Rationality, Risk, Uncertainty, and the Temporalities of Islamic Finance

Economist Frank Knight's (1921) distinction between risk (measurable uncertainty) and uncertainty (unmeasurable uncertainty with outcome distributions that escape theorization and remain unknown) laid the groundwork for economics as the science of risk and return, anchored by rational, utility-maximizing decision-making. In my paper, I examine how Islamic finance, which rejects wholly rational calculations of uncertainty and risk, provides opportunities through which the calculative rationality of conventional economics can be refracted and understood anew—namely through ethical possibilities typically taken as counterpoint to market-driven capitalism and the economization of virtue and altruism.

Offering an alternate genealogy of uncertainty that dispenses with rational or calculative reason in favor of sociocultural factors that bring these ethical possibilities into existence would be a zero sum argument between disciplines. Instead, the anthropological intervention of this paper is to access these ethical possibilities by considering the temporality of financial uncertainty. I follow Guyer (2012) and Pandolfo (2007) in approaching temporality as a framework that can enable, shape, or foreclose possibilities of accessing different life-worlds.

Temporality provides an access point into the life-world of the non-rational economic human constituting the ideal Islamic financial subject. I explore how the Islamic remembrance of death (al Ghazali 1995) allows for the present to become enfolded by the future promise of the eternal hereafter. Qur'anic verses foundational to the modern Islamic banking and finance industry entwine justice in earthly economic accounting with the justice set to befall the individual called to account before God upon death. This remembrance yields a comprehension of the present in light of this future that is emotional, embodied, and affective. This allows remembrance to become a platform for the pursuit of social justice, through a merging of concern for the self and society. For example, Islamic eschatological orientations manifest in the prohibition of riba (usury) as unfair and exploitative, and the promotion of risk-sharing contracts.

Eschatological orientations toward the present and future are also mobilized in the structure of products and services in ways that make particular assumptions about the time horizons and knowability of excessive uncertainty and risk. The inclination against gharar (financial transactions embedded in excessive uncertainty) raises questions regarding how much uncertainty can be borne before legitimate speculation, where inherent risks can be mitigated through information, devolves into mere chance—a gamble on a future outcome.

The notion that the future is truly unknowable, and thus truly creative, is a testament to the existence and divinity of God, whose planning cannot be foretold, anticipated, or otherwise mapped. Islamic finance does not necessarily introduce religion to a “secular” conception of finance, but rather introduces conceptualizations about uncertainty and risk that render the future (understood economically and anthropologically) as an open space of possibility.