The first part of Jeremy Harding's piece on Sharia finance can be read here.
The rules that govern Islamic banking and finance are non-negotiable, cast in tradition, as good as stone. A finance house that sticks to the plot will not come to grief in a credit crisis; neither will its clients. Yet once large sums are involved - sums beyond the reach of modest customers - Islamic entrepreneurs, corporate and institutional investors take risks with the principles that sharia-compliant finance is meant to embody, by colonising conventional areas where the promise of riches and power looks irresistible but the path is forbidden. The challenge here is technical as much as moral. Faith-accountable fund managers and devout privateers in Malaysia and the Gulf may want a stake in Western wealth creation, but they must try to stick to Islamic principles when they intrude on the money. 'Leveraging', 'derivatives', 'shorting': the ambient glamour of these operations, like the terminology itself, seems dangerous in the new light of day, yet cautious capitalists still find them serviceable and inventive theorists of sharia-compliance are intrigued by them.
LRB 14 May 2009 | PDF Download