Sharīʿah-compliant or Sharīʿah-based? The Changing Ethical Discourse of Islamic Finance

In: Arab Law Quarterly
Ryan Calder Assistant Professor of Sociology and Islamic Studies, Department of Sociology, Johns Hopkins University, Baltimore, MD, USA

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Observers call upon Islamic financial institutions to move beyond offering merely Sharīʿah-compliant instruments toward offering more Sharīʿah-based ones. But when did these terms come into usage, and why? What precisely do people mean by ‘Sharīʿah-based’? In this article we argue that the term ‘Sharīʿah-compliant’ emerged in the 1990s and allowed Islamic finance institutions to leave behind scandals of the 1980s, presenting Islamic finance anew as a technically rational project grounded in Sharīʿah expertise. In contrast, the call for Sharīʿah-based finance became popular in the 2000s, and especially after the 2008 global financial crisis, which made systemic stability and product transparency pressing concerns. Usages of ‘Sharīʿah-based’ fall into three categories: those that stress separation from conventional finance, those that stress authenticity, and those that stress welfare. This definitional multiplicity is not a problem but rather a starting point for debate and a sign of Islamic finance’s growing maturity as an ethical project.

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