Description

"The distinctive practices of Islamic banks are key to their popular appeal, but they
have proven a liability with regulators. Islamic banks have found themselves under
pressure to comply with international standards inattentive to their special characteristics,
and often detrimental to their interests. This presents a formidable challenge to the
industry which has had to confront substantial obstacles to collective action while
simultaneously answering fundamental questions about the nature of their enterprise and
its relationship with global capitalism. Is Islamic finance a rejectionist movement
seeking to create a separate banking system with its own norms, rules and logic? If not,
what is to be the nature of its integration into the international financial system?
I argue that Islamic banks are attempting an Islamic integration into the existing
hegemonic Western financial system that will force their recognition as distinct
institutions requiring different rules, while still gaining acceptance in global financial
markets. This has entailed the creation of a whole new set of transnational institutions to
develop and lobby for separate accounting standards, financial prudentials, the rating of
individual banks and products, and the management of liquidity. These regulatory and
facilitating bodies have recently gained the support of international financial institutions,
giving an enormous boost to Islamic finance in its search for international legitimacy.
These new institutions were initiated for the express purpose of integrating
Islamic finance into global financial markets. Yet in the current atmosphere of growing
mistrust between the West and the Islamic world post 9-11, they may be mobilized
politically to promote a regional market for capital mobilization and investment nurtured
by Islamic solidarity."