By Daromir Rudnyckyj

Author of

Beyond Debt: Islamic Experiments in Global Finance. Chicago and London: University of Chicago Press (2019).

Beyond Debt describes ambitious efforts by the Malaysian government to build an “Islamic Wall Street” in the country’s capital, Kuala Lumpur: an Islamic alternative to the conventional financial system.  The experts involved in this effort ask themselves and each other one question repeatedly: “What is the Islam in Islamic finance?” In other words, how to create a modern financial system that does not resort to interest-bearing borrowing and lending given the Islamic prohibition on interest?

Beyond Debt introduces four types of experts as the key actors in fashioning a global hub for Islamic finance: regulators, shariah scholars, financiers, and Islamic economists.  Regulators are employees of Malaysia’s central bank and are responsible for developing the rules for the country’s financial system.  Shariah scholars typically hold advanced degrees in Islamic law and staff the advisory boards of Islamic banks. Financiers work in existing Islamic financial institutions and seek to implement the products approved by shariah scholars. And Islamic economists hold graduate degrees in economics or finance and seek to reconcile secular, liberal economics with Islamic doctrine.

We might expect Islamic economists to be more flexible or liberal in their orientation—and, conversely, we might assume that shariah scholars would be more conservative. In fact, as Beyond Debt shows, it’s the reverse.  Shariah scholars are often more flexible in their interpretations than Islamic economists. One reason is that shariah scholars tend to be more interpretive in their approach allowing for the co-existence of multiple truth claims, whereas Islamic economists tend to emphasize a single, definitive truth.

In addition to counteracting easy assumptions about various actors in the world of Islamic finance, Beyond Debt also explores a central tension in this domain—namely, the debate over how the industry should fulfill the religious injunction against interest. On one side of this debate are experts who are content with the existing system. This version of Islamic finance exploits loopholes in shariah law to approve products that mimic conventional loans. For example, a bank might take an asset that it owns, like a computer, and sell it to a customer at a mark-up with a deferred payment. The customer sells the computer back to the bank on the spot, but at a lower price. In this “sale-and-buyback” arrangement the mark-up mirrors the prevailing interest rate.  However, it also leads to charges that such contracts meet the letter of Islamic law but not its spirit.

On the other side, some regulators have encouraged Islamic banks to deploy more authentic, “equity-based” products. One popular example is a mudarabah, which is an agreement between an entrepreneur and a financier in which the financier invests in a business venture in return for a predetermined percentage of its profits. The entrepreneur provides their skills, labor, and managerial expertise. The investor assumes all the financial risk, while the entrepreneur risks only their time and labor. This model curbs speculative practices and promotes equitable outcomes because the entrepreneur is not saddled with debt and unjust interest payments.  However, it also requires banks to incur more risk than they are usually accustomed to taking.

Creating an alternative financial system is a complex and difficult task; doing so while challenging conventional notions of finance and exploring alternative models is even harder. Beyond Debt offers a glimpse into a future where Islamic finance may play a significant role in shaping the future global economic landscape. Malaysia’s Islamic finance project evokes an emergent “geoeconomics” that seeks to capitalize on the country’s position between the world’s greatest contemporary source of surplus capital (on the Arabian peninsula) and its foremost site of industrial production (East Asia). If Malaysia’s planners succeed at building an infrastructure capable of absorbing investment from Gulf countries using Islamic investment instruments, Kuala Lumpur will become a key global financial conduit.

Daromir Rudnyckyj is professor of anthropology at the University of Victoria, where he serves as director of the Counter Currency Laboratory and principal investigator for the Futures of Money project. He is past president of the Society for the Anthropology of Religion and serves as a councillor for the American Ethnological Society. His research addresses money, religion, development, capitalism, finance, globalization and the state.