grew up in the Arabian Gulf; therefore, his experience of Islam is near my own

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and to the people I interviewed. Mandaville considers migration and technology

to be the most important factors impacting contemporary Muslim subjectivity. In

his book Transnational Muslim Politics: Reimagining the Umma (2004), he

explores how the Muslim diaspora in the West has come into contact with both

alternative sources of authority to the Islam of their countries of origin and with

alternative formulations of Muslim authority from their own communities.

Technology has further allowed new or previously disenfranchised voices to be

heard in the public sphere. These voices often articulate the experience of

diasporic Muslims better than traditional voices of Islam and therefore appeal to

many contemporary Muslims. As we saw in the demographic profile of the

people I interviewed, most of the people are Muslims raised in the diaspora in

either the UK or the US. Even the UAE nationals (except one—Miss Lutfi) have

significant exposure to global culture, either from living or attending university in

the UK or the US or, in the case of two women I interviewed, being a product of a

household of mixed nationalities. The people I interviewed are the people whom

Mandaville envisions when he talks about Muslims in the diaspora.

Mandaville sees Islam as a “master signifier” that functions as a totalizing

abstraction around which “meaning and discourse can be organized” (p. 55). He

distinguishes this view not only from a monolithic view of Islam but also from a

view of multiple Islams. He believes it is as wrong to view Islam either as a

completely distinct category called religion or as so totalizing that one cannot

make distinctions between other categories such as politics (or, I add,

economics). Rather, he treats Islam as a discursive concept that communicates

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social meanings within particular communities. This does not mean that Islam is

not a religion in a way that is spiritually meaningful; nor is Islam merely a way to

organize a community devoid of spiritual meaning. To Mandaville, Islam is a

form of social authority that “commands allegiance to a particular set of ethical

claims” (2004:59). He is concerned with religion and politics, but I understand his

argument to be applicable to any sphere of life and therefore I understand

economic activity to be included in this argument.

Interpellating the Islamic banker: Althusser

Louis Althusser (1971) writes about the reproduction of ideology and its

material expression in a way that I think provides an insight to the workings of

Islamic finance, and that complements Mandaville’s formulation of a Muslim

subjectivity. If a particular subjectivity is to be shared, individuals must first

recognize that they are members of that ideological community. Althusser

makes the claim that for an ideology to reproduce itself, it must convince

individuals to be subjects of that ideology. The key part of Althusser’s essay

concerns the need of an ideology to recruit, or interpellate individuals as its

subjects (p. 128), and this is ultimately what motivates Islamic bankers or

customers to participate in the industry. Islamic banking recruits its subjects by

hailing them as either Muslim or capitalist subjects, whichever term is relevant to

the audience. It does not matter that the actual banking practices are not very

different from capitalist banking or that the products have Muslim names, but only

that participants in Islamic banking “buy into” the ideology of having been

designated a part of the industry. It allows them to believe, in a sense, that they

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are reinforcing their Muslim identity by participating in Muslim banking practices.

At the same time, identification with the global economy is still possible because

of the hybrid nature of the institution. At the same time capitalist bankers are

able to see themselves as doing business with a bank.

Althusser also believes that “[i]deology has a material existence.” (p. 125).

An Islamic bank is the material expression of an Islamic banking ideology. If

Althusser believes that material practices serve to reproduce ideology (p. 126),

then participating in an Islamic banking situation, either as customer or banker,

must affect the consciousness of all involved, so that participants are actually

living their relationship to the ideology. It follows, then, that the conditions of the

Islamic banking ideology are reproduced through the material existence of an

institution designed to reproduce the practices of this ideology. Daily practices

found within the institution should support the ideology.

In this reading that combines Althusser’s interpellation with Muslim

subjectivity, I argue that Islamic finance uses an understanding of Muslim

subjectivity to provide a discursive space for Muslims who share a similar

subjectivity. Contemporary Islamic financiers do not have a clear territorial base

on which to establish identity: they call upon references to the umma to define a

conceptual space of identity, which is institutionalized in the form of Islamic

finance. Religion provides a base from which they may carve out “zones of

moral authority”2 in relation to capitalism, which are meant to transcend

geographic and other divisive group characteristics (nationality, ethnicity,

2 William Mazzarella, personal communication94


language, etc.) and to form an industry negotiated in the globalizing space of

international capitalism. In this sense, it may seem counterintuitive to study

Islamic banking as a local phenomenon. Yet looking at IBF in a local context

allows us to capture some of the intricacies associated with local practices of

global institutions. I will do so after explaining the roles of morality, institutions

and the function of a culture broker.

Morality, institutions and self-identity

When we situate Islamic banking within discussions of globalization, it

becomes possible to consider how the identities of individuals involved in an

institution shape and are shaped by the culture of that institution. What is an

institution? According to the American Heritage Dictionary, an institution is “[a]

custom, practice, relationship, or behavioral pattern of importance in the life of a

community or society.” Under conditions of modernity, construction of self-

identity becomes an ongoing process, which sociologist Anthony Giddens calls

the “reflexive project of the self” (1991:5). This reflexive project involves

continuously revising one’s personal biographical narrative as a person is

exposed to different ways of experiencing the world. Exposure to alternative

lifestyles often poses moral or existential dilemmas for the modern self. In the

past, close-knit communities may have provided guidance in solving these

dilemmas, for example, through initiation rituals or familial involvement in

marriage choices; however, the erosion of the modern community has left the

individual alone to contemplate moral issues without the support of community

traditions. Because there are so many different lifestyles from which to choose,

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the individual often turns to expert knowledge to filter information about daily life.

The institution becomes important in this context as a central organizing

mechanism for lifestyle choices. This does not imply that one chooses an

institutional affiliation through a kind of shopping process, but that people

gravitate toward institutions in which they feel comfortable asserting their

identities.

IBF as a culture broker

Because of the enormous presence of institutions in everyday life,

institutions do constitute a principal influence on the formation of self and identity

in the modern world; however, those same “selves” are active participants in the

formation of the very discourse from which their identities evolve. As a result of

this dialogic relationship between individual and institution, I argue that the self—

the “moral self”—is a product of the mutuality of both shaping and having been

shaped by moral discourse mediated by an institution. Mediation is any process

“by which a given social dispensation produces and reproduces itself in and

through a particular set of media.” (Mazzarella 2004:346) Individual and

institutional Islamic finance discourse and practices support the construction of

personal identity in an institutional setting. Islamic finance acts as a “culture

broker” by allowing moral values and global financial practices to work together

for the advancement of both by offering a space in which individuals can identify

with both simultaneously. Anthropologist William Mazzarella introduces the

concept of the institution as a culture broker in his book Shoveling Smoke:

Advertising and Globalization in Contemporary India (2004). In his book,

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Mazzarella argues that advertising professionals mediate their personal identities

in contemporary India by reconfiguring established (often state mediated) models

of the relationship between global and local culture. I argue that, in a similar

manner, the industry of IBF and its practitioners mediate between the culture of

globalization and the individual’s formulations of Muslim subjectivity by

interpreting and repackaging aspects of both.

Recent scholarship in Islamic finance has acknowledged the connection

between the institution of Islamic finance and Islamist identity politics (cf. Henry

and Wilson 2004; Mandaville 2004; Smith 2004; Kuran 2004). In particular,

Kristen Smith of Harvard’s Kennedy School of Government (2004) maintains that

a strong Islamic financial institution can indeed have an effect on identity in public

life by addressing non-financial concerns. In this way, the institution mediates

between global financial practices and local Muslim self-identifications. IBF

provides a physical and psychological space in which Muslims can construct their

identities simultaneously as individual citizens of diverse societies and also as

members of the global Muslim community, or umma, without sacrificing one for

the other.

Smith provides the example of Kuwait Finance House (KFH; an Islamic

bank), to illustrate an institution that uses marketing practices to mediate

between cultural experiences. KFH takes public steps to foster a religious

environment by organizing communal prayer in the office, showing a hiring

preference for men who have demonstrated their devotion to Islam and by

conducting non-banking business in a recognizably “Islamic” manner (Smith

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2004). Yet KFH is an international bank that relies on international markets for

its business. As institutional practices play a role in the construction of self-

identity, it makes sense that the physical space in which these practices are

carried out contributes to this process.

I contend that despite—or because of—the similarities and differences

between conventional and Islamic finance, each institution occupies its own

place in the global financial system. That place is valuable to those whose

trained eye and sensibilities care about the relationship between extant moral

values and normative financial practices. Islamic finance allows moral values

and global financial practices to work together for the advancement of both by

offering a space in which individuals can identify with both simultaneously. It is

important to examine these interactions because, as Jonathan Friedman (1994)

proposes, we learn about cultural processes not by learning how ‘cultures’

interact but how identities are constituted within certain relations.

Evidence of moral discourse

A conversation with an American, non-Muslim Islamic banker illustrates

the extent to which moral discourse informs the culture of Islamic finance. Kevin

Johnson,3 an associate director for global wealth management development of

EWBC, had been with the company for about fourteen years on the conventional

side (living outside of the United States, in London), in Dubai for three years, and

with Wadiah for about a year and a half at the time of the interview. He was

transferred into the division because of his specialized expertise, so he did not

3 All names in this study are pseudonyms.98


make a conscious decision to affiliate with Islamic finance (although one

imagines he could have refused the transfer). As such, he has a unique

perspective on the culture of IBF and comments on the moral discourse he has

heard in the industry:

Interviewer: Has working here changed the way you've looked at the banking industry? Here, I mean the Islamic finance division.

Kevin: [Yes] substantially partly because I've had much more insight into investment banking and investment products...it’s also because I've had to confront structuring issues and the moral dimension of banking.

Earlier in the interview, Kevin had emphasized that a lot of the difference

between conventional banking and Islamic banking has to do with the latter being

investment based while the former is commercially based. He said he came to

realize, however, that the differences in transaction structures came ultimately

because of the moral approach to lending, not because of the different divisions

of financial structures. Lending as an investment partner, which is the basis for

IBF, actually makes the transaction a different one from a conventional

transaction, even if its end point is the same. For Kevin, this means that the

moral dimension of Islamic banking makes it unique from the beginning, i.e., it is

not just another way to do the conventional banking. The moral dimension

organizes the finances.

At Johara, I interviewed Sadia, the office manager, who welcomes her job

as an opportunity to practice her faith in everyday activities in the workplace.

She affirms:

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You feel more comfortable, it’s my point of view, in an Islamic place since we are Muslims. In an Islamic place...whatever thing which is going in this bank it is per Shariah. And you feel like whatever money you are earning, it is like halal.

It is interesting to note that, while she was born and raised in Dubai, her mother

is Indian. Several times during informal conversations with me after the

interview, she referred to her mixed culture and family life as being influential to

her desire and ability to combine financial practices with Islamic beliefs. Her

personal identity is clearly linked with her professional choices, and she

expresses that choice in terms of moral choices related to her career.

Deterritorialization and identity

Local spaces of institutional territory encourage and support the attempts

of Islamic bankers to forge an identity based on their experiences of being both

placed and dis-placed in relation to territory and their conscious experience of

being part of the umma, or a community that corresponds neither to historical

time nor to geographic space. Azim is the attorney for the Islamic finance

company EIC. He was born in Pakistan, but moved to London when he was

eight years old and lived there until he moved to Dubai for this job about a year

prior to our meeting. When I asked about his reasons for wanting to work in the

Islamic finance space, he made a comment that reflects the sentiments of the

majority of people I interviewed:

Actually when I investigated it [the job opportunity], being a Muslim myself I appreciated, you know, what was trying to be achieved by actually producing halal products and my motivation is simply that...I feel I'm doing my little bit for my faith and for fellow Muslims...

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in addition to the fact that you know I feel I'm contributing to the development of people from my faith.”

Azim also speculates about why people (other than himself) want to be involved

in Islamic finance. He believes they feel good about being involved in an industry

that upholds their faith:

People who want to invest in Islamic finance usually invest not because the returns are amazing and the financial gains, you know, are better than conventional...historically usually they're either on a par if not slightly less, but because they have such strong faith and they want to invest in a manner which is compliant with their faith.

Azim’s colleague at EIC, Javed, was also born in Pakistan and raised in

the UK. He more explicitly invokes identification with the umma in his response

to the same question:

Javed: Yeah I mean...my wife was pregnant...we had the second intifada [September 2000] and I don't know if you remember the incident with the little boy who died in his father's arms.

Interviewer: Oh yeah the photograph...yeah.

Javed: Uh I mean those things you know - they just - I just can't forget them and, and then obviously when you're a father yourself or becoming a father--that's too disturbing for me...and I said "look I need to move away from this part of the world.” I could, you know, comfortably afford not to have continued work there [in the UK] for an extensive period of time [for financial reasons] but I wanted to move away and I wanted to be doing something for the Muslim world...

Notice how Javed—a Pakistani raised in the UK—refers to the Palestinian

intifada and Western media coverage of it as one of the primary reasons he

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“needed” to leave the UK and go to the Muslim world. The Palestinian cause is

well known to be a referent of solidarity discourse in the Muslim world (Eickelman

and Piscatori 2004), and Javed consciously connects it with an awareness of his

own place in the umma. Yet, he had spent almost all of his life living and working

in the UK and was especially rooted in the capitalist financial system. Association

with this Islamic finance company allowed him to bring together the “Muslim” and

“capitalist” parts of his identity.

Islamic finance as a bridge

Masood, the General Manager of EWBC for the entire Gulf region, spoke

to me about his philosophy for hiring people to work in his Islamic banking

division. He specifically looks for a person who has the right combination of

Islamic consciousness and conventional financial knowledge. In other words, he

looks for a person who is able to manage the relationship between capitalist

financial practices and respect for Islamic values. He does not want someone

who emphasizes one too much more than the other.

Masood: Islamic finance is...a value-based industry.

Interviewer: Right right.

Masood: And you need to hire people who have anaffinity for those values.

Interviewer: Right.

Masood: It's also a financial services industry whereyou need to have the financial services (knowledge).

Interviewer: Right.

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Masood: So you need to hire a combination of people who have respect for those values and people who have the familiarity with the financial services industry and are competent in that.

Note he does not specify that the employee should be Muslim; merely that he or

she has respect for the values of Islamic finance. Therefore, he explicitly looks

for a person who is able to bridge the gap between capitalism and Islamic values.

Masood is very thoughtful about the philosophy of Islamic finance and

economics. He is enthusiastic about not only the role of his employees in the

company but also of what the industry means for him personally as a Muslim

given the opportunity to participate in a values-based Islamic banking industry.

After a long reflection on how progressive Islam has been throughout the

centuries both in social justice and in integrating financial activities with the rest

of the world, he connects his own contemporary beliefs to those of a glorified

past: “that's a great feeling to have as a Muslim and as a banker to have the

opportunity to contribute to that world.”

A bridge within Islam

Another way Islamic finance may act as a bridge between cultures is on

the level of different subjectivities within Islam itself. Hesham was born in

Pakistan but left when he was a small child. He has lived in the Middle East and

in the United States, and now runs a conventional financial management

company in the US that also structures Islamic transactions. At the time of our

interview, he was relatively new to the field of Islamic finance and was going

through the process of introducing an Islamic hedge fund. He had some

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observations about the function of the Islamic finance industry as a bridge

between cultures.

It's been interesting to create that particular product actually...the world view of Islam has changed in my opinion because Islam is truly global today. American Muslims will be very different from European Muslims will be very different from Asian Muslims or Middle Eastern Muslims and so on and so forth because they're American, European, Middle Eastern, Asian and they have their own perspectives in that sense. I never really thought of it as a - as a truly global (religion) - 1 never really saw it as that.

Hesham became aware of the diversity within Islam only after beginning to work

in an Islamic finance space. His observation foreshadows a theme of chapter 4,

which deals with community issues. It is important for the purposes of looking at

the self, though, to understand that Islamic finance does provide a mediating

influence in how Islamic practitioners see the role of the industry in their lives.

IBF practitioners negotiate the effects of globalizing processes on their

personal experiences by associating with an IFI. The IFI acts as a culture broker,

or a space that mediates between one or more identities especially those of

being Muslim and a conventionally trained banker. Practitioners talk about the

moral discourse found in the industry as a way to deal with issues such as

deterritorialization and identity and that discourse provides a bridge between

identities forged in a conventional bank setting and one’s own upbringing as a

Muslim. When I asked the interviewees if their views on being Muslim had

changed based upon their involvement in the industry, everyone said that no,

being involved in the industry had reinforced their beliefs about Islam and being

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Muslim.4 This suggests to me that these Islamic finance professionals have

found a space in which they comfortably practice their faith in a professional

financial environment and in which they experience differing versions of a Muslim

subjectivity.

Practices and the individual

The second question I address in this chapter is: How are personal

identifications formed and negotiated through modem globalizing processes?

The answer is that Islamic banking discourse and practices support the

construction of personal identity in an institutional setting. Anthropologist-

sociologist Pierre Bourdieu (1977) proposes a model for the relationship between

practice and ideology, which he calls habitus. Bourdieu intends habitus to mean

habitual life experiences that reinforce the material conditions of the individual’s

life (p. 78). By performing habitual actions, the individual reinforces and

reproduces his or her environment. This concept reinforces Althusser’s idea of

the relationship between ideology and practice discussed earlier, although each

focuses on a different aspect of the relationship: Althusser concentrates on the

creation of a subject by ideology and the subject’s reproduction of that ideology

and Bourdieu on the reproduction of ideology by bodily practices. According to

both theorists, practices become constitutive of the individual by virtue of their

habitual nature. In the same vein, Islamic banking practices socialize Islamic

bankers in specific ways to reproduce certain—but not all—aspects of both

4 Two respondents were not Muslim so they cannot, of course, be included in this general statement. Both had opinions about how being a part of the industry had affected their views on Islam itself.

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capitalism and Islamic finance practices in ways that allow individuals to maintain

cultural identities of global bankers and members of a Muslim community

simultaneously. A person need not privilege one over the other as a unique

identity is shaped in relation to unique sociohistorical processes. This theory of

practices reinforcing and reproducing multiple identities supports Shweder’s

paradigm of the relationship between global and local (Shweder 2001) and

provides the method by which an individual is socialized into his or her particular

identity. By associating with the institution of Islamic banking, practitioners carve

out a space that mediates between global capitalism and a global Muslim identity

on both the individual and institutional levels.

Building a better self: Tripp

Charles Tripp is a Reader at the School of Oriental and African Studies at

the University of London. His specialty is politics and international studies, and

he has recently published a book called Islam and the Moral Economy: The

Challenge of Capitalism (2006). He approaches many ways in which Muslim

scholars have approached the perceived challenges of capitalism in the past

half-century, including Islamic economics and banking. He is concerned with

general theories rather than the individual experience, but I find one of his ideas

particularly relevant to my project. In a chapter on Islamic economics, Tripp

contends that there are two ways in which Muslim intellectuals have formulated

their responses to capitalism. First, scholars acknowledge the “power of material

factors, and thus the success of capitalism in attracting human beings,”

(2006:104) and have devised Islamic economics as a strategy that would

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strengthen Islamic society while preserving its identity. This argument is similar

to the argument of Timur Kuran’s book Islam & Mammon (2004). However,

where Kuran finds that Islamic economics has failed at the attempt to strengthen

Muslim economies and that the attempts to build a Muslim identity are perhaps

not strong enough to sustain material setbacks, Tripp finds in Islamic economics

an optimistic attempt to interact with global capitalism.

The second way Muslim intellectuals have responded to capitalism,

according to Tripp, is to apply principles of Islamic economics found in the Qur’an

to modern banking practices. In this way, Tripp sees Islamic banking as a

practical manifestation of Islamic economic theory. I concur with this belief.

Furthermore, Tripp argues that in order to do both of these things Islamic

economics has taken on the categories of capitalism to engage and critique

capitalism’s shortcomings vis-a-vis Islamic principles.

Like Mandaville, Tripp considers the social authority of Islam and

capitalism to be in competition with one another. The result of this competition

led Islamic economic scholars to become particularly attentive to daily practices

of Islamic finance. Because of the way economic categories are employed—

remember that Islamic economic theory uses these categories—it is necessary

for those practices to reinforce familiar concepts of economic activity. What

Islamic economic theory does, then, is to “create the conditions whereby

economic actors, as Muslims, would take for granted the norms and practices

associated with the ideals and structures of an ideal Islamic economic life” (Tripp

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2006: 109). Tripp invokes Bourdieu when he points out that this process is the

creation of an Islamic habitus.

The ‘Islamic economy’ being created by Islamic economic actors is in

many ways intended to be commensurate with the capitalist economy, or at least

its discourse. As a result, the Islamic economy is constantly discussed with

reference to capitalism or, in the case of IBF, conventional banking and finance.

In this comparison, Muslims assert the superiority of Islamic economics,

regardless of empirical support. Indeed, the Islamic finance industry intends to

improve upon global financial institutions by maintaining their positive features

and cleansing them of negative features (Maurer 2002a, 2002b; Al Saud 2000).

Islamic banks strive, in the words of a prominent Islamic bank’s vision statement,

to uphold “deep-rooted traditions in the new world” (Dubai Islamic Bank

brochure). Islamic finance professionals claim that an Islamic bank is a

conventional bank without its immorality. The framework used to determine

morality is based on Islamic text and tradition, yet the institutional framework is,

on the surface at least and to the untrained eye, indistinguishable from the

capitalist financial structure. In the words of Masood of EWBC:

Islamic finance (came) and benefited from the traditions, from the practices, and the technology, the know-how of conventional bankers, but Islamic finance is taking much and has much to give as well. I mean, just imagine a world in which the payment system and the financial (system) was separated, just look at the solidarity of those economies, just look at the benefit that the taxpayers would have if they had not to pay the cost.

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This is not to suggest that Islamic bankers do not critique capitalism but merely to

point out that the relationship is more complicated than a straightforward

rejection of capitalist ideology or institutions. Nevertheless, I argue that the moral

discourse constructed around Islamic banking may be at least a critique of the

current formulation of global capitalism presented as an “improvement” upon

capitalism. To illustrate the importance of perceiving the superiority of an IFI, I

quote a credit officer with Moody’s Investment Service, an agency that rates the

financial strength of multinational corporations (Cunningham 1999:150-151):

We at Moody’s do not take a view on what does or does not constitute Islamic finance. It is no part of our analysis to opine on whether an IFI [Islamic Financial Institution—author’s note] conforms to the Shari’a, or whether a certain Islamic instrument...is haram or halal....\Ne do however take an interest in whether an IFI is perceived by other Muslims as being compliant with the Shari’a. Suppose an IFI were to get a reputation for investing clients’ funds in areas which were subject to some doubt over Shari’a compatibility.This could result in depositors withdrawing their savings from that bank and placing them in another bank that had a reputation for more stringent Shari’a compliance. If the loss of deposits was large, the bank might come under severe strain, and have difficulty repaying deposits when due. As a result, its creditworthiness would be impaired.

Though the quote above refers to a company rather than an individual, it shows

how important it is that Islamic economics is perceived as superior to capitalist

economics. This statement also confirms what Masood pointed out earlier, which

is that a potential IBF employee (at least at EWBC) does not have to be Muslim,

but merely respect a Muslim subjectivity.

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Mohammed is an investment officer for the Private Investment Office of

the Dubai government. He has a conventional finance background and sees

Islamic finance in the following way:

My perception has changed of course. I have realized that not everything is conventional. I came to learn a better way of doing business. I wasn't thinking this way previously and I thought Islamic and conventional were all the same because the revenue all linked to interest, but after getting really to learn the underlying functionality of the Islamic I realized it's completely different. Since the Islamic banking is an evolving kind of business and need a lot of attention and need to be developed by special experts and researchers who can contribute to develop products - not necessarily to replicate them but there is a lot of opportunity that can be done.

Mohammed’s job is to promote Islamic finance on behalf of the government. It is

possible that he has an overly optimistic opinion of Islamic finance, especially

since he is speaking to me in an official capacity and he knows I am a

researcher. Nevertheless, I only asked him to compare the two kinds of banking,

not if one was better than the other. It is on his own initiative that he speaks of

Islamic finance as a “better way of doing business.”

(In)formal training

In addition to the discourse of morality, practices enacted by Islamic

finance professionals strengthen the argument that it is a superior economic

system inhabited by superior economic actors. Many IBF practices support the

idea of the Islamic economic actor’s superiority over a capitalist self. The first

place to look at practices is in the area of training: how do Islamic bankers

become Islamic bankers? The first thing I noticed about training in IBF is that

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there is very little formal training. Everyone I interviewed learned about IBF from

books—especially the Qur’an—and by talking informally to their colleagues.

Rania, the General Manager of Johara, had rotated through a few divisions, but

her employees did not undergo specific training in IBF, nor did any of the other

people I interviewed. Most people learned about IBF like Javed of EIC:

Interviewer: What exactly did you know about Islamic finance before you started working here?

Javed: I knew the principles. I mean I had read the Qur’an myself three times and not the Arabic text, the English text, the translations. My parents guided me.. .at a very early age. Now in terms of Islamic finance I knew you know the concept of riba? How do you know the concept of a partnership...you could see that it was in my career right from day one.

Although almost everyone learned about IBF after they joined the industry and

through informal training, Javed acknowledges that he had been, in a sense,

training to be an Islamic banker since he was born. His sense of having always

been an Islamic banker speaks to the idea of interpellation and how the ideology

of IBF speaks to part of a person that somehow is already a part of that ideology.

Others mentioned having been exposed to the principles of IBF during childhood,

but they did not pay much attention to them until they began working at an IFI.

At the beginning of my year in the field, I was planning to do an internship

at EWBC to learn how to become an Islamic banker. Those plans got changed

because of the Iraq invasion, but I did ask about training practices at EWBC.

Although Masood, the General Manager, had assured me during our interview

that there were many training institutes for Islamic bankers, there did not appear

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to be a formal training process at EWBC. Kevin, the associate director of EWBC

and a non-Muslim, cites the Qur’an as his first source of information about IBF.

Then, he says, he turned to other books, conferences and his colleagues to learn

about the business. He was already familiar with the company from having

worked in other departments, but he learned about IBF informally. This type of

learning may be due to a lack of interest in or funding for formal training

programs. Nevertheless, it has the effect of reinforcing relationships between the

practitioners themselves, as they must learn from each other in order to do their

job.

Financial transactions and partnership values

Forming partnerships is the basis for most Islamic finance transactions.

There are four classical Islamic financing schemes: although each specifically

addresses the concerns of Islamic finance, each is also compatible with

conventional banking practices. Given this compatibility, we may wonder why a

special Islamic institution is needed in the first place. Again, this existence of the

industry shapes and reconfirms a specific type of Muslim subjectivity: a training

process that leads practitioners to rely on their business partners for training is a

way to habituate a person to the idea of working together with partners.

Knowledge is acquired together, rather than autonomously through rote learning.

This is one more way that practices informally influence the construction of an

Islamic economic actor. I will briefly describe each kind of transaction below.

When I began reading about Islamic finance in the early 1990s, these

were the only transactions available to people who wanted to participate in

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Islamic finance. Present day Islamic finance transactions are based on these

four basic methods; however, there are now countless ways to structure a

transaction that adheres to Islamic law but provides competitive returns in the

market.

The first structure is a murabaha, or trade finance, which accounts for

some 80% of Islamic financing (Wilson 1997). This transaction is very formal,

and involves a buyer, a seller, goods for trade and a financier. The seller and

buyer wish to exchange goods or services and agree upon a price, all according

to lawful means. A financier, in turn, provides the money for the goods at their

cost plus a predetermined financing fee (al-Misri 1994). The financier then owns

the goods (but does not take possession of them) until the buyer pays for the

goods in full (Wilson 1997). This method is a short term financing technique,

and, except for the predetermined fee, looks and operates like capitalist trade

finance.

A mudaraba is a partnership between a provider of capital and a provider

of labor. A capital provider may be a bank, individual, or one of many groups of

investors (Wilson 1997). Profit and loss sharing are in proportion to the amount

of capital invested, and no one except the partners may receive profit (al-Misri

1994). Most importantly, liabilities are limited to the amount of capital invested by

each investor (Wilson 1997). This type of arrangement is virtually the same as a

limited liability company in capitalism, and is compatible with equity financing

through a stock exchange.

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Another type of partnership is a musharaka, under which both parties

supply capital (in contrast to a mudaraba, in which only one party or group

supplies capital). Losses are not limited to the amount of investment, so risk is

greater for all parties. The capitalist equivalent would be a venture capital firm

providing capital for smaller ventures (Wilson 1997).

Short term (ijara) and long term lease purchase contracts (ijara-wa-iqtina)

are functionally equivalent to their capitalist counterparts. Both are normally

used to finance machinery or other equipment. As under a murabaha

arrangement, in an ijara the bank purchases the goods and the buyer pays the

bank through a periodic (usually monthly) fee. At the end of the lease term the

purchaser may either purchase the item or let the bank dispose of it. The major

difference between a capitalist lease and an ijara is that, under an ijara, the

lessor assumes responsibility for owning and maintaining the asset, whereas that

responsibility falls to the lessee under the capitalist tradition (Wilson 1997). This

stipulation is consistent with the requirement of a seller’s responsibility to take

care of merchandise before the sale.

My first experience of Islamic finance in 1991 involved analyzing lease

payments on an ijara-wa-iqtina to our company from an entity leasing (for

ultimate purchase) an oil rig. The company was seeking to refinance its lease,

and wanted to negotiate lower payments. Negotiations proceeded on the basis

of the monthly payment amount, not as a cost plus interest payment. There was

considerable flexibility to vary payment amounts, for example, it made sense for

the lessee to pay more in the early months of the lease and diminish the amounts

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to be paid during the last months of the lease. This arrangement may be

compared with a typical lease for purchase arrangement such as a mortgage,

wherein payments might vary because of interest rate fluctuations.

Making a customer

In addition to the practitioners, customers must be educated about IBF.

Yasir, Javed’s colleague at EIC explains how customers learn about IBF:

Interviewer: What do you think about customers: how do they learn about Islamic finance?

Yasir: I think the bulk of the customers wanted to invest Islamically so if you made that assumption, and I make it, that means that they learned about Islamic finance socially, they were brought up in an environment where their parents told them that interest is haram, for example, so they were brought up in an environment when they knew there were certain restrictions - which I wasn't by the way - that were imposed on Muslims from a financial point of view. And then, you know, as more and more institutions started to create slightly more sophisticated products they learn about them through marketing, through those products or the banks they deposit their monies in telling them that these products are available. They potentially will make your money sweat a little more in a Shari’a compliant way so the customers might not be necessarily extremely educated because they don't work in the industry they just use the facility they've used all their life and are finding out more and more that actually that facility is broadening in terms of what it can offer.

Yasir’s point is that not only can people learn about IBF principles from their

families or friends, but also that marketing plays a big role in educating the

consumer about Islamic products. His comment illustrates particularly well the

phenomenon Althusser theorizes about: an institution can interpellate a person,

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or get his or her attention by making something clear that was true before, but

not necessarily obvious. In this case, a Muslim hears about Islamic finance,

realizes he or she could benefit from it, realizes that it is a good thing to do

because he or she is Muslim, and then seeks out what the industry has to offer.

Just like the IBF practitioner is trained, the potential consumer can be trained by

social and marketing practices as well.

Reinforcing gender roles

I will discuss the role of IBF in gender segregation more fully in chapters 4

and 5. In this chapter, I would like to address the issue of gender roles at the

level of practice as it concerns gender identity. Aside from any religious

injunction about gender segregation, the female employees I talked to at Johara

see working in Islamic banking as a chance to fulfill professional and familial

aspirations in a moral way. The ladies’ branch provided Rania, its General

Manager, with a chance to expand her career horizons by allowing her to take on

challenges and responsibilities she had not been able to experience in a

conventional, mixed gender working environment. In addition, it allowed her to

have more control over her time and to fulfill her role as a wife and mother to the

best of her abilities in addition to her professional work. This is an important

moral consideration because a Muslim woman has an obligation to take care of

her family. This obligation is found in texts (Stowasser 1994) and, although the

female’s obligation to care for her family is by no means limited to an Islamic

context, Stowasser contends that the obligation is particularly strong in Muslim

countries such as those in the Arabian Gulf. Therefore, a professional

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environment that allows a woman to fulfill familial obligations has a moral basis.

Rania contrasts her former working environment with the current one:

[Before] I had to go home sometimes very late or come back from home and not be there. It was happening in the last two or three years and I was feeling the pressure in my head. I saw myself drifting, the kids drifting away and they were teenagers where they needed me the most now, more than ever.

[Now] this is how it is different here, I finish, I have a particular time, my 9-to-5 job;5 1 know I go home I have my routine before the kids come home. I know before the kids come home I’ll cook dinner.

I wanted to take up something that, well, would release my full potential, both my job and [family].

For Rania, a separate women’s building enhanced her existing

professional and personal life. Conversely, Miss Lutfi cited the issue of gender

separation as primary to her decision and ability to work outside the home. Miss

Lutfi is unmarried. Married or unmarried, women in Dubai have great freedom of

movement in public places. It is not unusual for women in Dubai to go to

university (segregated universities are available and Miss Lutfi attended one); nor

is it unusual for women to work in an office. Some families, such as Miss Lutfi’s

family, object to unmarried women working in offices alongside men. In fact Miss

Lutfi’s family agreed to her working outside the home only because she was able

to work in a gender segregated Islamic environment. I believe this situation is an

important illustration of the ways in which a defined women’s space can

contribute to the ability of women to participate in an economy. The opening up

5 Typical working hours in an international bank are 8 a.m. -1 p.m. AND 5-8 p.m. or later. Rania is using 9-to-5 as a colloquialism: Johara’s hours are 8 a.m. to 2 p.m.

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of an Islamic space allows a woman like Miss Lutfi to expand her identity as a

professional woman in addition to being a Muslim woman. So, while IBF can be

influenced by its employees identities, it can help its practitioners acquire new

ones.

Peer pressure

Although Smith (2004) had found that the Kuwait Finance House puts into

practice certain Islamic behaviors, I found variable evidence of these practices in

the companies I observed. Most of the practices I found were related to the

women’s bank but I did find one instance of Islamic practices being enacted and

encouraged in EWBC’s Wadiah division. Peter, the European national who had

converted to Islam, admits to being the “peer pressurer* when it came to

encouraging Islamic behavior. He had been uncomfortable practicing his religion

(like fasting during Ramadan or praying during the day) in his former,

conventional job. Since he was responsible for setting up the Dubai office, he

was able to arrange the physical space and to set a precedent of behavior that

encouraged adherence to Islamic practices. He admits to being (or trying to be)

strict:

Peter: One thing that has happened - it has been a process of natural selection - whereby people that are Muslims but not practicing, that they joined us then, uh, I've taken the wrong way so they've been, naturally they've decided to pursue alternative solutions for their career. But for the rest it's everybody very much into practicing religion from the spiritual as well as the formal aspect so we all fast we all pray and we--very very very rarely one of us misses the prayer because - at the stated time - because we call each other.

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Interviewer: Is it peer pressure or you think it's really people moving toward this?

Peter: I don't know - I'm a peer pressurer, I'm the one.

Interviewer: (Laughs) You keep an eye on them.

Peter: So I don't know if the others pray after me.

It appears that Peter sees his office as full of people who adhere to proper

practices. I did not observe these practices with anyone else in that office except

Peter himself. He interrupted our meeting once to go and pray, but I did not

observe anyone else going to pray. It is possible that they did follow him but I did

not see it. In that office, Kevin (being Christian) would not have prayed, neither

would the Hindu or Lebanese Christian secretaries. Masood, the general

manager, never mentioned anything about office practices to me, nor did I ever

observe him go to the prayer area. I was observing in the office during

Ramadan: most Muslims in the office were fasting, but that is not unusual for an

office in Dubai. Peter’s insistence on being able to observe Islamic practices tells

me that he has found an environment that supports his Muslim subjectivity and to

which he can contribute his beliefs, whether or not others enact the same

practices.

Conclusion

In this chapter, I have addressed two questions. First, I ask how

practitioners of Islamic finance negotiate modern globalizing processes. I

explore how capitalist discourse and Muslim subjectivity come together in the

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institution of Islamic banking and finance. The institution then acts as a

mediating space between opposing identities using morality as its organizing

discourse. Secondly, I ask how personal identities are formed and negotiated

through modern globalizing processes. I take examples of institutional practices

that help IBF practitioners understand themselves as Islamic bankers, superior

to, but at the same time working in concert with, conventional bankers. The

bankers themselves turn around those practices and contribute to their

environment, sometimes using peer pressure, to make sure the environment

supports their view of Islam and its practices.

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CHAPTER IV

DISCOURSE OF COMMUNITY: THE TRANSNATIONALUMMA

After questions of self, the second existential problem for Islamic

financiers is the question of community: How does a person transcend

definitions of community based on geographical references to form a community

based on the universal facets of a transnational Muslim belief system? IBF

practitioners I interviewed invoked identifications with both conventional banking

and the transnational Muslim umma when talking about their membership in the

IBF community. In this chapter, I will explain what I mean by a transnational

umma, describe how identification with the umma is expressed in IBF, explain

how community discourse is built into some contemporary financial transactions

of Islamic finance, and describe some ways in which IBF reinforces and upholds

community structures of gender segregation.

Transnational umma

In chapter 1, I introduced the concept of adalah, or social justice. Adalah

refers to normative practices governing human relations with one another. In

other words, a preoccupation with actions of individuals toward their communities

is one of the two most important beliefs of the religion. Of course, every religion121


is concerned with the actions of individual actors vis-a-vis the community;

however, that concern is especially privileged in a Muslim belief system and is

encoded in the financial transactions themselves.

In the previous chapter, I explained Mandaville’s (2004) idea of Muslim

subjectivity. Those ideas are based on his view of how Islam is interpreted by

people who possess a Muslim subjectivity. He contends that both migration and

communications technologies have been extremely important in allowing

Muslims around the world to see themselves as connected to a worldwide

community of Muslims, which is called the umma. In the first part of this chapter

on community, I would like to emphasize the extent to which the idea of an umma

was integral to Islamic thought long before the age of globalization and how IBF

is part of the continuing story of the formation of the umma.

Mandaville points to two periods in history that have served to consolidate

strengthen the idea of the umma in Islamic thought. The first period is at the

founding of Islam. A key event in Islamic history is when the Prophet

Mohammad (PBUH) and his followers were forced to flee Mecca and go to

Medina. The events around the actual departure (the hajj, which is immortalized

in religious practice as one of the five pillars of the faith) and the events of the

growing Muslim community in Medina form the foundation for most Islamic

thought and Shari’a law. Certainly the happenings in the life of the Prophet, and

especially the way he forged alliances with non-Muslims and converts, are

thought to be the ideal type of religious events. This was a glorious period in

Islam, one in which the Prophet commanded allegiance to Islam and proved its

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superiority as a community system. Islam brought together people from a variety

of tribes and ethnic groups. Requirements for membership in the Muslim

community were based upon Allah’s specifications, not adherence to one tribal

chief or political leader. Therefore, it was an attractive community to be a part of,

and one that protected its members. It is no coincidence that Muslims of today

draw upon that nostalgia to assert their community identities, whether in Muslim

majority countries or—especially—those who live in the diaspora. Because Islam

itself rose up from conditions of living in a diaspora, Muslim minorities in living in

the West are hopeful about their opportunities.

The second important period of community relations in Islam’s history is

the confrontation with the colonial West. After hundreds of years of superiority,

Muslim communities were defeated by technologically superior western powers.

Following the initial shock of these defeats, a school of Islamic thought appeared

whose goal was to fight back against those powers via a revitalization of Islam.

Some adherents of this theory argued from a nationalist perspective (including

Mawdudi, who I discussed in chapter 1, but most advocated a transnational view

of Islam, on the grassroots level, that would allow its people to overcome colonial

occupation. One of the most important intellectuals was Sayyid Qutb (1906-

1966), who began the Muslim Brotherhood in Egypt. Though he was hanged for

his subversive work, his thoughts still inspire the discourse of Muslims facing

globalization and the challenge of capitalism today.

A third stage of development in the imagination of the umma began in the

1990s. During the 1980s and 1990s Muslim populations around the world—both

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in Muslim countries like Indonesia, Pakistan and Malaysia and in countries where

Muslims live in the diaspora—generated enough steady income growth to

develop a network of Islamic financial institutions. Innovations in institutional

structures and products have encouraged growing Muslim populations to

contribute to the Islamic financial network both institutionally and intellectually,

especially in the United States and Great Britain. In this chapter, I argue that

Muslims who participate in IBF see themselves as part of a transnational Muslim

community rather than merely products of a particular geographic place. Several

practices support that identification.

Deterritorialized community base

Most people I talked to referred to a de-territorialized community base

when they talked about their involvement in IBF. For example, Azim is the

attorney for EIC. When I asked his thoughts about working in the Islamic finance

space, he made a comment that reflects the sentiments of most of the people I

interviewed:

Actually when I investigated it [the job opportunity], being a Muslim myself I appreciated, you know, what was trying to be achieved by actually producing halal products and my motivation is simply that...I feel I'm doing my little bit for my faith and for fellow Muslims... in addition to the fact that you know I feel I'm contributing to the development of people from my faith.

Azim feels a strong bond with other Muslims and sees working in Islamic finance

as a way to act upon that identification. This is a theme I encountered repeatedly

in interviews.

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Kevin, of EWBC, has also noticed how the worldwide Muslim community

is reaching out to each other through Islamic finance after September 11th:

Now it's a sensitive issue but following on from the events on September 11 in New York on 2001 we found a—surge maybe putting it too heavy—but there has definitely been up-tick in the awareness within the Muslim community across the planet as we interface with it with respect to looking for, seeking Islamic products, asking to be recognized as a viable participatory segment in society that's genuinely contributing to the benefits of society and not to be asked to sacrifice their religious beliefs with respect to things which are clearly offensive such as interest and so forth.

He further notes that the potential market for Islamic finance is huge, about 1.2

billion Muslims worldwide. The size of this potential market should in turn make

Islamic finance more acceptable by international standards, by which he means

conventional finance standards. In other words, as Islamic finance grows, it

should become more acceptable to the standardized model of international

finance, which is based on capitalist values. The goal, if I understand Kevin

correctly, is to have an industry that adheres to certain religious values but is a

fully functioning part of the international system. This view of IBF is consistent

with the thesis I am proposing that the intention of the IBF industry is not to

provide a way out of capitalism, merely to improve upon it from within, while at

the same time strengthening the umma.

Community financial transactions

Community discourse permeates discussions about and within the Islamic

finance community. From the outset, the industry was meant to address

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community concerns. The focus on community stands in contrast to a capitalist

understanding of economic activity, which is built on the assumption that the

individual is the locus of economic activity, as Adam Smith so elegantly noted in

Wealth of Nations. Islamic economics subverts the neoclassical economic model

by asserting that individuals are (or should be) driven to cooperate for the good

of society. This is a very important difference between conventional finance and

Islamic finance, and one that is mentioned regularly in conversations with Islamic

financiers. We will see many examples of how these significantly contrasting

viewpoints play out in everyday practice. In chapter 3 ,1 introduced the four

classical financial transactions that have been structured deliberately in order to

reinforce the communal aspect of the economic system. Some contemporary

transactions were designed in response to contemporary conventional

transactions, but are based specifically on built in partnership arrangements in

keeping with the focus on community and cooperation.

The most noticeable difference between classical and contemporary

Islamic transactions is the presence of an institution called an Islamic bank. If we

look closely at the murabaha, mudaraba, musharaka and ijara methods of

finance, we notice that not one of them requires the existence of an institution.

Each form of financing is a partnership arrangement that can easily take place

between any entity with available capital and any entity in need of capital. In fact,

in the Middle Ages, merchant families themselves financed trade in the Muslim

world, not unlike trade finance in Europe at the same time (Udovitch 1979). For

example, my neighbor and I could both contribute some money to make a

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lemonade stand, agree that I will oversee the daily operations of the lemonade

stand, and that we would each get a share of the profits according to the relative

amounts each of us invested into the project. In this scenario, my neighbor and I

have agreed to open a lemonade stand under a musharaka agreement. We did

not need an institutional intermediary. The transactions I discuss below require

an intermediary in their financial structure. That intermediary is an IFI or some

kind of special purpose investment vehicle. They are more complicated than the

classical financial structures.

Salaam and Istisna

The salaam and istisna transactions are both sales contracts used when a

commodity is not available for delivery at the same moment financing is needed.

A salaam contract is used for commodity transactions when the financial

institution (on behalf of a buyer) advances the purchase price of goods to the

commodity owner. The goods are delivered at a later date to the financier, who

then delivers them to the buyer. The buyer pays the financier the purchase price

upon delivery of the goods.

An istisna works in a similar manner, except that it is used principally for

manufacturing and construction finance. The financial institution pays the

construction company as work is completed (say, on a building project). The

construction company delivers the asset when it is complete. The financier

delivers the asset to the customer, who then pays the purchase price to the

financier.

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The difference between salaam and istisna is based on the nature of the

goods in question. A salaam is used to finance goods (commodities) that do not

yet exist but are almost assured to exist in the future; e.g., agricultural goods

(say, soybeans) that need to be grown during the growing season. The

“production process” makes no difference to the transaction: the contract cannot

specify how the soybeans are grown, merely that soybeans of a certain quality

will be produced. The istisna, on the other hand, is tied to goods that would not

otherwise be produced, like a commercial office building. The istisna is usually

tied to a specific production process, which is essential to the final product and

which is included in the price as part of the risk structure of the contract (Vogel

and Hayes 1998; Bahrain Monetary Agency 2002).

At first glance, there does not seem to be anything particularly “modern”

about either of these transactions. After all, it has always been necessary to

finance commodities trades or to provide a fanner with financing based upon the

anticipated production of agricultural products. Udovitch (1979) points out that

trade finance was always prevalent in Muslim societies, just that merchants

would provide financing instead of financial institutions. Vogel and Hayes (1998)

draw attention to the modern nature of the Istisna contract: until the Industrial

Revolution few goods were exchangeable on a commodity basis as most people

produced their own necessary goods. There was little need for manufacturing

finance. It was only after the transformation of the nature of goods by the

industrial production process that it became necessary to provide long term

manufacturing finance (see also Appadurai 1986 for an extended analysis of the

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history of the commodity and its uses). The istisna is a response to the changing

commercial environment. It must be noted, also, that the istisna is only valid

under the Hanafi legal tradition (Vogel and Hayes 1998). Hanafi was the first

legal school to be recognized by Muslims, and is therefore the oldest madhhab.

Hanafi is generally considered to be the madhhab most amenable to

modernization. It is also the school most closely associated with the

geographical area of South Asia (India, Pakistan, and Bangladesh) that gave

inspiration to Mawdudi.

Sukuk

The two most prevalent financing structures in Islamic finance today are

the sukuk (bond) and takaful (insurance). I do not have any first hand data on

either sukuks or takaful1 from my research because they were first issued in

2002, when I was in the field. They have since become one of the most popular

financing vehicles: therefore, I will describe it briefly.

A sukuk is a form of bond usually issued by a government, or by a

corporation in partnership with a government. It is based on a conventional

government bond, and is used for long term financing. A conventional

government bond is a method of financing by which a government (local or

state/national) sells paper (bonds) to investors in exchange for 1) periodic

(usually annual) payments to the investor and 2) repayment of capital at the end

of the term. A bond is essentially an IOU from the government to investors.

Profit to the investor is based on an interest rate determined by a measure of the

1 The first takaful (Islamic insurance) company was launched in the UAE in October of 2002 (Khaleej Times newspaper article, October 12, 2002).

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stability of the government issuing the bond. The more stable the government—

and therefore the better able to repay the funds—the lower the interest rate.

Less stable governments must pay a higher interest rate. For example, if a local

government wants to build a bridge across the river, it would sell bonds in order

to raise cash to pay the contractors. Upon completion of the project, the

government would repay the investors from its own capital account.

The cash flow of a sukuk looks similar to the cash flow of a conventional

bond. The difference, as with most Islamic financial structures, lies with the

underlying assumptions and asset structure. Whereas a conventional bond is

backed by the goodwill and stability of the government, a sukuk is backed by

tangible assets. In the example of the bridge financing, the government might

pledge the income stream from some government properties or buildings to the

sukuk. Investor return would be derived from that income. In the event of a

government default, investors could theoretically sue the government for the

income from its property.

Sukuks are “hot” at this time in the Islamic finance market. On the global

market, issues of sukuks increased from $1.9 billion in 2003 to $6.7 billion in

2004 to more than $10 billion in 2005 fwww.zawva.com). The largest single

sukuk issuance on record to date was just issued by Dubai Islamic Bank on

December 10, 2006 in the sum of $3.52 billion fwww.zawva.com).

Takaful

Takaful is Islamic insurance. Insurance is a modern concept and

therefore is not found in any of the classical Islamic texts. Insurance means that

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a person or business (the insured) makes periodic payments (insurance

premiums) to an insurance provider so that in the event of loss (of inventory,

house, car, etc.) the insurance provider will compensate the insured party for that

loss. The concept of insurance is controversial; nevertheless, Shari’a scholars

have come to recognize the importance of insurance in the international business

arena. Takaful is one of the fasted growing areas of Islamic finance. I did not

interview anyone specifically about takaful during my fieldwork because the field

is generally considered to be somewhat separate from traditional Islamic finance.

I will describe it briefly, however, to illustrate how a conventional method of

managing risk can have huge implications for the practice of Islamic finance.

What are the problems with insurance? First, the industry is built upon

uncertainty about events beyond its control. Insurance deals with an amount of

uncertainty (gharai) because the outcome of a future event is uncertain in the

present. In a sense insurance is gambling (maysii), which is forbidden under

Islamic law. Because it is highly unlikely that every insured party will incur a loss

in the future, insurance companies effectively take a gamble that it will make a

profit from insurance premiums even after it pays its insured customers in the

event of a loss. This is the second objection to insurance (Lewis and Algaoud

2001). Life insurance presents a particularly difficult challenge to the concept of

insurance because of the idea that no one can predict the end of life and that to

insure the event shows distrust in God’s life plan.2 A third objection to

2 Vogel and Hayes (1998) point out that this should not be a concern because insurance protects the living from “adverse material consequences” (p. 151) of death and does not make any prediction about death itself.

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conventional insurance is that most insurance companies invest their premiums

in forbidden riba (interest-bearing) investments (Vogel and Hayes 1998).

However, this objection can easily be overcome by investing in one of the many

Islamic institutions available today.

Conventional insurance operates on a contract basis; i.e., the insured

party and the insurance company enter into a contract specifying terms of

payment and coverage. The word for Islamic insurance, takaful, means

“solidarity” and reflects the worldview built into a takaful arrangement. In general,

a takaful agreement is a collective enterprise, in which Muslims pool their

resources in order to aid each other in the event of a loss (Vogel and Hayes

1998). Members make periodic payments into the fund and the company invests

those funds Islamically. This investment is made on a mudaraba basis, with the

member acting as the financier and the takaful company as the mudarib

(entrepreneur). This arrangement also helps to mitigate the element of

uncertainty about future payments, as the members would expect periodic

payments on their capital investment. This arrangement is also consistent with

the concept of tawhid (unity), because economic actors are pooling their

resources to benefit the group.

Mohammed, of the Private Investment Office, says that what makes an IFI

distinct from a convention bank is that the customer expects to be a partner with

the IFI. He emphasizes the situation in which the IFI and the customer have

more interaction with each other. In addition, they share the financial risk of the

transaction.

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Mohammed: It’s more of a partnership...if I am your client my relationship with you is by taking the same risk. Any opportunity and any investment if for instance take a decision of making a real-estate investment so in this case the bank and the client take on - sharing the risk. That's the relationship that I expect from the Islamic bank.

Interviewer: Right so maybe more interaction.

Mohammed: More interaction, more involvement, more of knowing the customer and what I have seen from my own experience, once you get into an Islamic bank you almost get to know everybody.

Partnerships link aspect suppliers and consumers of funds and reinforce the idea

of community.

Rania states that the partnership aspect of Islamic banking is as important

as the actual amount of profit made by the bank or the customer. She believes

this is because the bank plays a role in the community of a support system:

And then they also have the flexibility of supporting you, Islamic banking. It supports you through it in terms of partnerships with you, in terms of management, so that gives you another flexibility and choice so that in case the business fails for some reason, you are not completely left on your own, high and dry, in a sense, not knowing what to do. Children aren’t driven out of the house because you owe the bank some money or something like that. We try to help you out in all possible ways to prevent that.”

From the customer’s perspective, an emphasis on partnership is a positive

aspect of Islamic finance. I talked to one customer before I decided not to

pursue the customer side of the project. Manoj is a very successful owner of

multiple businesses in Dubai, including marble and tile factories. He is a friend of

the family and had been living in Dubai for over thirty years so he had watched

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the growth of Islamic finance from ground zero. He is Hindu, from India, but

strongly emphasizes that anyone can participate in Islamic banking as he does.

Part of what has made him so successful is the fact that he finds the best deal in

the market, and he says that, often, Islamic finance provides the best financial

deal. In addition to that, he feels that Islamic banks look more at the merits of the

project and the customer rather than the interest rate, as the international banks

do. The Islamic bank’s profit is tied more to the project than the world interest

rate. He feels very comfortable with this method of financing and stated that he

would rather have a partnership relation with his bank.

Hamad was the director of the Islamic Banking division of the Dubai

International Financial Center (DIFC) during the time of my fieldwork. He is a

UAE national who was educated (undergraduate and graduate) at a prestigious,

socially liberal university in the United States. He is very philosophical about the

state of Islamic finance in the Gulf region. We had digressed from the formal

questions and were talking about what he sees as strengths and weaknesses of

the industry. In addition to what he perceives as a lack of innovation in IBF, he

sees the “entanglement of religious behavior* in business to be a weakness of

the industry. He sees IBF focuses too much on paperwork where it should be

taking the principles of Islam and applying them on a more fundamental level.

Hamad: I think we have to get rid of this model if we want to have a truly international Islamic finance. We have to separate it. I mean, if you create a truly new industry that does things in a certain way that will be more than just paperwork. So the contractual terms change—this is what you do in Islamic finance—so the contractual term changes and reposition what you

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are to commercial finance from lenders to investors to partnership (italics added). This is what they do.Islam rejected the usury concept, and considering] that most financing is usury, then the contractual terms only change where the financial institution turns into more of a partner (italics added).

Hamad’s critique of the industry is that it needs more innovation to truly uphold

the principles of Islamic finance.

Financial institutions and community welfare

On a personal level, Masood of EWBC views his involvement in IBF as a

way to promote the Muslim community’s welfare:

Well I always as a Muslim had a passion for this Muslim community welfare as such...and I always had a realization that you can't have a strong economy unless you have a strong banking system.And when you have a strong, to have a strong banking system you need strong indigenous banks.And I was involved in Islamic banking in supporting Islamic financial institutions in either managing their money or doing transactions for them as a banker.

It appears that the discourse of “IBF as community service provider” is a theme in

the offices of EWBC: the idea that banking is providing a needed service for the

Muslim community is echoed by Masood’s colleague, Peter:

I mean there are things that you once used to share with the community - for example the building of your house - the whole village comes together. You help me tomorrow you want to build your house I'll help you. Now we are living in a different more specialized society and everybody does its own job so we pool our resources in financial institutions, so instead of me going house to house to ask for help to build my house, [I] borrow money, build my house and then I will repay my share to that society so there is a social function - very important.

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So, while we may not see Islamic finance portrayed in the media as being

concerned with economic development, there are people working in the industry

who do see it as a way to help the community. Peter also recognizes a very

important fact in the world today: that institutions have taken over some

community functions. If institutions and aid agencies are now providing

assistance to the community, then it follows naturally that those institutions

should share some of the core values of the community they intend to help.

Shari’a Standards Board

Another way of strengthening community through the structuring of

transactions is to require Shari’a board (SSB) approval for every transaction, or

type of transaction. As I explained in chapter 3, Islamic scholars must publicly

declare that a transaction adheres to Islamic law before a company can go

ahead with that transaction. A company’s SSB does this by issuing a fatwa

(religious declaration). A transaction does not adhere to Islamic law if it is not

accompanied by a fatwa, as Khurram explains: “the fatwa is kind of more

expected by the retail clients...the retail market wants to see a fatwa.” The

issuance of a fatwa makes the transaction Islamic in a way that is recognizable to

members of the community.

I spoke with one Shari’a scholar, Sheikh Naim Al Jafer, who is perhaps the

best-known Shari’a scholar in the industry, so it was an honor to talk to him. He

is Bahraini, originally, and studied Shari’a law with his grandfather in Bahrain

beginning at age eleven. He attended McGill University in Montreal to study

finance, and this combination of interests and expertise has made him the most

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sought after Shari’a scholar. Sheikh Naim, as everyone calls him, looks like he is

in his 40s, but must be older because of the dates he studied in university. He

has a sparkling sense of humor and scatters funny stories throughout his formal

presentations as well as in our interview. He thinks that some reasons why

Islamic banking is good for the community is that it constrains debt so that it does

not spiral out of control as it did in South America, for example.

Sh. Naim: First of all the corruption level will be much reduced because there is no cash for cash, I am only purchasing goods and services. Number two, no society will be overburdened by something which it cannot produce you know? By lending an amount which it cannot produce, let alone which it cannot service, I think this has a grave impact on economies and...on individuals. And this is why there was some American author about equity, capital equity or something like that, and I was amazed that in the last chapter he talked about Islamic finance and he said that this is the way ahead.

Interviewer: Interesting!

Sh. Naim: Yes you should look...I have thebook...about equity or capital equity or something likethat.

I never saw that particular book. Nonetheless, what Sheikh Naim is doing is to

assert the superiority of Islamic finance vis-a-vis capitalist financing, not only for

the individual, but for the community.

Community and trust

Being part of a community also means being able to trust others members

of that community. Hesham, the Pakistani-born American business owner

introduced in chapter 3 referred to Islamic finance as a “bridge” that allows

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people with different Muslim subjectivities communicate with each other via the

language of finance. Many IBF practitioners see themselves as part of a

community, above and beyond a profession. Rania also confirms this feeling of

trust, and feels it especially in the Islamic banking environment:

I feel that it’s a very fair system. The only thing is that there are no hidden charges; they are very fair with the customers. I mean I worked in foreign banks and when I compare it I know. And people in general have a feeling of more trust and faith and caring. I’ve seen the compassion in here which I have not seen in foreign banks.

In addition to articulating trust based on community, Rania’s comments reinforce

the feeling of superiority many Islamic bankers feel over conventional banking.

Just as Mandaville suggests in his analysis of the history of the Muslim

community, many Islamic financiers recall the early days of Islam when thinking

about Islamic finance. Tony is an accountant who has worked with Islamic

finance in the accounting practice run by his father and himself.

Tony: Islamic banking probably has more because that was probably set as a precedent by the prophet himself because a lot of people entrusted assets to him.

Interviewer: Right.

Tony: Because he's honest, honorable and he would look after those assets - so Islamic financial institutions—probably that is the most important principle that they should adopt—that whatever's entrusted to you, you have to look after in the best possible manner

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Yasir, of EIC, raises the issue of trust not only from within the IBF

community itself, but as a way to promote interaction with the conventional

banking community:

Yasir: We actually try to tell them [conventional bankers] that "what we do is very, very similar to what you do" but we have a sort of filtering that we have to superimpose over what it is that they do. So we always try and make them feel, especially because there is a little bit of aura and, you know you don't trust what you don't know, we want to avoid confusion. A lot of Islamic institutions that I've come across tend like to create a mystique around the whole you know Islamic industry, to make it inaccessible to their Western counterparts. They feel threatened so they say "no no no there's no way you guys can do it"; “you need the Shari’a [Board] and it's impossible to talk to them and it's impossible to reach them and you have understand this and that.” It's actually not so, it's an accessible market. We've seen that demonstrated by Western institutions that have already set up shop and we take an opposite view. I mean we tell people literally "I do exactly what you do however I have to do it within these guidelines.” You have to do it within your guidelines" but amazing similarities.

Yasir sees trust as an important component of the “bridge” function of IBF. As I

have shown throughout this dissertation, an Islamic finance company can serve

as a bridge between the two cultures of conventional banking and the Muslim

world.

Gender and banking in Dubai

As it strives to conduct business in an Islamic manner, IBF contributes to

the idea of identity politics as embodied in institutions through the segregation of

men and women in a business setting. Though gender segregation is not a

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legally required practice in Dubai—as it is in Iran and Saudi Arabia—many

Muslims would prefer that men and women do not mix in public. Often public

spaces are arranged so that women and men can do business separately if they

wish. Many banks in the Gulf (conventional and Islamic) have ladies’ windows3

yet they are an unobtrusive part of the banking experience. Smith finds that

Kuwait Finance House (KFH) has a great effect on identity by making gender

separation relatively visible in public life, asserting that while “...integrating

women into the work force and economy, KFH simultaneously promotes gender

segregation within society” (2004:181). An Islamic bank in Dubai takes the KFH

model of business practice one step further by providing a separate building for

women’s banking. Dubai Islamic Bank opened a separate building in 2000 to

house a women’s division that was billed as the first of its kind in the world.

Johara means “jewel” in Arabic. Johara is also the name of the stand

alone ladies’ branch of an Islamic bank in Dubai, United Arab Emirates (UAE). I

was introduced to Johara about a month after I arrived in Dubai in 2002 to begin

fieldwork. A Turkish friend invited me to a promotion party for the bank that was

held in the elaborate ballroom of a large and exclusive resort hotel situated on a

prime piece of beach property just outside Dubai. About three hundred invited

guests—all ladies and mostly UAE nationals4—attended this reception, where

3 A “window” in banking terminology is an area of a bank that specializes in certain products or services. For example, the place where a customer deposits cash is called a “deposit window.” The window may either be a literal window or a section of the building.

4 “Nationals” of the United Arab Emirates are citizens of that country. In order to be a citizen, a person must have a family history both of ethnicity and presence in the territory that is now the UAE. A UAE citizen receives substantial benefits from the government including free health care (including travel to another country to receive medical care if appropriate care is not

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fabulous jewels were displayed in conjunction with banking information. Rather, I

should say that fabulous jewels were displayed and banking was discussed for a

few minutes during dinner. The real focal point of the evening was a “diamond

hunt.” Models hired by a local jeweler for the occasion presented to each table of

ten ladies a large box filled with thirty small, blue velvet lined boxes. Twenty-nine

of the small boxes held small cubic zirconia stones: the thirtieth box held an

equally sized diamond. To the untrained eye, these stones are indistinguishable.

As each lady at each table chose three stones from the box, jewelers’ assistants

(women) examined the stones with a jeweler’s loupe to determine its gemological

properties. One lady at each table had chosen a diamond from the box, which

she got to keep along with the two zircon stones. The “losers” got to keep three

zircon stones.

Ultimately, I did not win a diamond in the diamond hunt. I was not

disappointed, however, because that night I met the branch manager of Johara

and subsequently interviewed 33% of the female Islamic bankers in the UAE at

the time.5 In a business environment that is overwhelmingly dominated by men

(Smith 2004; Riphenburg 1998), the real jewel was the depth that obtaining

access to these women added to my research project. As I learned from

spending time in a stand-alone women’s Islamic bank, upholding appropriate

available in the UAE), free education, free land, and numerous other subsidies. Included in the citizen base is a large population of “Iranian locals” whose ancestry is from Iran. A person who marries a UAE national may receive citizenship but it is not possible to naturalize to UAE citizenship.

5 In 2002, there was only one stand-alone ladies’ branch in the UAE. Now there are five, with new ones planning to open in the near future.

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gender relations is part and parcel of the moral orientation and Muslim identity as

it is conceived of in Dubai.

Gender segregation in Islam

There is limited and disputed textual support for gender segregation in

Islam. I will discuss this issue in more detail in chapter 5, when I discuss purity

and piety. Quranic passages supporting the wearing of hijab appear to advocate

physical separation of men and women inside the home and veiling of women as

the public expression of segregation outside the home. Stowasser (1994) points

out that the implication of the latter verse is that women will move around freely

in society and therefore not remain segregated from males except by the veil.

The veil provides symbolic segregation so that public physical segregation is not

necessary. I am interested in how gender segregation upholds the idea of

community through the practice of Islamic finance—and vice versa—in the

specific case of Islamic banking in Dubai.

Gender segregation in practice

In most cultures, families “constitute ideological clusters that carry

meanings and values ascribed to them by both family members and those

external to the family.” (Eickelman and Piscatori 2004). Islamic practice as it is

manifested in UAE culture expects that women take care of the household in a

way that is much more embedded in the culture than it is in the United States.

This paradigm is most often reinforced by interpretations of the Qur’an, which

contend that the woman is the support structure of men, family, and society

(Stowasser 1994). Women can fulfill this function only by devoting full attention

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to domestic life. It is the woman’s role to “ensure the survival of moral society,

and, thus, the values of the Islamic way of life” (Stowasser 1994:127), thus

making gender roles a matter of community survival. Muslim women and men

take this injunction very seriously and consider a woman’s familial and household

duties to be not only extremely important, but a moral obligation. We saw in

chapter 3 how this belief affects women’s self-identifications.

UAE society is arranged so that women are supported in this role just as

men are supported in their public roles. Nevertheless, modern capitalist

influences have produced the desire for women to work outside the home

(Haddad and Esposito 1998), both for personal fulfillment and to contribute to

household income (Stowasser 1994). Like the Western world, the Muslim world

is also struggling with questions about whether or not it is appropriate or

desirable for the woman to work outside the home (Eickelman and Piscatori

2004). Corporate private sector employment in the Arabian Gulf is typically

limited to women from elite and middle-class families (Riphenburg 1998) who can

afford the domestic support6 for household duties and for whom the workplace

meets certain social criteria including gender relations.

Though gender segregation is not a legally required practice in Dubai—as

it is in Iran and Saudi Arabia—many Muslims would prefer that men and women

do not mix in public. Often public spaces are arranged so that women and men

6 “Domestic support” can refer to male cooks, drivers, gardeners, landscapers, etc., as well as to housemaids. Housemaids and factory workers, of course, constitute another class of women that have been explored in other venues (Sassen 1996; Malti-Douglas 1996; Ong 1996).I acknowledge their role in contributing to the ability of upper class women to work in the private sector, but it is not the project of this chapter to explore their particular conditions.

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can do business separately if they wish. Dubai Islamic Bank opened a separate

building in 2000 to house a women’s division that was billed as the first of its kind

in the world. Bank headquarters is a very commercial looking, high-rise white

concrete building located in the central business district of Dubai. The ladies’

branch, in contrast, is located in an exclusive area of the city, near the beach.

This location in a residential and shopping area makes it easy to get to for

women whose daily routine is concentrated in the vicinity. The two-storied

building is impressive: its concrete walls are painted yellow and the high windows

are tinted a trendy color of green. The architecture, in fact, is more analogous to

a large home than to a place of business. The well-appointed glass door at the

top of several stairs is also accessible by ramp for disabled patrons. The door

itself is hidden from public view by a concrete wall.

Rania is the general manager of this women’s branch, and is the head of

all of the women’s branches of her company in the UAE. She adamantly insists

that gender segregation in Dubai reflects social and cultural values:

Culturally it is like that, whereas Islam never has prohibited women from interacting, within decent limits is required, keeping your values and culture in mind, it has never prevented them from meeting. You learn the roles; it is a part of life. But in here it is the minimum interaction with male counterparts. That’s the culture.

This point of view is consistent with both Stowasser’s and Nomani’s readings of

Quranic text and supports the stance that gender separation in Dubai is a

community issue.

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The creation of a separate building for a women’s bank is a step toward

solving the moral imperatives for women to take care of familial duties and to

avoid gender mixing while simultaneously fulfilling a professional role in society.

Building design, location, and internal culture make it clear that it is a place for

women who are valued in their society. Women who work in the building feel

comfortable and privileged to be a part of an environment that values their

presence. Gender segregation in Islamic banking provides supports local ideas

about community, as men and women are able to uphold Islamic business

practices while participating in a global economy that does not hold the same

gender values. Building space and physical practices link local experiences of

self to global practices, even as people embrace and alter those practices in the

service of strengthening communal bonds.

Conclusion

In this chapter, I have shown how Islamic financiers view themselves as

part of a transnational community. Many of the people I interviewed joined the

industry specifically so they could contribute to the Muslim community in some

way. Because of the association of IBF with diasporic Muslims, the industry

reinforces ideas about community that are not linked to territory or state

boundaries. Ideas of community are encoded into the financial transactions

themselves, which are then imbued with ideas of trust related to being part of the

community. Finally, I showed how the configuration of a women’s Islamic bank

upholds one community’s ideas about gender segregation. In the next chapter, I

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will turn to the concept of Divinity to show how spiritual concepts are encoded in

the industry of Islamic finance.

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CHAPTER V

DISCOURSE OF DIVINITY: SPIRITUAL BELIEFS AND FINANCIAL PRACTICES

Divinity discourse is concerned with the domain of thought that

encompasses ideas—variably expressed—that humans have some kind of

relationship with the divine world, and that some (or all of) this-worldly activities

support this relationship. Therefore, I propose that the third existential problem

of a globalized world the industry of IBF addresses is: ‘To what extent can

spiritual ideas be encoded into daily life practices?” Of course, we assume for

this project that I am talking specifically about daily economic practices. Ideas

about divinity may be expressed in an infinite number of ways, and three of these

domains became apparent to me during the course of my fieldwork and

interviews: language use (Arabic), purity of the body, and social justice

concerns. In this chapter, I will explore how each of these domains of thought

impinges upon Islamic banking and finance practices, and how practitioners

create an environment to support these spiritual concerns.

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Language and IBF

One of the most recognizable features of IBF is that all of the transactions

have Arabic names, no matter what language the practitioners speak with each

other. In fact, most Islamic finance business is conducted in English and

documents are usually written in English or, in the appropriate circumstances, in

English and Arabic. This phenomenon is not only part of my observation in the

unique environment of the Arabian Gulf: Maurer also acknowledges English as

the lingua franca of the industry (Maurer 2005). The use of the Arabic language

in this way is understandable for transactions mentioned in original texts, such as

murabaha, mudaraba, and musharaka, etc. It is harder to understand, though,

why Malaysian or American Islamic bankers would, in the twenty-first century,

construct a transaction similar to a municipal bond and name it “sukuk”, which

means “financial certificate” in Arabic. I contend that the practice of giving Arabic

names to concepts and practices—and subsequently using them despite the

native spoken language—is one of the most important practices in IBF.

Bill Maurer is an anthropologist who studies money and its meanings in

Caribbean offshore financial institutions and in Islamic finance. In his earlier

articles on IBF, he had explored interpretations of Islamic financial

understandings (Maurer 2001), the relationships between morality and

mathematical models of derivatives (Maurer 2002), and knowledge creation in

accounting models of Islamic finance (Maurer 2002). From this foundation,

Maurer has built a theory about meaning and various forms of currencies and

economic activities. In his book on Islamic finance and other types of alternative

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currencies, Mutual life, limited: Islamic banking, alternative currencies, lateral

reason (2005), he takes up the question of the relationship between names and

reality, or what he calls “adequation.” He asks (Maurer 2005:154):

How does the instance of the letters ‘m-u-d-a-r-a-b-a- h” on the page of a contract function in an Islamic banking endeavor that in all other respects iconically re-presents a conventional contract, word for word, form for form, line for line on the physical piece of paper, except for the interjection of those nine Roman letters signifying—what? An Arabic word? A word as English as burrito? A divine call to virtue? An effort?

He uses a theoretical model based on anthropological and sociological linguistic

theories, such as those of Sassure and Peirce to think about the relationship

between cultural and linguistic expressions. He contends that cultural critics

essentially use two modes when thinking about this relationship. First, there is

the effort to classify, identify and analyze signs. This mode is one of

ethnographic description and analysis and it follows such models as Riceour’s

“culture-as-text” metaphor or Geertz’s “cultural system of meaning embodied in

symbols.” The second mode of analyzing relationships between culture and

language he refers to is the attempt of social scientists to “assess their own

theories’ adequacy to the cultural materials they purport to explain” (Maurer

2005:155). This mode takes the form of a theoretical critique and depends on

having a particular theory of signs, like Sassure’s theory of signs.

Maurer links the two approaches by linking signs and money. He says

that money is a sign. He is interested in the materiality of money and the

formative nature of money in “theories of signs and adequation” (Maurer

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2005:155). Western theories of signification have often resorted to money

metaphors and monetary reason as they make claims about the world of signs.

He finds that in many analyses of culture and language (like Jakobson’s and

Eco’s) that there is an analogy between economics and linguistics. Maurer then

points out Peirce’s theory of naming, or coinages. Peirce, according to Maurer,

says that it is necessary to coin words when something has been discovered,

and it becomes both a privilege and a duty to assign a suitable expression to that

conception. This seems to be what Islamic finance professionals are doing when

they name particular transactions: the transaction has either been “discovered”

in the sense of having always-already been there or “created” and in need of a

name for a new phenomenon. As a result of its ability to be created and re

created by naming, money is a humanly created moral good and not a given

universal. The analogy between the universality of economics and linguistics

falls apart when it becomes apparent that both are social conventions,

constructed and re-constructed by human beings. At the same time, naming

things makes them seem like “timeless truths” (Maurer 2005:167).

IBF is partly an industry built on “timeless truths.” Its practitioners invoke

nostalgia and the Golden Age of Islam to build a modern industry. Much of the

discourse revolved around “what the Prophet (PBUH) intended,” especially

regarding economic activity. There are a few passages in the Qur’an and

ahadith that guide economic behavior. However, in the contemporary world

there are technologies and relations of production and consumption that simply

did not exist during the time of the Prophet (PBUH). In order to tie today’s

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economic activity with that nostalgic view of Islam, it is necessary to endow

concepts with names that tie the modem to the past. As Maurer repeats

throughout his book, the future of IBF is the past. Frederic Jameson, with his

take on late capitalism that includes an emphasis on nostalgia, would agree.

Names, Arabic names, serve a function in the industry to construct a reality of

IBF. Practitioners both embrace the names and actively coin new ones as the

need arises. Names and reality “adequate,” as Maurer suggests, and make IBF

a reality.

In terms of language use and IBF, I want to make two further arguments.

The first is an extension of Maurer’s argument about naming. In his theory,

Maurer is concerned with coinages—both literal coinages in the case of IBF and

Ithaca HOURS currencies1 and linguistic coinages in the naming of IBF terms.

His argument about how both forms of alternative currencies bring together

communities by re-constructing concepts of valuation is a powerful one. My

argument about naming concerns the people, rather than the currencies, and is

derived from Althusser’s theory of interpellation. I introduced this theory in

chapter 3 on self discourse. Islamic banking recruits its subjects by hailing them

as either Muslim or capitalist subjects, whichever term is relevant to the

audience. It does not matter that the actual banking practices are not very

different from capitalist banking or that the products have Muslim names, but only

that participants in Islamic banking “buy into” the ideology of having been

1 Whereas part of Maurer’s book is about Islamic finance, the other part is about a form of currency created by the population of Ithaca, New York for use in the town by its inhabitants. He argues that both IBF and HOURS explicitly seek to bring together their respective communities “through new articulations of value and information.” (Maurer 2005:164)

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designated a part of the industry. It allows them to believe, in a sense, that they

are reinforcing their Muslim identity by participating in Muslim banking practices.

At the same time, identification with the global economy is still possible because

of the hybrid nature of the institution. At the same time capitalist bankers are

able to see themselves as doing business with a bank.

This section of a discussion on language could have been placed in any of

the three sections of this dissertation: Autonomy/Self, Community or Divinity.

The relationship of naming to reality could easily relate to construction of the self,

in the sense that a person’s “name” or designation as a Muslim would contribute

to how he or she views his or her status as an actor of Islamic finance practices.

Or, shared understandings of Arabic terms could serve to reinforce community

ties. This speech genre, in Bakhtin’s usage, serves to indicate identity, both on

an individual level and on the level of the community, or umma. I do believe that

the present discussion is relevant in either or the two preceding chapters, or

more appropriately, in both of them. However, I have chosen to place this

discussion in the context of divinity because of the importance of the Arabic

language in the context of the spiritual aspect of Islam. This is the second

extension argument about language I wish to illustrate.

Arabic: the divine language

It is difficult for a non-Muslim to comprehend the importance of the Arabic

language to Islamic thought, yet the actual words of classical Arabic are

extremely important to the spiritual essence of religious teachings, and therefore

to its practice. In the first instance, the Qur’an was revealed to the Prophet

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Mohammed (PBUH) in a particular form of Arabic poetic style that is considered

to be a superior literary form to both spoken Arabic and to other forms of poetry

(Bamyeh 1999). As such, Bamyeh (1999:116) contends that:

[F]or the Arabs to whom Islam was first disclosed, the field of language was itself the field of the miracle, in the same way that, as some classical commentators have noted, medicine was the field of the miracle in the age of Jesus, who had to prove his credentials by miraculous healing, or magic was in the age of Moses, who likewise had to prove his credentials through that venue of truth production.

Bamyeh further emphasizes just how fundamental is language analysis to most

systems of Islamic thought: soon after the death of the Prophet the “science of

speech” (7/m al-Kalam), for example, is one of the earliest and most important

components of Islamic philosophy (Bamyeh 1999). Revelation of the Qur’an in

this exact form of Arabic was especially auspicious and surprising because the

Prophet (PBUH) was thought to be illiterate.

The Qur’an is, in fact, an oral document. Although it has been written

down and translated, it is first and foremost intended to be recited: the word

“qur’an” means “recitation” in Arabic. Its verses are recited daily in each prayer;

they are recited in mosques during Ramadan and during weekly communal

prayers (juma)\ certain short suras are recited for specific purposes such as for

protection on a journey (Waines 1995). In this age of technology, recordings of

Qur’an recitations are played in homes to teach them to children or to provide a

peaceful or meditative atmosphere. Home use of recorded Quranic verses

should not be confused with the playing of sermons, including revolutionary ones

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(cf. the Ayatollah Khomeini’s illicit cassette recordings sent from France to Iran

which fueled the Iranian Revolution of 1979). Even among a highly literate

population, reciting orally the words of the Qur’an is thought to be the optimal

mode of transmission of the holy words.

On a practical level, to “learn to read” the Qur’an means to learn how to

pronounce the words in their original form, not how to read or understand the

written form of Arabic. While I was living in Dubai, I thought it would be easy to

find someone to teach the Qur’an to my daughter (surely this would be easier in

a Muslim country than in the US), and I was happy to have her learn to “read” the

Qur’an like her father did and the way her cousins are learning to read the

Qur’an. I had not understood until then that by learning to read the Arabic Qur’an

she would forego the ability to understand what the words meant, at least until

she was old enough to attend an adult level discussion group. Alternatively, I

could have supplemented her education, but I was told that learning the

meanings of the words (in English) would confuse he attempt to learn the Arabic

pronunciation. I made a decision that marks one of the few times I have dropped

my inclination to see events in my life through a kind of “cultural relativist” lens: I

decided I would rather have her learn the meaning of the Qur’an rather than just

repeat the words. I understand, intellectually, the importance of vocalizing the

words, but my quest to uncover meaning overrode that abstract knowledge

despite the messages I was receiving from the surrounding culture and from my

research.

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Someone who can read and write Arabic is able, of course, to read the

words but that does not mean they will understand them. It is not easy to read

the Qur’an, either in the original Arabic or in translation. It does not follow a

narrative form like the Hebrew Bible. The 114 chapters, or suras, are not

arranged chronologically or by subject matter and do not follow a narrative logic.

In fact, the only criterion for ordering of the suras seems to be length: the longest

are at the beginning and they shorten in length toward the end. The Qur’an does

not contain collections of stories that are easily repeated (Waines 1995).

Children often memorize all, or at least large portions, of the Qur’an without

knowing what the words mean. Even native Arabic speakers cannot understand

it very well, as the Arabic of the Qur’an is a classical form, akin to how

Shakespearean English sounds to a contemporary English speaker. Every

single one of the people I interviewed were English speakers since birth or young

childhood, except for Miss Lutfi, who had learned English in her later years of

school. All spoke other languages in addition to English and most use a mix of

English and that other language—Arabic, Urdu, Persian or Italian amongst my

interviewees—in daily conversation. Nonetheless, they all used the Arabic words

for certain terms associated with the industry. I did not conduct an interview

without using at least one Arabic word, even with the two Americans I talked to.

Furthermore, the interviewees used those terms without translation, as if they

expected me to know them. I did know them, of course, but because I was

presenting myself as someone who needed to be educated about Islamic

finance, I thought that someone might try to explain or translate. No one asked

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me if I needed translation or even hesitated when using a word to see

(nonverbally) if I needed translation. Some of the most common terms are: riba

(interest/usury), halal (favored), haram (forbidden), and the names of specific

transactions (e.g., mudaraba, ijara, musharaka, etc.). Because of the great

importance placed by Islamic tradition on language use and because of its

pervasive occurrence in industry discourse, I have included the discussion of

language in this section on divinity.

Even a person new to the industry must be able to interpret a number of

basic terms. For example, one interviewee had been bom in India but raised in

America. English is, of course his native language, and he illustrates how

entrenched the Arabic language is in the culture of Islamic banking. His

introduction to the field of Islamic banking was mediated by the presence of the

Arabic language in an English publication. He says:

I worked for some very small brokerages on Wall Street and I read a magazine called Islamic Banker, and I was fascinated by various instruments that I had difficulty pronouncing let alone understanding.

Although he had specified earlier in the interview that he had been raised in a

“religiously aware” but not “religious” environment, I do not know the extent to

which he learned to read the Qur’an in Arabic or if he learned it at all.

Bill Maurer points out that some of the “issues of permissibility [in IBF]

seem to hinge on very finely tuned definitions” (Maurer 2005:25). Even the name

of the industry has been disputed. While most practitioners call it “Islamic

banking” or “Islamic finance” or IBF, as I have in this dissertation, opposition

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exists that opposes calling it any of those things. This opposition contends that

the proper term for the kinds of transactions we have been talking about is lariba,

which means, literally, “no riba” in Arabic. Spokespeople for this view say that

the term lariba captures the industry’s activities more accurately. Moreover, they

contend that the term “Islamic” can have negative connotations in the

contemporary political climate, plus their activities are not restricted to Muslims

(Maurer 2005). Either argument would also assist in marketing the industry both

within and outside of the Muslim community by opening it up to non-Muslims and

to Muslims who are wary about being too closely associated with negative

elements of Islam. This way of thinking has arisen exclusively, as far as I can

tell, from American practitioners of IBF. I found absolutely no opposition to

current uses of IBF from my subjects. In fact, I personally believe that the term

“Islamic banking” is an oxymoron, as the industry of banking is built on charging

interest; therefore, I am very careful to use “Islamic finance” when I talk to

anyone in the industry. People in the industry in Dubai are not so careful and

use “Islamic banking” and “Islamic finance” interchangeably. Perhaps the

attention to the details of the industry name is more pronounced in places where

Islam, and Muslims, forms a minority group. This possibility would be interesting

to explore in future studies.

The language of riba

One area of importance in language use which Maurer has pinpointed is

the issue of permissibility hinging on both language use and translation. There is

perpetual disagreement among IBF scholars and practitioners about whether or

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not to translate the word riba as “interest” or as “usury.” The debate over the

acceptability of riba and, especially, the responses to the Al Azhar fatwa I will

discuss below, are important to understanding the motivations behind the

industry. In this section, I will touch upon the controversy sparked by the fatwa

as it relates to the use of language.

In an article devoted to the debate, Mahmoud El Gamal, a law professor at

Rice University and expert on Islamic jurisprudence and Islamic finance, outlines

the difficulties faced by scholars. In a 2003 article called “’Interest”’ and the

paradox of contemporary law and finance, which he also presented at the Dubai

conference in February 2003, scrutinizes a fatwa issued by Sheikh Tantawi of Al

Azhar (a leading institution of Islamic scholarship in Egypt) in 2002 that appears

to allow certain forms of riba in banking transactions. This fatwa was issued in

Arabic and translated by El Gamal in its entirety in the article. He also provides

the original Arabic version for those who wish to scrutinize the original language.

According to El Gamal, Sheikh Tantawi does not agree with the inclination of

contemporary Islamic bankers to classify transactions under medieval categories.

The reality of today’s world is that financing comes with a certain cost and no

matter how you package that cost, the price ends up to be around the market

cost, or LIBOR. This relationship to LIBOR was supported in several of my

interviews. Mohammed, of Dubai’s private investment office, confirmed that price

is often “based on conventional financing benchmarks, so that's why when we do

a transaction it's not uncommon to say we've had LIBOR as a benchmark even

though LIBOR is an interest rate.”

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One objection to riba is that knowing the rate of return in advance negates

the spiritual element of time (Wilson 1997). Tantawi argues, conversely, that in

the current banking climate, it is better to avoid moral hazards of nondisclosure

than to adhere strictly to profit and loss sharing rules (El Gamal 2003:25-26). In

other words, a good deal of circumvention is necessary in order to organize a

financing arrangement that adheres to both a market rate of return and with strict

Islamic law. Within that circumvention, there arises the potential of the agent not

to disclose the full profit opportunities of the investment. This leads to what El

Gamal calls a moral hazard, and makes the transaction less than optimally

transparent. This potential must be eliminated, says Tantawi in the fatwa, which

makes the fixed rate of return based on LIBOR (i.e., it looks like interest) more

acceptable than the alternative. He also acknowledges the tendency of

conventional banks with Islamic windows (like EWBC/Wadiah of this project) to

supplement debt financing with interest bearing instruments when the income

from Islamic products are insufficient to do so. This does not mean that Tantawi

has declared interest to be acceptable in every case, but the fatwa has opened

the door to a lively debate.

Tantawi’s fatwa was, and still is, highly controversial. I attended the Dubai

conference on Islamic finance in February 2003, just three months after the fatwa

was issued in December of 2002. When Professor El Gamal presented his

interpretation of the fatwa, there was a lot of debate about it in the session itself.

The first reaction and term of the debate was on the translation itself. Many

people—Arabic speakers—wanted to go directly to the language itself to

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determine the “real” meaning of the words. This is why El Gamal provided the

Arabic original at the end of his online article. Now, this is not terribly unusual in

and of itself: academic debates in most fields often hinge on disputed meanings

of terms or translations. What is important here, though, is that this issue raises

important questions about the acceptability of certain transactions which are

mediated by the use of the Arabic language. Arabic, in turn, is a foreign

language to most IBF practitioners yet crucial to the interpretation of is tenets

because of its status in the divine realm of discourse. This use of language

supports the assertion that elements of IBF are intended to speak to the identity

of its participants on the level of morality and religion.

Purity and piety

Kosher products

An unusual use of language illustrates the importance of naming products

to the industry. I asked Kevin, the American working at EWBC, about his

observations of language use:

Karen: Are you expected to know the Arabic terms for things? Are you expected to use riba instead of interest?Kevin: Well I mean I find that certainly in liaising with other members of the Islamic financial community that those terms are bandied about much more readily than others but I also find as a Westerner and a non- Muslim I find that people are much more willing to tolerate me slipping or even using the words back...It's remarkable how many people in the Muslim community turn back to me and ask me if my Islamic investment products are kosher (laughs).

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Peter, Kevin’s European colleague at EWBC, also talked about their Islamic

products as being kosher. Although Kevin’s laugh at the end of his quote reveals

his belief in the ironic use of the word kosher, there is a more intricate connection

to the use of that term in an Islamic context.

The term kosher is pervasive in American, English speaking society and to

a great extent has lost its connection to its specifically Jewish roots. I would not

find it unusual to hear the term used among my friends and colleagues, whether

or not they are Jewish. Because all except one of the Islamic bankers I

interviewed are products of that society and/or are familiar with the idiomatic use

of the word, it is not unusual to hear that term used in conversation. However,

kosher also has another function in communities of Muslims living in the US or in

Europe. Muslims abide by many of the same dietary laws as Jews, including the

requirement that meat be slaughtered and blessed in a certain way, called

kosher in Yiddish (Jewish) and halal in Arabic (Islam). The technique is

understood by Muslims to be similar and the blessing performed at the time of

slaughter is also similar. In addition, Jews are seen as People of the Book, or as

members of the same chain of divine activity leading back to Abraham (Waines

1995; Bamyeh 1999). As such, Jews and Muslims are related spiritually as

followers of the same divine tradition and all Muslims I know openly acknowledge

this tradition, media coverage notwithstanding. There are often no halal butchers

in areas of the United States and Europe where the Muslim diaspora is relatively

small but one can usually find kosher butchers, or at least kosher meat is

available in grocery stores and restaurants. As a result, Muslims who wish to

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eat meat and adhere to Islamic dietary laws fulfill that obligation by consuming

kosher meat. Therefore, the use of the word “koshef' as related to Islamic

products is not as unusual as it sounds at first glance. Both idiomatic language

use and beliefs about divine tradition provide support for its use.

In sum, one important aspect of IBF is the attention to the Arabic language

and its place in the divinity discourse of the industry. The language of Arabic has

a spiritual element to it dating from the inception of the religion itself.

Furthermore, issues of whether or not certain financial practices are permissible

do hinge on the use and translation of terms such as riba. Giving a transaction

an Arabic name authenticates it in the eyes of practitioners and those names are

used no matter what language is being spoken. Novices to the industry, even

non-Muslims and researchers, are expected to be familiar with terms in their

Arabic form. Finally, even idiomatic use of the term /cosberfrom a Jewish context

has divine roots in shared traditions.

Mixing money and genders

Purity and piety are juxtaposed in an interesting manner in IBF, and refer

to both money and gender. Likewise, the Arabic term for “mixing” is al-ikhtilat

and it has been used to refer to the mixing of sexes and the mixing (in financial

circles) of riba and non-riba monies. In a general sense, the entire industry is

built upon the concept of purifying money. For example, in chapter 3 I introduced

two schools of thought about Islamic finance practice. One of those schools

bases its ideology on the prohibition of specific types of transactions and trading

in goods forbidden under Islamic law. Activities relating to the trade of alcohol,

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pork or other goods deemed “unlslamic” are thought to be tainted, or not pure.

Insofar as goods being traded or acceptable business practices are deemed to

be Islamic, those goods (or practices) have been purified. Because impure

goods do not mix with purified goods in IBF, the industry has purified economic

activities.

Evidence of this purification process comes from the practice of requiring

approval of a company’s activities from a Shari’a Standards Board (SSB). It was

repeatedly made clear to me during my research that, essentially, any economic

activity is considered Islamic “unless it’s not.” Maurer (2005:105) also found this

to be the state of affairs in his research. One of the claims I am investigating in

this project is the claim that “Islamic banking provides all of the benefits of

conventional banking without the immorality.” For that statement to be true, it

would mean that the industry takes proactive steps to make sure its activities live

up to that standard. Having a SSB is one way to protect the moral claims of the

industry.

Another piece of evidence of the attempt to purify the industry comes from

the creation of certain other investment vehicles meant to purify otherwise

questionable transactions. I say “questionable” not because Islamic bankers

intentionally violate Islamic law and repent later and try to redeem themselves.2

The US stock market has been a source of innovation for purifying individual

investments. For example, in the 1980s, there was a call to divest from South

2 Although this has reportedly happened before IBF was wide available, especially in the US and UK. For financial expediency, a person or company might do business involving interest payments and then donate the amount earned from interest to charity.

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Africa in protest of apartheid laws: presently, there is a call for companies to

divest from Darfur in protest of the war. The Dow Jones Islamic Market Index

(DJIM) was created in 1999 to screen stocks on the basis of Islamic criteria.

Maurer (2005) says that the index is based on two assumptions about the

relationship between Islam and the global market: first that a “global Islamic

market” already exists waiting to be tapped and second, that any activity is

permissible unless it is not. Maurer’s assessment supports my claim derived

form knowledge of the industry that “anything is Islamic, unless it’s not.”

I actually spoke with the man who conceived of and developed the DJIM.

RS is of Indian origin and was raised in the US. We met up at the coffee shop in

the Hyatt Hotel in Dubai, where the International Islamic Finance Forum was

being held in February 2003, and spoke during the early evening tea time amidst

the clinking of teacups. At this point I was more than halfway through my

fieldwork stay and I had interviewed more than half of the “bankers” I had hoped

to interview. To supplement what I was hearing from bankers, I wanted to talk to

people who had a more general view of the industry. When I heard that RS

would be in town for the conference and that I could be introduced to him, I

jumped at the chance. I asked him what a customer expects from an Islamic

investment:

RS: I think the first thing is not performance or cost, the first thing is compliance: Who is on your Shari’a Board?

Interviewer: Ok.

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RS: After that question is addressed and they feel comfortable the next question is...basically how did it perform to its conventional counterpart? Is my Islamic mortgage more expensive than a conventional mortgage? If it is, no matter how compliant it is I'm not going to be interested because I don't want to put down 30% and have a pay back period of 30 years.

Interviewer: So you see customers as not willing to really give up any of the benefits of conventional finance?

RS: They don't want - they should not be penalized for their faith.

RS’s observation supports the view that purity of funds is of utmost importance to

investors in the industry, but that purity should not be obtained at a significant

monetary cost. Therefore, consumers demand that the industry provide the

benefits of a conventional investment without the immorality, as insured by the

SSB.

A difficulty in always performing purely Islamic transactions is the

necessity to interact with conventional banks. This has been a problem

especially in banks that have both conventional and Islamic divisions like EWBC.

Kevin, of EWBC, explains the problem this way:

[When] we take funds from clients on an Islamic basis we need to make sure that they are properly segregated not just at a product level but at an overall balance sheet level. So that we don't accidentally - you know - taint the funds that have been received.These are elements that we have to deal with in bringing in Islamic products to our Islamic windows.

I also interviewed Said, a Lebanese banker who was the head of Sharjah Islamic

Bank (SIB) at the time of our interview. SIB was actually in the process of

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converting from a conventional bank to a purely Islamic bank in 2002-2003.

Said, like Kevin, explained the difficulties inherent in preserving the purity of

Islamic money. Both saw the problem as one of an underdeveloped market.

“Normally”, i.e., in under the conventional banking system, a bank is required to

maintain reserves to cover unexpected cash needs, which they do by placing

funds in a secondary market. The bank then either draws from or adds to those

reserve funds based on the daily cash needs of the institution. Essentially, banks

loan each other money on a short-term basis so that all can cover their cash

needs.3 The IBF industry is still trying to figure out how to manage this situation

while maintaining the purity of its funds. Trying to avoid mixing of riba and non-

riba monies is a major concern not only of conventional/mixed banks but of pure

Islamic banks as well.

Purity, gender and Islamic banking

A second meaning of purity that I have not seen expressed in IBF

literature has to do with a traditional anthropological concept: purity of the body.

Of course, this issue arose for me because I spent a lot of time at a stand-alone

women’s Islamic banking branch and, to my knowledge, no one else has done

ethnographic research amongst female Islamic bankers. Many scholars of Islam

talk about the importance of practices in Islam to the purity of religion (cf. Kuran

2004; Mahmood 2001). In this study, I have cited the example of the Kuwait

3 The cost of these funds is based on interest. Of course an Islamic bank does not have access to these funds because of the prohibition on interest and must find other ways to cover its short term cash requirements. This is an ongoing problem in the industry but I will explore that dilemma in future research.

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Finance House and its relationship with public practices. One of those practices

that link ideas about divine purity with daily practice is gender segregation.

I relate the practice of gender segregation to the practice of segregating

pure money from impure money. There is one important difference, however.

When we speak of segregating money in IBF, there is clearly a demarcation

between “pure” money (Islamic) and “impure” money (conventional or interest

bearing). Although Islam’s practices mainly endow the woman with the visible

burden of maintaining sexual purity (via hijab and purdah), it is really incumbent

on men and women to maintain distance (Khuri 2001). When I speak of gender

segregation, I am not implying that one gender is more pure than the other.

Rather, I operate under the assumption that both genders are pure (or,

conversely, impure) and segregation maintains the integrity of both genders. I

wish to carry this assumption throughout this project.

As it strives to conduct business in an Islamic manner, IBF contributes to

the idea of identity politics as embodied in institutions through the segregation of

men and women in a business setting. Many banks in the Gulf (conventional and

Islamic) have ladies’ windows4 like KFH, yet they are an unobtrusive part of the

banking experience.

4 A “window” in banking terminology is an area of a bank that specializes in certain products or sen/ices. For example, the place where a customer deposits cash is called a “deposit window.” The window may either be a literal window or a section of the building.

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FIGURE 1: Gendered Entrances

Photograph by Karen Hunt Ahmed © 2007

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As we have seen, Smith finds that KFH has a great effect on identity by

making gender separation relatively visible in public life, asserting that while

“integrating women into the work force and economy, KFH simultaneously

promotes gender segregation within society” (2004:181). Johara, in Dubai, takes

the KFH model of business practice one step further by providing a separate

building for women’s banking.

Textual justification

There is disputed textual support for gender segregation in Islam.

Journalist and author Asra Nomani5 contends that there is no support for the

practice of public gender segregation in the Qur’an at all, not even for

segregation during prayers.6 In all of my annotated Qur’an reference books, I

could find no passages specifically prohibiting the mixing of men and women in

public except by virtue of the veil. Indirect support for segregation is derived from

the well-know “hijab verse” in the Qur’an (33:53). This verse is widely interpreted

to refer only to the Prophet Mohammed’s wives although when it is taken

together with a later verse from the same sura (chapter), it appears to extend an

idea of segregation to all women when they leave the house by advocating the

donning of the veil, or hijab (Stowasser 1994):

And when ye ask (his ladies) for anything ye want, ask them from before a screen: that makes for greater

5 Nomani is the Wall Street Journal reporter who organized the highly controversial desegregated prayers in New York in 2005.

6 http://www.asranomani.com/mecca/archives/2005/06/the iordan time 1 .php: last accessed 2/4/06.

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http://www.asranomani.com/mecca/archives/2005/06/the

purity for your hearts and for theirs.... (Sura 33:53; Ali 1934:417)

O Prophet! Tell thy wives and daughters, and the believing women, that they should cast their outer garments over their persons (when out of doors): that is most convenient, that they should be known (as such) and not molested.... (Sura 33:59; Ali 1934:418)

These passages appear to advocate physical separation of men and women

inside the home and veiling of women as the public expression of segregation

outside the home. Stowasser (1994) points out that the implication of the latter

verse is that women will move around freely in society and therefore not remain

segregated from males except by the veil. The veil provides symbolic

segregation so that public physical segregation is not necessary. Nevertheless,

the passage is sufficiently ambiguous so that some interpretations of it support

separation of women and men as a moral directive in public as well as in private.

Segregation in practice

There is much support for the extension of private gender segregation to

the public sphere in present day Islamic practice. Although the rhetoric harks

back to the “Golden Age” of Islam (the first three hundred years After Hijra,

approximately 632 CE through 1000 CE), circumstances in which women (and

men) find themselves in the modern world are drastically different from those of

the seventh century and modem Islamists have struggled with that reality.

Fuad Khuri, a US-trained American University of Beirut anthropologist with

a specialty in Bahrain culture, explores the conception of the body in Islam in his

2001 book, The Body in Islamic Culture. He found that there are many ways to

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signal personal purity, social distance and segregation based on age and gender

in Muslim societies. He discusses how men and women maintain their private

domains both inside and outside the houses. Within the house, architectural

designs in traditional houses help to maintain separate domains for men and

women. Veiling is used to separate men from women, and he also found

evidence of segregation in schools, universities and hospitals in Bahrain. I also

observed separation of men and women in the same institutional settings in

Dubai, including banks. Non-banking private offices do not appear to be

concerned with this separation, although government offices, such as the post

office and telephone company, maintain the segregation.

Gender and banking in Dubai

Though gender segregation is not a legally required practice in Dubai—as

it is in Iran and Saudi Arabia—many Muslims would prefer that men and women

do not mix in public. Often public spaces are arranged so that women and men

can do business separately if they wish. Dubai Islamic Bank opened a separate

building in 2000 to house a women’s division that was billed as the first of its kind

in the world. Bank headquarters is a very commercial looking, high rise white

concrete building located in the central business district of Dubai. The ladies’

branch, in contrast, is located in an exclusive area of the city, near the beach.

This location in a residential and shopping area makes it easy to get to for

women whose daily routine is concentrated in the vicinity. The two-storied

building is impressive: its concrete walls are painted yellow and the high windows

are tinted a trendy color of green. The architecture, in fact, is more analogous to

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a large home than to a place of business. The well-appointed glass door at the

top of several stairs is also accessible by ramp for disabled patrons. The door

itself is hidden from public view by a concrete wall.

There are multiple levels at which women interact with Johara. First of all,

the bank building itself is theoretically open to any woman. In practice, there are

certain constraints on who enters the building: a customer must have enough

money to be able to do business with the bank or she will immediately feel out of

place. The building’s decor and air of exclusivity are designed to let people know

who is really welcome there. In contrast to lower class Brazilian squatters who

experienced several discourses about their social position and identity from

institutional and political sources (Walker, forthcoming), women associated with

Johara receive a coherent discourse when dealing with the bank. The difference

lies in the distinction between a women’s personal involvement in the bank itself.

Though the social class of women with access and women who work in the bank

may be the same, “working” in any environment, involves a more personal

investment in the institution than merely being able to walk into the building, or

even to put money into the institution.7 Practices associated with daily work and

the physical and emotional energy required to enact these practices makes the

workplace a powerful site for the study of identity formation. For the purposes of

this chapter, I am interested in the perspective of those women who “work in” the

bank, although I begin with my impression of the bank as I first experienced it

when I walked in as a “customer.”

7 I wish to thank Jonathan Marion for pointing out the difference in personal investment implied by “working in” the bank versus “having access to” the bank.

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In addition to its offering of traditional banking services, the atmosphere

inside the Johara building welcomes the customer and tries to make her bank

visit as comfortable as possible. As a customer, I can say that banking at Johara

is the pleasant experience it is designed to be. When I went to the bank for

services, e.g. to open an account, I was always seen immediately: the bank had

enough personnel to accommodate routine business without delay. When I

arrived for scheduled interviews, I waited on the sofas and was always offered

tea or coffee. I also sat in the waiting area to observe the daily routine. Though

the bank was never frantically busy with customers at any one time, it was rarely

empty. Each time I was there, a steady stream of women would enter or leave

the building. Ladies rarely arrived alone, and if someone was not banking she

sat in the sofa area with me. The interior of the building was always quiet and

peaceful, even during relatively busy times. During slower times, the tellers and

customer service employees seated at the desks talked quietly amongst

themselves as they worked on computers and walked papers to and from offices.

Johara is staffed exclusively by women, including the security guard and

tea server—which are traditionally male jobs in an office. I was told that

customers were of many different backgrounds, even some European and

Philipina Christians, but I saw only Muslim customers during my observations:

they were mostly UAE locals, but the dress style of a few indicated that they were

from the Levant. Tellers and management employees were veiled in local UAE

style, wearing a black abaya over their clothes and a black sheala loosely

secured over their hair. The Pakistani security guard wore navy blue pants and a

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loose white shirt with a blue necktie. Her hair was covered with a navy blue

scarf. The tea lady wore a long skirt and loose, long shirt, usually in light colors

such as grey and white, with a long white scarf.

I asked all three of my informants about their experiences working in a

stand alone women’s Islamic bank. Two of the women specifically cited positive

changes in their lives as a result of working in a segregated environment. Each

woman contended that her ability to work in an environment that supported both

her and her family’s ideals of gender relations had enhanced their professional

and personal lives. For example, Rania’s varied career history suggests that

neither she nor her family objected to her previous employment in a mixed

gender environment, and her personal opinion on gender relations supports her

actions. In fact, she adamantly insists that gender segregation in Dubai reflects

cultural values:

Culturally it is like that, whereas Islam never has prohibited women from interacting, within decent limits is required, keeping your values and culture in mind, it has never prevented them from meeting. You learn the roles; it is a part of life. But in here it is the minimum interaction with male counterparts. That’s the culture.

This point of view is consistent with both Stowasser’s and Nomani’s readings of

Quranic text and supports the stance that gender separation in Dubai is a local

moral issue.

The ladies’ branch provided Rania with a chance to expand her career

horizons by allowing her to take on challenges and responsibilities she had not

been able to experience in a conventional, mixed-gender working environment.

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In addition, it allowed her to have more control over her time and to fulfill her role

as a wife and mother to the best of her abilities in addition to her professional

work. She contrasts her former working environment with the current one:

[Before] I had to go home sometimes very late or come back from home and not be there. It was happening in the last two or three years and I was feeling the pressure in my head. I saw myself drifting, the kids drifting away and they were teenagers where they needed me the most now, more than ever.

[Now] this is how it is different here, I finish, I have a particular time, my 9-to-5 job;8 I know I go home I have my routine before the kids come home. I know before the kids come home I’ll cook dinner.

For Rania, a separate women’s building enhanced her existing

professional and personal life. Conversely, Miss Lutfi cited the issue of gender

separation as primary to her decision and ability to work outside the home. Miss

Lutfi is unmarried. Married or unmarried, women in Dubai have great freedom of

movement in public places. It is not unusual for women in Dubai to go to

university (segregated universities are available and Miss Lutfi attended one); nor

is it unusual for women to work in an office. Some families, however, such as

Miss Lutfi’s, object to unmarried women working in offices alongside men. In fact

Miss Lutfi’s family agreed to her working outside the home only because she was

able to work in a gender segregated Islamic environment. I believe this situation

8 Typical working hours in an international bank are 8 a.m. -1 p.m. AND 5-8 p.m. or later. Rania is using 9-to-5 as a colloquialism: Johara’s hours are 8 a.m. to 2 p.m.

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is an important illustration of the ways in which a defined women’s space can

contribute to the ability of women to participate in an economy.

The creation of a separate building for a women’s bank is a step toward

solving the moral imperatives for women to take care of familial duties and to

avoid al-ikhtilat while simultaneously fulfilling a professional role in society.

Building design, location, and internal culture make it clear that it is a place for

women who are valued in their society. Women who work in the building feel

comfortable and privileged to be a part of an environment that values their

presence. Men and women are able to uphold Islamic business practices while

participating in a global economy that does not hold the same gender values

practiced therein. Embodiment, in the form of building space and physical

practices and interactions, link local experiences of self to global practices, even

as people embrace and alter those practices.

Ethical investing

Some contemporary movements have taken up the call to police the purity

of financial dealings. These movements do not usually develop from a religious

sensibility (although some do) but do claim to be upholders of a moral order.

Some IBF practitioners see Islamic finance as part of the trend to ethical

investing. Karl Polanyi, in the book The Great Transformation (1944), recognized

the need for social movements and the government to balance power

differentials inherent in a market economy. He viewed human nature as one that

could easily be overcome by material greed: as a result, the freedom of a self

regulating market could prove too tempting for humans and lead to the collapse

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of society. Therefore, society must provide a mechanism to offset the corrupting

forces of capitalism. He suggests this may be accomplished through institutions

and individuals. Institutions are needed to balance freedoms but there is always

a tradeoff between individual freedom and societal regulation. Power differences

will always make things unequal and so morally based regulation is always

needed, regardless of the economic situation.

Corporate social responsibility

Polanyi’s “social movement” reform would be recognizable today in the

corporate social responsibility (CSR) movement. CSR is an institutional

movement that incorporates a myriad of practices intended to simultaneously

maximize a company’s profit and raise social welfare. Ideally, the same

practices that benefit the public good (such as fair hiring practices and work

conditions, dealing honestly with employees and customers, practicing

environmentally friendly manufacturing, etc.) are good for company’s busines

and, consequently, good for profits. In fact, CSR has become its own industry,

and most corporations employ whole departments of people whose job is to find

ways to make the corporation more responsible and to let the public know that it

is doing so (The Economist survey on Corporate Social Responsibility 2005).

Journal articles cite ways to build values and ethics into an organization as a

business grows (Joyner, Payne and Raiborn 2002). A computer search of a

suburban Chicago public library found such titles as: Common Interest, Common

Good, Value Shift: Why Companies Must Merge Social and Financial Imperatives

to Achieve Superior Performance, Good Business and, appropriately, Saving the

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Corporate Soul & (Who Knows) Maybe Your Own. These articles and books are

geared toward middle management businesspeople who might be able to

influence a company’s policies.

Both Polanyi and advocates of the contemporary CSR operate from the

premise that capitalism does not pay enough attention to social needs and must

be fundamentally reformed to make it more socially responsive. This sentiment

echoes medieval perceived associations between business and greed. Even in

medieval times, commercial activity was assumed to operate on the premise of

greed. The difference between the Middle Ages and the twenty-first century

(among others!) is that it is no longer solely the responsibility of religion to

contain that greed: in modern times, that burden has been taken up by

communities of like-minded people advocating certain business practices as

preferable to others and, where appropriate, legislation.

There are many people who do not think capitalism is fundamentally

flawed vis-a-vis CSR. Economists like Milton Friedman (Free to Choose, with

Rose Friedman 1980) and his colleagues of the Chicago School of Economics

think that the free market, if allowed to function without government or social

intervention, will operate for the betterment of society. Adam Smith also took this

view when he wrote about how individuals striving to benefit themselves would

benefit society as well (2000/1776). The Economist survey cited above is written

in support of the free market and its ability to reward businesses who operate

ethically. The survey cites corporate behaviors that can appear to be socially

responsible but, upon closer inspection, are not. For example, corporate

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philanthropy looks good; however, corporate executives who give to charity are

not using their personal money. They are using the shareholders’ money, which

is, technically, stealing from the owners of the company even if the money is

used for a good cause. In another case, direct foreign investment in developing

countries has been shown to be one of the best ways to spur the economic

growth of that country. Outsourcing jobs, for example, is a way of investing in

developing countries but is an unpopular strategy in the eyes of most people,

even if those same people feel strongly about other corporate social issues.

Socially responsbile investing

A complimentary investment scheme to CSR’s concern with behavior of

representatives acting on behalf of business organizations, socially responsible

investing (SRI) is concerned with personal investing behaviors. SRI is an

umbrella term for the approach to investing that takes into consideration both

financial and social criteria for buying investment vehicles like mutual funds. It is

closely related to CSR in philosophy (an SRI investor might have a portfolio of

CSR stocks), but CSR is concerned with corporate behaviors and SRI with

individual investing behaviors. The investment philosophy may be based upon

any kind of underlying philosophy, either religious or non-religious, and the

investment portfolio reflects that philosophy.

For example, Dow Jones company has provided the Dow Jones

Sustainability Indexes since 1999. These indices—covering North America,

Europe, various other regional indices—track the performance of portfolios of

stocks based on their performance on “economic, environmental and social

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criteria” (http://www.sustainabilitv-index.com; accessed 9/18/06). Many other

funds are focused solely on environmental criteria, leading to the label of “Green

Funds.” Funds such as Winslow Green actively invest in companies that

promote environmentally friendly policies and companies that proactively benefit

the environment, such as “alternative energy technology companies”

(http://www.winslowqreen.com: accessed 9/18/06). The Calvert Fund has

formulated its own “Calvert Ratings” to provide investors with company-specific

evaluations on criteria such as the “environment” and “human rights.” Each

company is rated on each of five criteria and the decision is made to add it to the

fund or not (http://www.calvert.com: accessed 9/18/06). Though these funds

have strict social criteria, investors ultimately expect to make a profit on their

investments, as “corporate social and environmental performance is closely

linked with financial performance.” (Ibid) Islamic finance has been compared to a

green fund, in that its policies are based on a certain philosophy of life yet its

participants also expect to make a profit on investments.

Green funds

These two movements—the former deals with institutional behavior and

the latter with individual behavior—are two sides of the same coin in a movement

that strives to mitigate perceived destructive effects of capitalist growth. Whether

viewing behavior from a corporate or individual perspective, the individual

investor ultimately makes a decision about where to put his or her money. A

person concerned with CSR would choose to become (or remain) a shareholder

of an individual company based on that company’s CSR record and how well it

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http://www.sustainabilitv-index.com

http://www.winslowqreen.com

http://www.calvert.com

accords with the investor’s personal belief system. An SRI fund is also a vehicle

for an individual’s investment: the only difference is that an SRI fund is a

collection of stocks that have, together, passed relevant screening criteria.

Under either scenario, an individual is making an investment decision about his

or her private investment strategy.

Some factions of both CSR and SRI align themselves with religious beliefs

whereas others take a more general view of morality, but all are concerned with

ethical and moral matters of economic activity. Vehicles or ethical investing were

originally linked with environmentally friendly investments and are therefore often

called “green funds.” I will use the two terms interchangeably in this discussion.

Many Islamic finance practitioners associate their work with the general

movement toward “ethical” investing. I will argue below that, although Islamic

finance shares many characteristics with ethical investing, the emphasis placed

on the “social justice” features of economic activity serve to delineate a Muslim

subjectivity from a capitalist subjectivity in such a way as to make IBF similar to,

but not strictly part of, ethical investment movements.

IBF as ethical investing?

Although I immediately thought of IBF as an ethical investment scheme, I

did not know if practitioners themselves thought of it that way. I did not ask any

questions specifically linking IBF to green funds: I wanted to see if anyone

mentioned a connection. Of the twenty-four people I interviewed, ten

spontaneously talked about IBF as an ethical investment: seven bankers (of

fourteen), the head of DIFC, the founder of the DJIM and the Shari’a Scholar.

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The topic arose once in a panel discussion at the I IFF conference in Dubai. In all

of those cases, they brought up the connection to ethical investing in response to

my question: “How do you explain what you do to conventional bankers?”

One of the most detailed discussions I had about “green funds” was with

Yasir, of EIC. A citizen of the UK, bom in Lebanon, Yasir was the primary sales

force for EIC’s products. The first time I ever talked to him, we had a long

discussion about how IBF is part of the ethical investing movement. I took a lot

of notes, intending to follow up on this thought when I formally interviewed him. I

did:

Interviewer: Speaking of...socially responsible investing, I remember we talked about this when we first met and I wrote down what you said but do you see this as something similar to socially responsible investing or the green funds?

Yasir: Absolutely, I mean because the majority of the market come into this market because of a belief not because of a product a newly-launched, you know, type of product with certain types of...attributes and returns. They're not attracted to it because of pricing and product per se, they're attracted to it because of a belief which is the religion first and foremost. You know if I had to say off the top of my head I'd say three quarters of the people who have assets in this industry are there because of a belief, the other twenty-five of which I one day might become are there because they were attracted by the dollars and cents, you know, commercially it made sense to them; so you know environmentally socially friendly, [the] same thing. I mean people invest in, people buy into the cooperative VISA credit card because they don't finance wars, because they don't finance, uh, laboratory testing on animals and that's a belief. It's not something that you're born with so I think there [are] enormous similarities between the two. But again same as with socially responsible funds, when

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they first came to the, to the market they had a hurdle rate - they had a handicap. People were told "look if you want to feel good about your conscience it's going to cost you this much. It's not a lot but it's going to cost you a little bit." Whereas you know the real test will be - and I think it has to be there for a no-brainer - if it can cost you nothing more, why on earth would you not say 'yes'?

Yasir has obviously thought a lot about this connection. Generally, his

colleagues at EIC tended to connect IBF with a more secular version of ethical

investing: three of the four explicitly made the connection with a detailed

explanation. His colleague, Radwan, also cites it as the first thing he would

mention when explaining his business to a conventional banker: ‘We talk to

them about three basic principles: first it's ethical investing and most people can

relate to that. You know no pornography, no alcohol, and no gambling type of

thing.”

Another colleague, Javed, speaks of learning about Islamic finance in

terms of how ethical investors learn about their funds:

Javed: I mean it's like the ethical fund...what I'm what I'm saying is that every thing that I'm—every Islamic fund is a socially responsible fund because of all its principles and parameters. Now does that manager go to a special SRI course? Or does he learn special do you see? He usually uses his conventional knowledge and bridges the gap of the socially responsible.

Note that all three of these men work for the Islamic finance company I

consider to be most secular in its approach to Islamic finance. In addition, two of

the three people I interviewed from EWBC—the Islamic division of a conventional

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bank—made a connection between IBF and ethical investing or corporate social

responsibility. All, except the Shari’a Scholar, whose case I will discuss below,

are people whose business activities are most likely to have them trying to bridge

the gap between IBF and conventional finance. It seems they have learned to

explain what they do in terms of ethical investments.

Does ethical = religious investing?

Two interviewees linked ethical investing directly to religious investing in

Christian or Jewish contexts. Those two conversations were very different, and

proceeded as follows. One person to link IBF, ethical and religious investing is

Masood of EWBC:

There's a whole movement towards ethical investments and they are not called Christian investments but the fact is that the ethical investments are driven by the same source I mean at the end of the day as human beings we go back to the same source of knowledge and wisdom. We've got the same wisdom, whether the wisdom came through the prophet Jesus, Moses, or Prophet Mohammed these people all of them it is at the end of the day the same divine wisdom and Islamic finance allows us to look at those opportunities.

Fie also mentions something called an “Interest Bank Movement” in England,

which has “hundreds of thousands” of members. I could find no movement with

that exact name, but a Google search turned up a European humanist movement

to set up an interest free public bank. The important message of Masood’s

comment is that there are people in the industry who are actively trying to build

bridges between the divine beliefs of Jewish, Christian and Islamic beliefs.

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The other person to link IBF specifically to Jewish and Christian

investment funds was the Shari’a Scholar, Sheikh Naim. In this case, though,

Sheikh Naim uses the example to differentiate IBF from the other modes of

religious investing:

And this is why even though those who invest ethically from Christian churches, Synagogues - these people to them the matter of interest is not that much.They may object to alcohol, tobacco, pornography you know? But the matter of interest - once I asked [names an asset management company] and they said: ‘You know we have other people who ask similar things like you for managing their funds.’ So I asked if any of them also object to interest and they said: ‘No, only you.’ So this is very important to understand the background.

Ethical investment may resemble religious investment in many ways, but it does

not necessarily resemble Islamic religious investing. I imagine that if we

scrutinize Christian and Jewish investment funds, we would find details to

differentiate them from each other as well. Just as similarities between religious

beliefs can be emphasized in order to bridge the gap between capitalist investing

and Islamic investing, they can be emphasized to maintain a separation between

religious groups as well.

Sheikh Naim’s comment about interest being the key dividing line between

IBF and other modes of religious or ethical investment provides a good starting

point to answer the question: Is IBF the same as or different from ethical

investing? My answer is that they are related phenomenon, both arising from the

human impulse to protect society from avarice. These same impulses have been

in evidence throughout human history. In this sense, IBF may be placed

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alongside ethical investment schemes and, yes, may be considered part of a

larger movement.

Conclusion

In sum, the industry of Islamic finance provides some answers to the

question of how spiritual beliefs may be encoded into everyday economic

practices. From use of a divine language of Arabic, to addressing concerns of

financial and bodily purity and piety, to joining the discourse of ethical investing

movements, IBF attempts to infuse a sense of the divine into the economic

practices of the industry.


CHAPTER VI

CONCLUSION: THE “BUSINESS” OF CULTURE

Throughout this dissertation, I have examined the world of Islamic banking

and finance and asked why such an industry thrives now, in the twenty-first

century, when Muslims around the world have found no need for such an

industry during most of the fourteen hundred years of Islam’s existence. I

situated the industry by examining external forces of globalization that led to the

creation of such an industry. I also looked at everyday practices and moral

discourses to determine how individual participants in the industry conceive of

the industry and its role in their lives and in the international financial market.

Based on my observations and interviews during fieldwork, I have posited that

the existence of this industry is an answer to the question: “How can Muslims

living in the diaspora integrate their identities as Muslims with identities as global

citizens?”

In the preceding chapters, I have presented some answers to this

question in the form of problems presented by globalization and the IBF

approach to addressing those questions. After setting the stage with these

issues, my concern in this chapter, as I summarize my findings and suggest187


future directions for research, is with questions of the efficacy of the industry in

addressing these problems. Does IBF “pull it off” as a culture broker? That is,

does the industry perform the duties it claims to perform as a bridge between

conventional finance and an Islamic belief system, or between Muslim

subjectivities as they vary across individual Muslims? If it does, as I believe it

does, why and how does this process work? Finally, is IBF in the business of

finance or in the business of culture? Because the financial transactions are

recognizable to conventional bankers, do the differences in what people say

about them make this industry a different financial industry, or the same financial

industry whose function performs cultural work for its participants?

Does IBF work as a culture broker?

In chapter 2, I introduced the concept of globalization and talked about

how theorists conceptualize globalization in terms of global flows and global

consciousness. Both categories build upon an imagery of flows of people,

images, capital and technology to create a consciousness about the world and

relationships within it. Technological advances and the relative ease of human

migration are the two primary factors in the formation of this condition of

globalization. I explained how the reconfiguration of time and space under

conditions of globalization have led to some existential problems for all people—

not just Muslims—to think about and solve in their lives. In this dissertation, I

examine how three of those problems can be solved in the context of a Muslim

subjectivity.

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I have shown throughout this dissertation that I do indeed believe that IBF

works as a culture broker for its practitioners. IBF works because it provides a

physical and psychological space in which individuals with an orientation to both

conventional business norms and Muslim moralities can mediate their

relationships with the self, the transnational Muslim community and the divine

world. Those relationships have been problematized by conditions of

globalization. I addressed each of these relationships in a separate chapter of

this dissertation.

In chapter 3, I looked at how the industry solves questions of identity for its

practitioners. In the search for self-identity, an individual asks: “Who am I?” in

relation to many facets of society, some of which may be incompatible with one

another. A cultural psychology of the self posits that both psychological

processes and cultural input form the self, or a self-identity. In this dissertation, I

have looked at the “culture” side of this equation. Charles Taylor posits that the

self locates itself within the framework of a metanarrative of morality to determine

the proper way to live one’s life. Anthony Giddens posits that the institution is

important as a central organizing mechanism for lifestyle choices, which include

choices about which metanarrative to employ in the construction of self-identity.

IBF is crucial to the formation of a particular kind of self vis-a-vis its relationship

to an environment specifically designed to mediate between conflicting

worldviews. The Islamic finance industry intends to improve upon global financial

institutions by maintaining their positive features and cleansing them of negative

features, and by forming individuals as “Islamic economic actors” to carry out this

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function. In this chapter, I examined some discourse and practices employed

within individual Islamic banks and by Islamic finance practitioners that support

the construction of this particular kind of economic actor.

In chapter 4, I turn to questions of the relationship of the self vis-a-vis the

community. I ask: How does a person transcend definitions of community based

on geographical references to form a community based on the universal facets of

a transnational Muslim belief system? Islamic financiers view themselves as part

of a transnational Muslim umma, bound together not by geography, ethnicity or

cultural beliefs. This umma has been formed most recently as a result of the

disbanding of colonial rule in many Muslim countries and the resultant migration

of Muslims to non-Muslim majority countries (Al-Rabouie 2007). Rather, as the

Islamic finance industry has developed mostly with the input of Muslims living in

the diaspora—outside Muslim countries—Muslims who join IBF see themselves

as contributing their efforts to building a Muslim community that transcends those

traditional community boundaries. A transnational umma exists outside time and

space, and can be accessed in part by performing financial work that reinforces a

concept of community. For example, values of partnership and trust are built into

the definitions of financial transactions, which in turn mark the industry as being

different from conventional finance. Ironically, though, those transactions are

recognizable to conventional bankers, a fact that reinforces the role of IBF as a

culture broker between conventional and Islamic financial belief systems.

In chapter 5, I turned to beliefs about the divine world and the ways in

which some (or all of) this-worldly activities support this relationship. I asked:

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“To what extent can spiritual ideas be encoded into daily life practices?” I looked

at three domains of ideas about divinity and how they are encoded in Islamic

finance practices. First, I looked at language use. Arabic is considered to be a

divine language in Islam, and the recitation and aural associations with that

language are important to Muslims. Despite the fact that the lingua franca of IBF

is English—in keeping with its function as a bridge between cultures—financial

transactions must be given Arabic names to legitimate them in the eyes of

practitioners. Of course, the most important use of language is the translation of

the Arabic term “riba.” The industry is defined by its objection to riba, yet that

concept is disputed within the industry, in part because of translation from Arabic

to English. Finally, even idiomatic use of the term kosher from a Jewish context

reinforces the bridge function of IBF and emphasizes both the purity of products

and a shared divine tradition based on Abrahamic teachings.

Two more concepts from the discourse of divinity figured prominently in

this project. The second concept after the use of Arabic is the idea of keeping

pure things separate from impure things. Just as purity of financial transactions

must be maintained by keeping riba money separate from non-riba money, the

purity of both the female and male bodies must be maintained in the work

environment. One bank in Dubai maintains gender segregation by providing a

separate building in which women can do banking activities. By working in this

bank, in a separate building, women and men can uphold community norms of

gender segregation and pay attention to community values of familial obligations

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while performing a valuable economic role in society. Because men do not enter

this space, their own purity is maintained as well as the purity of the women.

The third concept of divinity I explored in chapter 5 was the idea that

financial transactions can convey something about the purity of society’s moral

order. Theorists like Karl Polanyi acknowledge that economic practice can

provide a potent breeding ground for material practices leading to the ultimate

collapse of society. Contemporary proponents of movements like corporate

social responsibility, or socially responsible investing build upon this concept of

restoring the moral order through ethical investing schemes. Most Islamic

financiers see their industry as being part of that general trend, although the

Shari’a Scholar differentiates Islamic finance from the others because of the

prohibition of riba. Nonetheless, all of the ethical investing schemes, including

Islamic finance, share a goal of providing the benefits of conventional finance but

taking away the immorality.

How does IBF work as a culture broker?

Nostalgia

IBF works as a culture broker through three processes that mediate the

relationships of self, community and divinity. There are three processes in

particular that are employed by the industry of IBF and its participants and

through which the industry has been established in the role of a culture broker.

First, nostalgia is used to provide an emotional basis for the existence of the

industry. Frederic Jameson (1998; 1984) states that nostalgia is simply the belief

that the world was better in the past (either one’s personal history, or the

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collective past), and that present day problems could be solved with a return to

that past. He examines the role of nostalgia in contemporary society. Nostalgia

is crucial to understanding not only internal debates in Islamic banking, but also

their relationship to the wider context of Islamic politics. Islamic banking is based

on the assertion that there is an “Islamic” way to do business and this notion

drives attempts of the industry to carve out a space in the global economy. With

references to the glorious days of Islamic during the time of the haj, or flight from

Mecca to Medina, and references to Quranic verses and originals texts,

contemporary Muslims evoke memories of a past when Islam was not yet

weakened by colonial and other insults to Muslim society. By arranging the

Islamic finance industry in terms of references to the past, a contemporary

industry can also evoke the past. Essentially, the future of Islamic finance is a

return to the past, as Bill Maurer deftly observes (2005).

Interpellation

A second process of mediation was discussed in chapter 3. Interpellation

is a key process in the construction of both the IBF industry and of the ideal

Islamic banker. In order for a person to become an Islamic banker (or customer),

a person must be recruited as an Islamic finance participant. It does not matter

that the actual banking practices are not very different from capitalist banking or

that the products have Muslim names, but only that participants in Islamic

banking “buy into” the ideology of having been designated a part of the industry.

It allows them to believe, in a sense, that they are reinforcing their Muslim identity

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by participating in Muslim banking practices. At the same time, identification with

the global economy is still possible because of the nature of the institution.

Marketing is the most effective means by which to recruit Islamic financiers and

customers. Glossy ads appeal to the senses and the desire of many Muslims to

reassert the “good” side of Islam in the face of negative media images. Most ads

attempt to present an image of Islamic finance as a progressive industry that is

also in touch with the needs of traditional Muslims.

Consider an ad for the Islamic finance division of an international bank I

saw in a news publication recently. In the ad, we see two Arab women dressed

in Gulf attire sitting at a laptop computer apparently discussing a serious financial

matter. Their abayas (black outer clothing worn by Gulf women) are not

adorned, which is standard business attire for women. If this were a social

occasion, there would probably be some embroidery on the clothes. Despite

being attired in full hijab, both women are obviously wearing makeup, even

though a strict interpretation of Islam forbids makeup. Nonetheless, most

professional women and women who think of themselves as knowledgeable

about international fashions (i.e., from Europe) do wear makeup. It is also

significant that this particular company is not a company for women only, like

Johara. Yet the ad appeals directly to women and, likely, to any man who thinks

of himself as being progressive on gender relations.

Through the window we see the water, which we understand to be the

Dubai Creek because this ad is in a Dubai magazine. The glass of water on the

table imparts a certain idea of hospitality: drinking water is scarce and precious

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in the desert and, although there has never been a shortage of drinking water in

Dubai in recent times, it is a sign of hospitality in the desert to offer water to one’s

guests. The large glass windows further tell us that the building is of modern

construction style that is typical in Dubai. Despite the signs of modern

technology and cosmopolitan dress styles of the women in the ad, we can see in

the background a traditional coffee pot. The presence of a modern symbol of

hospitality (a glass of water) and traditional symbol of hospitality (the coffee pot)

serves as a visual cue that the industry of Islamic finance can take care of, or

welcome, its customers in the traditional way while at the same time it is able to

offer the latest in technology and financial services. This ad interpellates

potential customers by appealing to both traditional Islamic and Gulf cultures, as

well as to an individual who thinks of himself or herself as an actor in the global

financial scene.

Another ad I have seen is for an Islamic bank’s private banking division.

This ad also performs the function of combining tradition with modernity. In the

background, we can also see a large glass window and the city outside. The two

men are marked by clothing style, just like the women were in the ad above. The

traditionally dressed Arab man could either be the banker or the customer,

though I know that in this particular bank he is more likely to be the banker. The

other man is of indeterminate ethnicity. He could be European, American, or

Arab. He is dressed in a Western style business suit, which is also a symbol of

fluency with the norms of the global marketplace. Technology, in the form of a

laptop computer, is visible in the picture, even though these men are not using it.

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This ad is also meant to convey an idea of the Islamic bank as a bridge between

traditional and modern, Islamic and international cultures.

A balanced culture

The third way IBF mediates relationships between cultures is to regulate

the culture of IBF so that it does not get too far out of balance. Recall that

Masood, the General Manager of EWBC, talked about the need to hire someone

who can balance the philosophies and value systems of conventional finance

with a sensitivity to Islam. The importance of this balance became clear to me

over the course of my fieldwork, as one of the companies I was associated with

ultimately failed. I believe that failure was in large part due to the company’s

philosophy falling out of balance. In Appendix A, I introduce the reader to the

companies in which I spent time. EIC—Ethical Investing Company—was one of

those companies. When I first met the managers of the company, there was a lot

of energy in the office and among the people. Business was looking up and

looking good. They had enough cash to market themselves and to sponsor

several Islamic finance conferences. They were becoming well known in the

industry and looked like a trendy, powerful company. I interviewed four of their

employees early in the fieldwork stay, and it was notable that all four of them

emphasized the company—and the industry of IBF—as fulfilling a niche in the

international financial services market. All—especially the General Manager

Radwan—emphasized the emotional work they needed to do in order to

convince their potential customers of the viability of the business. They

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downplayed the emphasis on Islam, yet pulled it out and used it at just the right

moment during the sales process.

By the end of my stay, though, the company’s situation had become

complicated: the company was folded into its parent company and moved

offices. Three of the four professionals I had interviewed found other jobs. I was

never told any of this directly, but was left to make my own conclusions about the

situation. Of course I knew the offices moved because I sat in on some meetings

at the new location, but I had to guess about the other things or listen to industry

gossip. Although the company still operates under the same name, I no longer

know the whereabouts of three of the four men I had interviewed.

It is possible that there was another reason or reasons that EIC disbanded

that year. Perhaps a business deal went wrong and lost money. Perhaps the

principals disagreed on one or more issues and dissolved the company.

Perhaps the parent company had other plans for this subsidiary. I cannot

confirm any of these speculations, but I do know that this company took a very

pragmatic view of the relationship between finance and Islam in marketing

practices. EIC’s offices and employees were by far the most progressive of the

companies I became associated with, in terms of decor and personal dress

styles. Its offices were located in the trendiest “Internet City” development in

Dubai, and they were always willing to try innovative products. In addition, the

employees were highly visible participants in Islamic finance conferences. The

employees were very explicit about how they approached potential customers

and how they marketed their products. All four were very aware that they were

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using emotions to sell their products. No other respondents spoke as openly

about the need to tap into that desire to connect with other Muslims through

Islamic finance. In their interviews, as well, all four talked freely about the

“moment” at which they decided to become part of the world of Islamic finance.

Unfortunately for EIC, it seems that the balance between “Islam” and

“finance” was somehow off center. The other respondents I spoke to were aware

of the need to appeal to the customers’ emotions, but none were as deliberate

about it. In the other companies, both Islam and finance were acknowledged, but

somehow there seemed to be equal attention paid to both. Employees of EIC

took pains to assure me that they were part of the international financial scene

but also knew that they were using Islam as a marketing tool. In the end, an

unbalanced approach did not work. It appears that more successful companies

must do what Masood suggested: maintain a sound financial knowledge base

while remaining sensitive to Muslim subjectivities, but not be too obvious about it.

Only in this way can an Islamic finance company perform the services it needs to

perform, both financially and psychologically.

A business of finance or a business of culture?

IBF is in both the business of finance and in the business of culture. If the

industry is a true culture broker, it must be fluent in both sides of the business.

Finance is the language of the industry. Like the English language, the terms of

finance are recognizable symbols and a currency that can link conventional

finance with Islamic finance. Islamic economic theory uses terms taken directly

from conventional (or capitalist) economic theories to outline its value system and

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then engages with those terms to question them. For example, the concept of

“interest” or even “usury” is a recognizable term in conventional and Islamic

finance. IBF acknowledges the necessity of lending money yet challenges the

methods by which money is lent, borrowed and repaid. A basic economic

assumption—that sometimes money must be lent and repaid—is not questioned

but turned around into a problem of morality. In turn, those terms of morality

challenge the base system of capitalism itself.

Yet IBF is most definitely in the business of culture. Islam—or a morality

based on a shared Muslim subjectivity—is ultimately as important as the

principles behind the financial transactions. Jonathan Friedman (1994) writes

that we learn about cultural processes not by learning how ‘cultures’ interact but

how identities are constituted within certain relations. In this dissertation we have

learned how identities are constituted in relations of self-identity, community and

divinity in IBF. The identities being constructed in each of those relations

reinforce beliefs about the individual as being a modem self who is part of an

international community of Muslims and who has found a work environment in

which he or she can enact practices important to his or her sense of the

requirements of the divine world. IBF, in the sense of being a culture broker, is in

the business of culture.

A recent article in a trade journal talks about the function of IBF in the face

of globalization (Al-Roubaie 2007). Professor Al-Roubaie writes that

“globalisation is changing the way people do business, and, therefore, it is

necessary that Muslims be prepared to take advantage of the new economic

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system and strengthen co-operation.” (Al-Roubaie 2007:18). He acknowledges

that Western economic theory will always remain important because of its role in

the construction of Islamic economic theory. But he also emphasizes that,

although Islamic economic theory sets forth guidelines on conventional economic

concerns such as production, consumption, trade, etc., the moral value system of

Islam is different from the conventional system. Therefore, the author contends

that Islamic finance is a separate business from conventional finance as he

simultaneously advocates integration of Islamic finance into the international

system.

I do believe, with Al-Roubaie (2007), that because Islamic finance

espouses a value system based on Islamic values that the difference between

IBF and conventional finance in significant. Even though the financial

transactions are recognizable to conventional bankers—in terms of cash flows—

Islamic financiers conceive of them as being different transactions. Moral

discourse and daily practices within the companies confirm that IBF practitioners

conceive of their industry as being a bridge between conventional finance and

traditional Islamic values. IBF is an industry of finance, but it is also an industry

in the business of mediating culture.

Contributions of this study

This study contributes to existing literature in two areas. First, this study

extends traditional globalization literature to include an emphasis on the

individual as he or she experiences that phenomenon. Existing globalization

literature conceptualizes the movements and psychological implications of

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globalization in broad terms. Most of the theories, like Appadurai’s, try to explain

the flows of globalization and show how people, images, technology, capital and

ideas move from place to place around the globe. Many of the theories make

predictions about broad cultural trends, such as whether or not world culture will

meld into one homogenous mass or splinter into rival factions of religious or

ethnic groups (cf Huntington 1998). Most leave the reader with the impression

that globalization is a big machine, rolling over the globe and leveling everything

in its path. In this kind of reading, globalization is a general process and

individuals

I look at globalization from the point of view of the individuals who actually

experience it. I build upon a literature that sees globalization in terms of flows

and consciousness and ask how the individual experiences these abstract

processes. I found that individuals experience these global flows on a personal

level not addressed in most of the existing theories. While a person may

“migrate” in the globalization literature, the individual experiences it as his or her

life. He or she only knows what it is like to be, for example, a British citizen

whose parents were born in Pakistan but who lives in Dubai. A person does not

“migrate” or “flow” but tries to mediate all of the relationships and experiences

caused by those processes. Images and ideas can be important, as we saw with

Javed, whose impetus for joining Islamic finance came from the photograph of a

Palestinian boy who died in his father’s arms. Images such as these, along with

the moral discourse and practices in IBF, allow people such as Javed to see their

participation in IBF as a way of being “better than” both conventional financiers

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and the negative media images they see on the nightly news. Aihwa Ong may

write about a concept of “flexible citizenship” but my respondents look at me and

call themselves “citizens of the world.” This study has contributed to a picture of

globalization based on individual experiences living in the contemporary world.

A second contribution this project has made to the literature is in the field

of cultural psychology. Studies in that field have often honed in on specific

cultural groups, such as Japanese, Puerto Rican (Triandis, et al. 1988), Chinese

(Hwang 2000), Oriya or middle-class American cultural groups (Shweder, Balle-

Jensen, Goldstein 2003). These practices may be shaped by a shared cultural

tradition that is often the result of generations of people living geographically near

to each other. These kinds of studies are important when we are trying to

understand certain phenomenon of practice in bounded groups. These studies

also provide a foundation for the field of cultural psychology and lend ample

support to the contention that both psychological and cultural processes shape

the self. I have extended this argument about the dual contributors to the

formation of self to redefine culture in terms of globally connected individuals

bound together not by geography but by a shared subjectivity. In the case of

Islamic financiers, this subjectivity is based on the teachings of Islam as found in

classical texts, a vision of the self as an economic actor who simultaneously

participates in global finance and purifies its immorality. This self is formed

through moral discourse and practices in the space of the IBF industry and its

institutions and seeks to make a self, which is superior to the “self” of the existing

conventional finance industry.

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Limitations of this study

Upon completion of a major study, one can always think of what should

have been done. I believe that I did the best I could to collect data and interview

a wide variety of people in the Islamic banking and finance industry. I thought

about my questions deeply before I put together the interview protocol, and the

Institutional Review Board made certain I thought about them some more after

that. Going into the study, I suspected that the IBF industry was a “culture

industry.” From what I had already experienced and read about the industry, it

seemed highly unlikely that its participants were developing a completely new

financial system. It certainly did not seem like anyone wanted to. Therefore, I

wanted to find out what, if anything was different between conventional finance

and Islamic finance. My questions reflected that curiosity. I began asking the

standard “demographic” questions like “Where are you from?”, ‘Where did you

grow up?”, Where did you attend university?”, etc. as a way to get the

conversation started during the interview. I used them as warm-ups before we

got to the “real” issues.

Upon reflection, I would like to have spent more time and effort exploring

the life stories of the respondents. Having come to the conclusion that IBF really

is a culture industry, I would like to know more about the trajectories of the lives

of people who have ended up working in the industry. I feel that I have a basic

knowledge of those circumstances, but I would like to have more information

about the details of things like at what age they moved from one country to

another, what life was like as a Palestinian in the UK, how someone decided to

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go to university in the USA versus in the UK, and how those choices might be

related to the decision, years later and after substantial involvement in

conventional finance, to join the IBF industry and all of the implications of that

decision.

A second limitation that I would point out is that, although I had worked in

a finance company that structured Islamic transactions in the early 1990s, I did

not actually work in an Islamic finance company during fieldwork. As I mentioned

in Appendix A, I was trying to negotiate an internship with EWBC when the US

invaded Iraq. Therefore, I have many observations about details of transactions

and marketing methods, but no direct experience doing either one of those from

the time of fieldwork. I had to rely on what people told me about the training

process in order to discern some of the practices that were important to the

financiers. I was able to follow the progress of structuring some transactions, but

they were always explained to me after the meetings and could have been

amended in any number of ways to appeal to what the people thought I wanted

or needed to know. If I were to do this project again, I suppose I could not stop

an invasion, but I would try harder to secure an internship or a job in an IFI.

Finally, throughout the write-up of this dissertation, I have paid more

attention to the theory of Islamic finance and how individual, personal practices

relate to that theory than I have to how financial practices relate to that theory. I

chose to do this because I am interested in how people organize their work lives

based upon the morality to which they are exposed through religious texts and

symbols. Although I discussed a few financial structures, such as the partnership

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basis for thinking about investments, I did not make that the focus of the project.

In retrospect, I would like to have emphasized the ways in which financial

practice are like and unlike conventional practices, in order to highlight the

distance between Islamic finance theory and Islamic finance practices, on a

transactional level. I will pursue this line of thought in future publications.

Future directions

Now that I have a good foundation for learning about Islamic banking and

finance practitioners, I would like to concentrate on the customer. I assume that

practitioners participate in and experience IBF differently from those people who

are drawn in to partake of the services offered by IBF. How do nostalgia,

marketing and difference management work on customers of potential

customers? How do potential customers become actual customers? What is the

balance between emotion, desire, and practical reasoning employed by the

potential customer when evaluating IBF? How does the interaction between

employee and customer shape each other’s understandings of the industry? I

would like to design a new study that focuses on the customer’s experience of

Islamic finance.

A second future direction should include a comparative study. I would like

to compare conventional finance discourse and practices with Islamic practices

to gain a finer understanding of the similarities and differences between the two.

Most of my current data comes from my own experiences working in a

conventional bank and in a conventional finance company that did a few Islamic

transactions. I would like to systematize that knowledge in the form of a study.

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After I have collected customer data, I would like to focus on the

theoretical aspects of Islamic finance. I would like to spend some time studying

the details of some transactions and regulatory issues to see how the industry is

being formed vis-a-vis the institutions of globalization. Do individuals working in

IBF experience the institution in a similar way to people in other institutions that

serve as a culture broker, such as in the advertising industry studied by William

Mazzarella (2004)? If the idea of an institution as a culture broker has merit, as I

think it does, that function should hold up in different industries and across

different cultures.

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APPENDIX A

INSTITUTIONAL AFFILIATIONS

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Company #1: Ethical Investing Corporation (EIC)

In the fall of 2002, when I was first introduced to the company, there were

about twenty employees of EIC: four professional or managerial staff, one

receptionist/office manager, and fifteen or so back office staff, including the

accounting, pubic relations and IT (information technology) staff. All of the

executives had backgrounds in conventional finance and working at EIC was

their first exposure to Islamic finance. I met the General Manager through family

contacts and he introduced me to the other managers. The company gave the

impression of being a “hip” company: the office decor, personal mannerisms and

business outlook of the professionals gave the impression that the ideas—and

people—were cutting edge business strategists. Indeed, they approached the

business like they were planning for, and shaping, the future of Islamic finance.

My impression every time I visited the office was that it was a place I was proud

to be affiliated with, given that I view myself as someone who is in tune with

current trends and fashions. They helped me a lot by being forthcoming with me

about their company’s business transactions and, especially, about their own

personal reasons for choosing to work in the company. They also sponsored me

for both of the Islamic Finance conferences I attended (in Bahrain and in Dubai)

so that I didn’t have to pay to attend the conferences.

By the end of my stay in 2003, though, the situation had become

complicated: the company was folded into its parent company and moved

offices. Three of the four professionals I had interviewed gradually found other

jobs and two of the original employees were still with the company. I was never

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told any of this directly, but was left to make my own conclusions about the fates

of the others. Of course I knew the offices moved because I sat in on some

meetings at the new location, but I had to guess about the other things or listen

to industry gossip. Although the company still operates under the same name, I

no longer know the whereabouts of three of the four men. I have my own

analysis about why the company structure changed and I will discuss this in

Chapter 6.

Company #2: Johara

Johara means “jewel” in Arabic. Johara is also the name of a bank for

women: the stand-alone ladies’ branch of an Islamic bank in Dubai. I was

introduced to Johara about a month after I arrived in Dubai in 2002 to begin

fieldwork. A Turkish friend invited me to a promotion party for the bank that was

held in the elaborate ballroom of a large and exclusive resort hotel situated on a

prime piece of beach property just outside Dubai. About three hundred invited

guests—all ladies and mostly UAE nationals1—attended this reception, where

fabulous jewels were displayed in conjunction with banking information. Rather, I

should say that fabulous jewels were displayed and banking was discussed for a

few minutes during dinner. The real focal point of the evening was a “diamond

hunt.” Models hired by a local jeweler for the occasion presented to each table of

1 “Nationals” of the United Arab Emirates are citizens of that country. In order to be a citizen, a person must have a family history both of ethnicity and presence in the territory that is now the UAE. A UAE citizen receives substantial benefits from the government including free health care (including travel to another country to receive medical care if appropriate care is not available in the UAE), free education, free land, and numerous other subsidies. Included in the citizen base is a large population of “Iranian locals” whose ancestry originates in Iran but who are now UAE citizens. A person who marries a UAE national may receive citizenship but it is not possible to naturalize to UAE citizenship.

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ten ladies a large box filled with thirty small, blue velvet lined boxes. Twenty-nine

of the small boxes held small cubic zirconium stones: the thirtieth box held an

equally sized diamond. To the untrained eye, these stones are indistinguishable.

As each lady at each table chose three stones from the box, jewelers’ assistants

(women) examined the stones with a jeweler’s loupe to determine its gemological

properties. One lady at each table had chosen a diamond from the box, which

she got to keep along with the two zircon stones. The “losers” got to keep three

zircon stones.

Ultimately, I did not win a diamond in the diamond hunt. I was not

disappointed, however, because that night I met the branch manager of Johara

and subsequently interviewed 33 percent of the female Islamic bankers in the

UAE at the time3. In a business environment that is overwhelmingly dominated

by men (Smith 2004; Riphenburg 1998), the real jewel was the depth that

obtaining access to these women added to my research project.

I will discuss the case of Johara extensively throughout this dissertation.

The very presence of a stand-alone ladies’ Islamic bank illustrates the

importance of moral concerns to Islamic bankers on all levels. Notions of self,

community, divinity and the intersection of global and local practices are

embodied in the women’s bank.

Company #3: EWBC Wadiah Finance

Wadiah Finance is the Islamic banking window of a global conventional

bank. EastWest Bank Corporation (EWBC). Its name means something like

“trust” in Arabic. The office is located in a high-rise building on Deira (old

210


business) side of the Dubai Creek along the main road that runs along the Creek.

Behind the building is the area leading to “inner” parts of Deira: the Gold Suq,

the Spice Suq and various other marketplaces for wholesale consumer items.

The building itself is relatively new and of a standard design: one side holds

apartments and the other office suites. This part of Deira is known for

inexpensive shopping, but the apartment tower houses some expensive clothing

boutiques easily accessible to the residents of the apartment building and tourists

who stay at the Intercontinental Hotel or the Four Points Sheraton just down the

street. There are also many similar high-rise apartment buildings in the same

vicinity.

There were about 20 employees in this office, including secretaries and

tea/coffee boys. The office layout included a few offices along the perimeter by

the windows and cubicle space in the middle of the floor. I saw the kitchen on

the opposite side of the office space from the executive offices. I was told that

there is a prayer room near the kitchen but I did not actually see that room.

This location is conspicuous for Wadiah because it is not located in the

main office of EWBC. The reason for the separation was never explained to me,

but I suspect it has to do with a few things. First, the managers are very careful

in their business dealings because they do not want to give the impression that

they are mixing with the conventional side of the business in any way. Separate

office space could account for this kind of impression management. Or, it could

be a space issue. Dubai has grown rapidly and there may simply have not been

enough space in the main building for extra offices. Finally, rent is likely cheaper

211


(though not cheap) in this building than in the newer parts of Dubai. Although the

division makes a profit, it had dealt mainly with commercial transactions in the

past. In this case, few customers would visit the office and it would not be

necessary to spend a lot of money on a grand office space or prime location.

The employees at this division did not appear to have much contact with retail

customers—their function was to train employees of the retail branches about

how to deal with Islamic transactions, not to interact with retail customers

themselves. Therefore, the slight inconvenience of getting to the office may not

have been an issue for them.

I had intended to enter into an internship arrangement with Wadiah during

the final portion of my fieldwork stay, in the spring of 2003. However, geopolitics

intervened and I was not able to follow through on this plan. Although I had

conducted my first interviews at EWBC in the fall of 2002,1 had to wait until

January 2003 to meet with the General Manager, Masood Ahmad, because of

his travel schedule. He would be making the decision about whether or not I

could join the company as a trainee or unpaid intern.

Meanwhile, it was becoming obvious to everyone in Dubai that the United

States was going to invade Iraq soon. Especially after Colin Powell’s speech to

the United Nations on February 3, 2003 in which he provided justifications for an

invasion, we knew an invasion was inevitable. It is difficult to describe the tense

atmosphere in Dubai—and in the Gulf in general—during those two months

leading up to the invasion on March 20, 2003. We waited and watched daily for

even the smallest sign that things were changing: Were there more or fewer

212


American sailors in the bars? Did that mean there were more military personnel

in the Gulf or that they were leaving to be deployed to a secret location? Many

people remembered that communications (TV, radio, telephone lines) had been

cut off during the first few hours of the Gulf War in 1990. Would the same thing

happen this time? Should we leave? Would it be safer to be in the United States

or in Dubai during the war?

Concrete walls went up around the American School my child attended,

followed by the children’s questions and insecurities. The muscular, male Jr.

High computer teacher joined the Ghurkha guard at the elementary school

entrance in place of the nice, middle-aged female teacher who had previously

been greeting the children in the mornings. We wondered why there were so

many Pakistani “construction workers” hanging around outside the school.

Parents needed a photo ID to enter the school, even when accompanied by their

own children. I asked my daughter every day if the Consul General’s children

were in school that day, or if they had “gone on vacation.” The consulate warned

us repeatedly not to go anywhere that was associated specifically with the United

States. Everyone I know had standing plane reservations, one bag packed and

plenty of cash on hand in case we needed to evacuate.

On the other hand, business went on more or less as usual. I only know

two Americans who evacuated. Some Americans held church in private homes

instead of in the church building. The World Forum on Islamic Finance was held

in Dubai in late February with few cancellations. The Dubai Classic Golf

Tournament was held in early March 2003, and only Tiger Woods pulled out due

213


to the threat of war. We told ourselves that no one in his right mind would attack

the money center of the region, or at least not until after the Golf Classic. Then

we wondered if anyone in control was in his right mind. We comforted ourselves

that the consular notices recommended only “voluntary evacuation” instead of

“ordered departure” for Gulf personnel.

When the ordered departure notice was issued for Americans and

Europeans in Kuwait and Saudi Arabia in mid-March, I was in the midst of

finalizing an internship position at Wadiah. While the consular notices pertain to

consulate employees, most foreign companies follow the consulate’s lead for

evacuating private employees. By this time, everyone was convinced that Dubai

may have been the safest place on earth to be during a Gulf War (no one would

bother the money), so EWBC’s employees—along with thousands of others from

foreign companies in Kuwait and Saudi Arabia—moved to Dubai indefinitely.

That meant that my internship space was turned over to company employees.

There was literally no desk space for me in Wadiah’s offices and no brain space

for them to help with my research. I had to be content with three good interviews

and several hours of observations, copious company literature and field notes.

Other respondents

Originally, I had intended to interview only Islamic finance practitioners,

customers, or Shari’a scholars, when I could get to them. As I spoke to

practitioners, many of them noted how important attorneys and accountants were

to the industry. In particular, documentation is a key component of many of the

transactions so many lawyers are intimately involved in the process of structuring

214


both the companies themselves and the individual transactions. As such, I made

an effort to talk to both attorneys and accountants in hopes of getting an account

of the industry and its practices from different perspectives and to provide context

for what I was hearing from the practitioners.

Also during the course of my research, I realized that interviewing

customers was not only very difficult—companies were reluctant to give out their

client lists—but that my research would benefit more from having a clear picture

of the practitioner side before moving on to the customer interviews. As such,

the next phase of my research (after the dissertation) will be to include customer

data in my overview of the industry. The one customer I did interview is a friend

of the family. His viewpoint was fascinating but I will only touch upon his

comments briefly during this write up.

215


APPENDIX B

INTERVIEW PROTOCOL

216


My goal for the semi-structured interviews was to uncover how everyday

discourse and practices of Islamic banking contribute to the individual’s

understanding of him/herself in relation to global capitalism and a global Muslim

identity. Everyone who works in or does business with an Islamic bank is not

Muslim. I include non-Muslims in my sample in proportion to their presence in

the banking system: I asked the same questions of Muslims and non-Muslims.

For each set of questions, I followed up depending on their answers.

1. Tell me about your career/business history. How did you come to work at/do business with this Islamic bank?

2. How is working/doing business here different from working at/doing business with another bank (if any) or another institution (if any)? [General question—tailor to specific work history.] [Also ask about the physical appearance of the offices and prayer room specifically.]

3. What did you know about Islamic banking before you came to be associated with the bank?

4. How were you trained when you first joined the bank? Or, What did the bankers tell you about the industry and their products before you became a customer?

5. What do you do here every day (bankers only)? [Specific activities.]

6. How is an Islamic bank different from a conventional bank?

7. How is an Islamic financial transaction different from a conventional transaction?

8. What do your customers (or you) expect from an Islamic bank that is different from what they (you) might expect from a conventional bank?

9. How important is it that the bank and customer profit from the transaction financially? How would you say this compares to what is expected at a conventional bank?

217


10. How do you explain what you do to conventional bankers? How do they usually react?

11. How do you explain what you do to clients or potential clients? How do they usually react?

12. Why would someone bank here instead of Citibank (or another comparable bank)?

13. Why would someone work here instead of Citibank (or another comparable bank)?

14. Has working/banking here changed the way you look at the banking industry? How? Why or why not?

15. Has working/banking here changed the way you look at Islam? How? Why or why not?


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