Sacred Profit: A Sociology of Islamic Finance

The first commercial Islamic bank was founded in 1975. Today, Islamic finance is a $1.6 trillion global industry that has been growing at over 20% per year since the year 2000. It offers financial products ranging from Islamic auto loans to Islamic derivatives, all of which adhere to rules derived from Islamic texts -- most notably a ban on interest./nIn light of the short history and sudden growth of Islamic finance, this dissertation asks three main questions. First, why is there a thriving Islamic-finance industry today, yet no other large-scale form of religious finance -- no Christian-finance industry or Jewish-finance industry, for example? Second, why has Islamic finance grown so fast, especially since 2000? And third, how do Islamic financial institutions manage to offer the same kinds of products that conventional financial institutions do while remaining "Islamic"?/nThe answer to all of these questions centers on one group -- religious jurists -- and their changing relationship over time to the forces of capital. In most religious traditions at most times in history, religious jurists have been guardians of a relatively formalistic approach to law. In the case of the ban on interest, I show in Chapter One that religious jurists in Judaism, Christianity, and Islam during the medieval period all performed very similar roles: they elaborated complex formal rules as to when financial transactions did or did not violate the ban, and thus helped merchants devise ways of circumventing the ban while not running afoul of religious law. The jurists helped religious law evolve to accommodate commercial needs. However, in Judaism (except for Orthodox Judaism) and Christianity, religious jurists faded from their high social significance between the 16th and 19th centuries. The interest ban itself faded and disappeared too. In Islam, by contrast, religious jurists have remained a respected and significant social group until the present. They help guard the beliefs that (a) the interest ban is part of God's law and (b) that adherence to legal form is a crucial condition for piety./nChapter Two explores how this dual survival in Islam -- of the interest ban and of religious jurists -- set the stage for the emergence and efflorescence of the Islamic-finance industry in the late 20th and early 21st centuries. In the 1970s, petrodollars flooded the Gulf region. Pious Muslim entrepreneurs experimenting with the possibility of interest-free banking enlisted the support of religious jurists to certify that their products were indeed in compliance with Islamic law. This alliance between financial capital and relatively conservative religious jurists concerned with legal form gave rise to the modern Islamic-finance industry, which sells "shariah-compliant" financial products certified by the jurists that circumvent interest using formally acceptable combinations of asset trades and leases./nChapter Three argues that Islamic finance is today an "ethical-consumption certification apparatus" akin to the fair-trade and socially-responsible-investment movements. All three center on highly technical means of certifying that consumer products are indeed ethical. These certification schemes give customers peace of mind, but also create new technical understandings of the ethical./nChapter Four returns to the jurists at the heart of Islamic finance, who are known today as "shariah scholars" and who sit on the "shariah supervisory boards" that oversee each Islamic financial institution. This chapter describes how shariah scholars, despite some internal differences, maintain a strong corporate identity that valorizes deep technical knowledge of Islamic law. A perfect marriage ensues between the scholars' scientific-technical understanding of shariah and the bankers' scientific-technical engineering of new financial instruments./nChapter Five examines ethical contests within the industry. It shows how even the most contentious debates within Islamic finance today entrench the formal-technical approach to religious law guarded by the shariah scholars./nIn sum, Chapters Two through Five show that the accommodation between financial capital and religious law that jurists facilitated throughout medieval history has become the basis for a new, highly technical, certification-oriented form of 21st-century capitalist finance.

Advisor: Fourcade, Marion
Lie, John