Keeping the Faith?: Reconciling Disjuncture in the Praxis of Islamic Banking and Finance

While some economic practices currently occurring in the Islamic Banking and Finance (IBF) field are cited for their ethical value there is a consensus among Muslim practitioners that ideal Islamic economic practices consonant with religious representations – focused on such idioms as the realisation of risk-sharing, equity, and socio-economic justice - are not occurring at this time. This disjuncture is a catalyst for subjective reflectivity.  Based on fieldwork conducted in the nascent South African IBF field between 2013 and 2015, this paper will discuss attempts to reconcile ethical religious representations with practices in the IBF field. As will be shown, two noticeable courses of action were visible amongst Muslim practitioners in the field: adaptation to, or exit from, the field. Adaptation involved re-calibrating notions of the ethical - Islamic “goods” - in economic practices in order for reconciliation with Islam.  For others, it was impossible to adapt to the nature of the field and they either exited out of choice or were forced to leave.

Aziz is the chairman of a boutique asset management company in Cape Town that developed one of the first Sharia compliant funds in South Africa. A former anti-apartheid activist with Marxist political-economy and radical Islamist moorings, he has reconciled his identity and modern Islamic ethical frames via the praxis of capital accumulation as a means to oppose the “other” – the hegemonic neo-colonial forces associated with Western neoliberalism. For Siraj, a Johannesburg based asset manager and Imam in one of the city’s Deobandi mosques, adaptation was framed in terms of the opportunity IBF practices offered him to exercise piety. Through his meticulous application of financial techniques to eliminate riba (interest) from the Sharia compliant funds that he managed he was able to engage in rituals of purification that both provided Muslim investors with consumable dividends and also offered him a pietistic, disciplinary practice that mitigates against the dangers lurking within the self.

An alternative group of Muslim practitioners had failed to adapt to the logic of practice in the South African IBF field. Abraham, the former head of the Islamic banking division of one of South Africa’s largest conventional banks, seems to have practiced an ethic of redistribution in a manner too extreme for the taste of his conventional employers. A maverick accused of exposing his bank to undue risk by offering generous loans, coupled with his conservatism towards developing controversial IBF products, resulted in him being forced to take early retirement. Faiz, an alim (religious scholar) and former head of the Sharia department of an Islamic bank was not forced out of the field, but rather chose to leave because of what he perceived to be irreconcilable differences between IBF practices and the ethical objectives of economic practices espoused in Islam.  For him, the emphasis on form over substance, the casuistry entailed in Sharia compliance and his disillusionment with the prospects of IBF institutions moving towards the achievement of Islamic objectives were sources for his voluntary exit.

By means of analysing the habitus, discourses and practices of these four IBF practitioners in the South African field, this paper will focus on the processes of mediation between Islamic ethical frames and economic practice that engender either adaptation to, or exit from, the IBF field. IBF, in its institutional form, may have been inspired by an Islamist agenda, however the field has drawn the participation of Muslim (and it should be noted, non-Muslim) practitioners that embody a diversity of modern Muslim identities and habitus. As such, justificatory ethical frames evident in the discourses and subjectivity of market actors display proclivities to a spectrum of modern Muslim identities. Each of these subjective identities undergoes its own process of reconciliation with IBF practices and, as such, are not captured by reductionist analysis that focus solely on the Islamist typology. Recent scholarship on Islam and modernity have identified three typologies of Muslim identities, each with their own tropes in addressing the modern context: reformist (modernist and adaptationist), Islamist (fundamentalist), and traditional. These three typologies supply the constituent parts of a discursive language game from which individuals can self-select and weave into modern identity construction and ethical frames.

This paper will aim to shed some light on aspects of this new justificatory ethical frame. In order to do so, I will draw from recent studies on modern Islamic discourse and identity. I will argue that idioms from broader contemporary discourses on Islam in modernity that have largely  been overlooked in many social scientific studies of IBF might help better explain processes of ethical reconciliation with economic practices that occur in the field. This calls for an analytical shift away from reified theoretical conceptions of Islamic economics and economic rationality towards synergies between the practice of finance and broader everyday religious discourses on ethics, Muslim identities and modernity.

As will be argued, for IBF practitioners able to adapt, maximising capital accumulation and profit were seen to be ethical practices. They were convinced that generating economic capital, and the additional by-products (other species of capital) produced as part of this process, would facilitate the realisation of certain Islamic objectives. As such, their practices were justified in terms of maximising the accumulation of capital plus the added value of a movement towards the realisation of subjectively reconciled Islamic “goods.” These innovative ethical frames are the outcome of subjective processes shaped both by the structural forces of the market as well as by social and historical forces that have generated affinities between actors’ habitus and modes of modern Islamic discourse.