Jurisprudential Schizophrenia: On Form and Function in Islamic Finance

Abstract

7 Chicago Journal of International Law 605 (2007)Despite its explosive growth over the past several decades, Islamic finance continues to have trouble attracting large numbers of otherwise pious Muslims as potential investors. The underlying reason for this is that the means that the practice employs to circumvent some of the central Muslim bans relating to finance (most notably, the ban on interest) are entirely formal in their structure and are equivalent to conventional structures both legally and economically. However, the practice purports to serve functional ends; namely, through offering Muslims alternative means of finance that are intended to further Islamic ideals of fairness and social justice. This has resulted in schizophrenia within Islamic finance, with proponents and practitioners creating formalisms to comply with Shari'a while continuing to insist that Islamic finance has a functional purpose that cannot sensibly be ascribed to it given its current structure. Either Islamic finance needs to describe itself as nothing more or less than the mere conformity with doctrine in a manner that does not serve any functional purpose at all, or, given the interest of the Muslim community in social justice in economic affairs, the practice needs to reinvent itself, focusing less on mimicking conventional alternatives and more on achieving at least to some degree the ends of social justice and fairness it endlessly promotes.