Emerging Moralities through Islamic Finance: Multiple Modernities Framework in the Making of Islamic Banking and Finance

This paper attempts to evaluate the developments in IBF by locating it as part of the (unintended) modernisation produced by Islamic political identity search.  In other words, this paper aims at exploring multiple modernities with the objective of locating the developments in IBF within this framework whereby it aims to demonstrate the emergence of multiple Islamic moralities. In doing so, this paper argues that while multiple modernities are produced with the involvement of Shari’ah scholars as part of the IBF institutions, developments in IBF in the secular Western countries is a clear indication of the internalisation of Shari’ah based rulings within the secular legal and regulative environment.

Islamic economics aims at a world order where the ontological and epistemological sources, the Qur’an and hadith, determine the framework of economic value system, the operational dimension of the economy and the behavioural norms of individual Muslims. Islamic economics (and finance) hence represents socially constructed and religiously founded ‘modern’ economy and also an identity. Such a project would have been expected to produce a post-modern paradigm; or would have implied that Islamic Economics could have been located in post-modern turn with its own logical construct as an alternative way of constructing everyday life with its own epistemological and ontological sources.

Importantly, in the development trajectory of Islamic finance, Islamic economic values have been compromised for the success of these institutions; as fiqh dominated IBF solutions focus on the nature of process (Shari’ah compliancy) rather than the consequences of the given injunctions and developed products (Islam based).  Hence, the recent debate between Shari’ah compliancy vs. Islam based IBF is a product of such developments, which implies the conflict between Islamic values against modern construct of fiqh understanding of IBF, as the latter is constructed with modern economy requirements of efficiency and profit and return maximisation through the approval of Shari’ah scholars who claims to uphold Islamic values. Thus, Islamic finance utilises the same Islamic foundational norms in placing itself in the existing conventional paradigm, because “like any other financial system, Islamic banking has to be viewed as evolving to meet modern requirements” (Ahmad, 2005: 26).

In this rational interpretation, IBF no longer aims at creating an authentic meaning of every day life; but perpetuates its existence by Islamising and rationally justifying the institutions and products/instruments of the ‘conventional finance’ through the forced logic of locating Islamic wisdom through delusional maslahah (public interest) for these in the epistemology and ontology of Islam. Thus, such convergence towards conventional finance indicates the recognition of the hegemonic meaning generated by modernity, however, with the religio-cultural interpretation, which makes it part of multiple modernities. With this, the signifier is no longer the ontological norms of Islam but capitalism; and hence sovereignty changes to capitalism while Islamic ontology is relegated to instrumentality to ensure Shari’ah compliancy. In this process, Islamic finance has expressed its construct within modernity by giving up its consequentialist value proposition and expressing itself with the efficiency paradigm of neo-classical economics. Interestingly, it is the Shari’ah scholars which have responded to such demands in de-secularising the substance of Islamic finance by relegating the entire process to the conventional metaphor of moving capital but with old forms. This process can be expressed within multiple modernity project through which the hybridisation of Islamic finance (hybrid products of the conventional paradigm) through mimicking (of conventional finance) have resulted in observed convergence.

It is also important to understand that there is also a causality, as Islamically constructed financial solutions are then endogenised within the existing (secular) structure and legal/financial systems of the host countries, through which the process of multiple modernity gets even further complicated. Thus, the causality of convergence takes place in bi-directional manner by commencing from Islamic finance to conventional finance. 

Islamic finance through mimicking conventional finance has moved away from foundational ontological claims by relegating the process through Shari’ah epistemology of rational morality as expressed rational legal meta ethics has found refuge in the conventional financial markets as hybrid products. As part of bi-directionality, Islamic financial products produced through multiple modernity is institutionalised and endogenised within conventional finance. Hence, the convergence; and hence due to such a converging profess through mimicking and hybridisation that Islamic finance has been welcome in every corner of the world.

Hence, modernity is re-produced by the ‘other’, here by Islam, in the form of an alternative modernity.  In this case, IBF borrows the institutions of the ‘modernity’ and therefore ‘Islamises the products and institutions of modernity’ with its own ontology and epistemology, creating ‘multiple modernities’. In other words, modernity of West has welcomed Islamic finance through its inclusionary dynamism; because IBF is no longer represents an alternative value system and ontologically based normative operation nor ontological represented morality but is part and parcel of globalised financial system in a rational manner..

In sum, Islamic economics movement had emerged to essentialise the Islamic morality by creating an Islamic system of economics through ontological interpretations of Islamic normative world through which even a particular modes of production is aimed at as part of the social formation of the society. However, in practice, until recently only IBF institutions could be develop, which through Shari’ah scholars opted for a rational-legal definition of Islamic morality and therefore IBF has relegated the entire financing paradigm to riba prohibition and developed into financialisation whereby produced a new morality based on Shari’ah compliancy. Thirdly, with the development and use of new Islamic financial instruments, such as tawarruq and even to the extent of asset-based sukuk, the fatwa of Islamic Fiqh Academy is even dismissed to make these products available in the market whereby a different definition of Islamic morality emerged. Furthermore, inclusion of such moralities into the financial system of the secular countries lead to another expression of morality. Hence, while Islamic finance in the modern world has been possible through multiple modernities, multiple modernities have created various Islamic moralities through the blending, mimicry and mirroring and using different signifiers whereby ontological imposition of Islamic morality whither away.