Balancing Religion and Finance. Did Islamic Finance overcome possible difficulties that the Islamic law posed on conventional finance?

Content

1 Introduction

2 What were the exact investment problems of conventional finance?
2.1 Financial operators before Islamic Finance (supply side)
2.1.1 The Islamic financial markets between 1850 and 1970 (roughly): structure and size
2.1.2 The role of the Shari'ah: prescription and reality in conventional finance
2.2 The consumers' preferences before Islamic Finance (demand side)
2.2.1 Defining the consumers of conventional finance and their difficulties with conventional finance
2.2.2 Which financing methods were common?
2.3 Pre-conclusion: What did the restraining impact of the Shari'ah and the consumers' religious mentalities on conventional finance exactly look like?

3 Did Islamic Finance provide solutions to the hitherto carved out problems?
3.1 What is Islamic Finance?
3.1.1 The concept of Shari'ah-compliance
3.1.2 What is the “Islamic world” - or: which countries are important to survey?
3.1.3 Islamic banking and Investment
3.1.4 Takaful or Islamic insurance
3.2 The market situation with Islamic Finance
3.2.1 Is Islamic Finance working on the markets? (supply side)
3.2.1.1 How ‘big’ is Islamic Finance? Structure and size of the markets
3.2.1.2 Is Islamic Finance working? The comparative efficiency of conventional and Islamic Finance
3.2.1.3 Is Islamic Finance really Shari’ah-compliant? The disputes around Islamic Finance
3.2.2 Who is interested? The demand for Islamic Finance

4 Conclusion

5 Appendix
5.1 Technical definitions
5.2 Glossary of Arabic terms

6 References

1 Introduction

Since the mid-1970s, an industry growing at considerable pace in the Islamic world is gaining market shares all over the world in countries with sufficient Muslim populations. This “Islam- ic Finance” industry claims to act in line with the ethical and practical principles set forth in the Qu'ran and the Shari'ah, thus appealing to Muslim and non-Muslim clients alike who search for viable alternatives to conventional financial products. As explained, the first begin- nings of this phenomenon can be traced well back into the 1970s when the first “Islamic Banks” started operating in Egypt and Jordan. The rapidly accelerating speed of expansion caused the idea of Shari'ah-compliant financial intermediaries to spread also to Saudi Arabia, Indonesia, Malaysia and other countries, of which each country had its own reasons to either support, restrain or ignore the growth of IIFS (Institutions offering Islamic financial Services). In Egypt, for instance, the Sadat regime used Islamic banks to boost the opening of the econo- my (infitah, or open door)¹, whereas in secular Turkey, Islamic banks were “welcomed, but not allowed to use the word Islam in their name, nor refer explicitly to their Islamic charac- ter.”² Further examinations of Islamic Finance history in several countries like Jordan³, Pak- istan and Iran⁴, etc. each paint a different picture of the emerging industry.

In the past decades, a vast amount of research has been published - empirical and theo- retical - to review the impacts of Islamic Finance on the financial markets of the Islamic world. These works, to a great deal inspired by the enormous need of the industry for quanti- tative and qualitative research, all dealt with questions of comparative efficiency of conven- tional and Islamic Finance, the demand for Shari'ah-compliant financial products, the actual genuineness, or authenticity, of the industry, etc. However, only a very small portion of these research works dealt with the question whether or not the Islamic world actually needs Islam- ic Finance. At first, this might seem as a trivial question (if there was no need for Islamic Fi - nance, there would not have been this substantial growth). But at second thought, one realizes the associations that come which come with the question of raison d'être: Why did Islamic Fi- nance emerge? Does it add an economic value to its markets? And most importantly, is it - so far - successfully reaching its goals? To my understanding, the works that deal with this big- picture analysis, are thin on the ground. Therefore, this work shall take a first step at putting Islamic Finance into the historical context it needs to be seen in, by compiling the manifold works into a cross-sectional approach to characterize the industry. The most salient aspects of the analysis here will be legal, historical, and economic ones, in order to grasp the 'big picture' of Islamic Finance.

It is undoubtedly the case that Western financial instruments (or “conventional finance”), that is to mean financial products that were developed for and in Western (Euro- pean and Northern American) markets, met considerable difficulties when trying to expand these into the Islamic world. Simultaneously, financial operators in the Islamic world were of- ten restricted by religious laws in the ways they could act on markets, as well as by mistrust from pious clients in the demand that they were able to generate. Hence, financial inclusion was difficult to achieve in the Islamic world. Of course this was also due to other factors (i.e. financial illiteracy, spatial distance to service providers, etc.) - but it is no exaggeration to at- tribute a significant part of the difficulties that conventional finance (CF) faced in Islamic markets to the restraining religious laws - like the prohibition of taking interest (riba). Unsur- prisingly, the Islamic world started to develop its own financial instruments to satisfy the need for financial inclusion: The emergence of “Islamic Finance” (IF) was the result. Therefore, the interesting question that shall lead this analysis is: Did Islamic Finance - in its whole extent - really overcome the difficulties that the Islamic faith posed on conventional finance by offer- ing an opportunity for financial inclusion without breaking the Shari'ah-law?

Generally, the approach that we will take towards our research question is a two-step method: We will look at the exact nature of the difficulties that conventional finance faced before the 1970s by analyzing the Islamic financial markets, respectively the influence of the Islamic law on supply and demand. After having done that, we will briefly assess the most important features of Islamic banking, Islamic Investment, and Islamic insurance.

The second step of the analysis is similar to the first, but it involves the analysis of the Islamic financial markets today. This work will base the evaluations of the proposed question mainly on four characteristics that are important to judging whether Islamic Finance is 'work- ing soundly' and thus has solved the compliance problems that conventional finance had: the structure and size of (along with the growth of) Islamic financial markets, the efficiency and cross-industrial growth stimuli of Islamic Finance, the reputation of the industry among Shari'ah experts, as well as the consumers' preferences over conventional and Islamic Fi- nance. The last characteristic makes up for the demand-side of the analysis - here lies the par- allel of the two steps that is responsible for granting some comparability of the findings of the two steps.

Although the two-step analysis should work soundly in theory, there are some practical difficulties that are worth some consideration. The first reason for caution is the literature it- self. As the Islamic Finance industry is a relatively young field of business, the number of re- liable and empirically sound works on matters of this field is limited. As already said, there are many papers on Islamic banking and insurance that either only focus on legal and reli- gious, or on performance issues, each ignoring the other respective aspects. Therefore, it is very important to be conscious of the specific background of the author(s) as often research was funded and thus possibly influenced by companies from the emerging industry that need- ed to enlarge the corpus of research into their field of business. Throughout this work, it will be the task of this paper to use as many differently oriented papers as possible for one particu- lar chapter to guarantee the soundness of the analysis both in reflecting the 'big picture' of Is- lamic Finance and in staying as neutral and objective as possible.

The second problem is the sheer broadness of this topic. There is a huge space for comparisons between the different specific industries of Islamic Finance, not only in terms of legal, social, and cultural disparities, but also in terms of geo-economic diversities. Those comparisons will - in important cases - occasionally be made, but the decisive factor for this work will be the overall similarity of the particular industries. This similarity allows, where it is sufficiently present, to draw broad conclusions about the nature of the financial markets in the Islamic world. Of course those differ over time and from country to country, but the important assumption is here that the country-wise legal and economic differences can - to a certain extent - be ignored for the sake of focusing on the time-wise differences.

So, we will look at the problems that the Shari'ah and the Muslim faith caused for con- ventional finance. Then we will address the question: did Islamic Finance resolve these prob- lems?

2 What were the exact investment problems of conventional finance?

2.1 Financial operators before Islamic Finance (supply side)

2.1.1 The Islamic financial markets between 1850 and 1970 (roughly): structure and size

Muslims have, since the beginnings of Islam, been able to “establish a system without interest for mobilizing resources to finance productive activities and consumer needs”⁵, Pejman Abedifar et al. state in their joint paper on Islamic Finance. And indeed, financing in business or risk-sharing was in no way non-existent in the Islamic world over the course of history. There were systems of individually oriented contract laws, for instance between merchants and capital owners, that were based on individual financial intermediation, as Timur Kuran elaborates in his work on the economic development of the Middle East⁶.

But why is it then necessary to ask for the obstacles that conventional finance faced in Muslim countries? Why would someone have to introduce the idea of a distinctly 'Islamic' fi- nancial system? The reason could be seen in the change of the Islamic financial sector that be- gan with the political and economic penetration of the Arab and South Asian regions by West- ern (colonial) powers⁷:

Western financial institutions (especially banks) became dominant and the Islamic tradition re - mained dormant. Over the last 50 years or so, however, there has been a revival of interest in de - veloping a modern version of the historic Islamic financial system.⁸

On this account and in order to find out about the concrete problems that Muslims had with Western financial models, it might be helpful to have a look at what the financial markets in Muslim countries looked like between 1850 and 1970. Oddly enough, the bulk of (mostly Muslim) researchers who deal with the emergence of nowadays Islamic Finance do not men- tion - or at best only briefly - the time between 'old' (medieval) and 'new' Islamic Finance: In- stead of asking what exactly were the finance problems in the modern Islamic world were, they seem to simply assert that the insufficient financial inclusion and the ensuing sluggish economic development would directly result from the un-islamic nature of the financial prod- ucts that were common before Islamic Finance. The result was a broad ignorance concerning the nature of financial institutions between the mid-19th and the mid-20th century: as it is 'clear' that the Islamic world needs a “rediscovery of the classical economic principles”⁹, those fi- nancial institutions that are regarded as non-compliant with the Shari'ah, or as the invention of “the West”, are seen as negligible in the context of describing an Islamic economy that should end the misery of the Islamic world and that should be based on Shari'ah-compliant fi- nancial instruments.

Nevertheless, Timur Kuran discusses in his paper “Why the Middle East is Economical- ly Underdeveloped” the influence of the Islamic law on the financial inclusion in the Islamic world¹⁰. Timur Kuran ascribes a considerable backwardness to the Islamic financial system, at the beginning of the colonization period (early 19th century). According to him, small-scale re- source pooling by the wealthiest faced institutionalized capital accumulation by banks in the West, involving mass participation¹¹. The central factor that Kuran outlines to being responsi- ble for the underdevelopment of the financial intermediation, and thus for the dragging imple- mentation of Western (conventional) financial instruments, in the Islamic world, is the starchi- ness of the Islamic law, that only knew a handful of contracts built around century-old schemes.¹² Consequently, the pre-modern Islamic financial system almost exclusively relied on individual contracts well into the nineteenth century.

Moreover, Murat Çizakça¹³ describes a changing financial landscape in the Arab world at the turn of the 19th to the 20th century. However, he ascribes the state of underdevelopment of the Arab world to the decline of the classical Islamic financial instruments such as the al- ready discussed individual contracts (the exact contract forms will be examined in the chap- ters 3.1.3 and 3.1.4, as the modern Islamic Finance originates in these contract forms), and the orientation of the Islamic economies towards Western capitalist models. In this respect, Çiza- kça can be seen as one example for the above named group of authors. Contrary to Kuran, he asserts that the arduous implementation of conventional finance in the Islamic world rather re- flects a passive resistance of the Muslim community than the numbness of Islamic law (this notion shall be further discussed in chapter 2.2.1).

When looking at the process of 'Westernization' in the Islamic financial markets at the beginning of the 20th century more closely, Ibrahim Warde's¹⁴descriptions are useful. Al- though modern financial instruments like interest-operated loans, deposit accounts, commer- cial banking, insurance facilities, and most frequently governmental borrowing (i.e. in case of the Ottoman Empire)¹⁵, entered the hitherto sparsely commercialized financial markets of the Islamic world through colonization, and thus relatively simultaneously in the majority of the Muslim countries, Ibrahim Warde explicitly points to Egypt when speaking of a particular pi- oneer market¹⁶. The National Bank of Egypt (founded in 1898), the Banque Misr (1920), and the ones that followed, operated according to Western principles of banking (loans were is- sued with prescribed interest rates that in some cases also included default risk premiums - a clear case of riba¹⁷). However they were somewhat restrained by a religiously determined corset: “Egypt's legal code, which was French-inspired, allowed interest not exceeding seven per cent, and served as a model for many Arab codes.”¹⁸ In 1904, Warde explains, mufti Sheikh Muhammad Abduh even officially legitimated interest from savings or insurance poli- cies in a controversially debated fatwa (an arbitral award issued by an Islamic tribunal)¹⁹.

Despite the uncertainties, the conventional finance industry in Egypt and the Islamic world grew, interestingly making Egypt the third largest stock market in the world for some time after World War II.²⁰Even in strongly pious countries like Iran and Pakistan, taking interest was allowed until the first practicable Islamic alternatives were available.²¹

But not only Egypt developed a conventional banking system of substantial size. Profit- ing from the fact that countries like Iraq and Syria operated with state-owned banking sectors, Jordan saw many of the biggest banks in the Arab World placing their center of operations in its capital, Amman²², as Rodney Wilson explains in his work on the emergence of Islamic Banking in Jordan. This includes the Arab Bank, the Cairo Amman Bank, the Jordan Kuwait Bank and the Petra Bank²³. Due to the “liberal economic climate”²⁴ in Jordan, a considerable amount ofribatransactions would have been made by the commercial banks in Jordan, Rod- ney Wilson argues. An increasing number of the Jordan-based commercial banks deployed their fund capital on assets in the forms of overdraft facilities, term-based loans (almost half of them deployable assets), and interest-earning government bills and bonds. Although Wilson does not provide the exact time frame for the numbers, these descriptions still show the ex - traordinarily liberal banking policy of Jordan.

But despite the relatively liberal authorities (in terms ofhara'amtransactions), the Central Bank of Jordan and the affiliated authorities would have welcomed the rise of Islamic banking, as they would have wanted to promote a “plural system”²⁵with bothribaandhalaltransactions possible:

While not wishing to see the [Jordanian] banking system Islamised, the authorities were sensitive to the wishes of those who wanted Islamic financial services, and it was recognised that many be- lievers were unhappy with the kind of banking facilities offered by the riba commercial banks.²⁶

This may reflect the sentiment of a market niche, even where Shari'ahprinciples were not widely applied in finance. This trend for Islamization in the banking sector obviously began with the consumers wishing forhalalalternatives to conventional finance - but we will have a closer look at that in chapter 2.2.

2.1.2 The role of the Shari'ah: prescription and reality in conventional finance

Over the course of the history of Islam, theShari'ahhad a very strong grip on the feasibility of new commercial ideas, especially in finance: namely by judging the righteousness of one's business. For example when thinking of the traditional Islamic trust system - thewaqf²⁷- the following question easily comes to mind: “Why did the waqf not evolve into a genuine corporation able to remake its rules of operation, change its mission and reallocate resources of its own will?”²⁸The answer that Timur Kuran gives involves the Shari'ah: the waqfsoften did not evolve because of the danger of being accused as being impious.

So far, we have seen that the Muslim world historically did not know institutionalized financial intermediation until the advent of Western financial institutions who then spurred the development of a conventional finance industry in the Islamic world. This is also described by Valentino Cattelan: “financial support in classical Islam was mainly supplied by informal cap- ital providers or by credit-labour partnerships for commercial activities.”²⁹.

Yet, even after conventional finance was established through locally owned commercial banks, financial institutions in Muslim countries had to operate in a field of tension between Shari'ah law and devout Muslims who looked with skepticism upon riba transactions from the West (more on that in chapter 2.2). But what exactly were the practical restrictions that the Shari'ah put on conventional finance? In theory, there are many legal obstacles that could im- pede the undertaking of conventional finance, such as the prohibition of saving and borrowing based on an interest rate and default risk premiums, insurances based on a risk transfer, the difficulty of merging of financial processes into greater financial corporations that act as a le- gal person, etc. In the following, we will assess the problems that result from Shari'ah restric- tions for conventional banking and insurance (this will be important in order to understand the legal approaches that Islamic financial institutions take in order to overcome those problems).

In general, there are four features of the Islamic law that warrant examination when try- ing to determine the character of the Shari'ah with reference to finance³⁰: the prohibition of riba, gharar and maysir, property rights in Islam, inheritance rights in Islam, and the contract law in Islam. Probably the most commonly known specification of Shari'ah is the “absolute prohibition of interest payments on debt”³¹. Imtiaz Pervez asserts that interest is often differ- ently defined, but the definition of riba that most Shari'ah scholars could agree on is that in- terest represents an ex-ante fixed amount of money that is payed by the borrower of the mon- ey to the loaner as a remuneration for the loaned capital (be it an individual or a bank) in case of deposit accounts, regardless of the outcome of the venture, and enforced by the official au- thorities.³² The characteristic property of interest in the Islamic law is thus, that of being an ar- tificially created amount of money that does neither correspond with the worth of the loaned capital, nor with an actual service, and is hence dissociated from a real or tangible property. For that reason, interest would manifest an “unjustifiable property rights claim”³³. To com- plete the triad of prohibited practices, we should briefly discuss what is meant by gharar and maysir. As the prohibition of riba complicates the loaning and borrowing of money and thus the banking business, the prohibition of gharar and maysir rather focus on the issues of uncer- tainty and risk.Ghararis meant to describe the “uncertainty or ambiguity created by the lack of information or control in a contract”³⁴. This lack of information does not only refer to ambiguous contracts, but also to every form of commercial exchange of which the result is not foreseeable. This definition includes practices like short-selling and speculation, as well as the trading of derivatives.Maysirrefers to “impermissible games of chance”³⁵(e.g. gambling). In that respect, conventional insurance (or any form of risk transfer in exchange for money) is regarded asmaysiras well. In so far as gambling is one form of (artificially created) uncertainty, the Islamic law regards maysiras a sub-category of ghararand thus forbids it. So,ghararcould be seen as asymmetric, and/or imperfect, information, whereasmaysirexplicitly refers to using a state of uncertainty to generate profit.

All of these principles found their essence in the Islamic property right, Mirakhor and Yong explain. The fundamental basis of property right in Islam is that “Allah (swt) has creat- ed all property and Allah (swt) is the ultimate owner”³⁶. However, people would be allowed by the Shari'ah to “claim property rights over what is produced through their own labor or transfers through gift giving, exchange, contracts, inheritance, or redemption of rights in the produced property”³⁷. Timur Kuran describes the legal architecture of the inheritance system in the Shari'ah: only one third of an individual's wealth would be available to his/her free will to pass on to whomever he/she wants - the remaining two thirds would be “reserved accord- ing to intricate rules for a list of extended relatives of both sexes”³⁸. Although one could hold property undivided over generations by letting his/her heir buy out the rest of the heritage, Kuran argues the Islamic egalitarian inheritance system greatly caused the fragmentation of wealth.³⁹ It is for these narrow specifications of the legitimacy of property rights transfers that business practices which fall under the classification of riba, gharar, and/or maysir are forbid- den: they simply do not constitute legal ways to transfer property. Besides this first big restric- tion that the Shari'ah posed on conventional finance, another obstacle has historically been the Islamic contract law.

As Mirakhor and Yong lay out⁴⁰, it is very difficult to include virtually every possible contingency in a commercial or risk-sharing contract - but does that qualify for being gharar?

This question itself caused widespread uncertainty and heated discussions about theShari'ah legitimacy of certain types of contracts - generally, the uncertainty was greater and the discus- sions fiercer, the more complicated the respective contract was. This, of course, had no posi- tive impact on the formation of financial and commercial institutions that faced all kinds of uncertainties (e.g. danger of credit default in finance) in their daily business, as also Timur Kuran states:

In turn, the prevalence of small partnerships kept the Middle East free of various organizational challenges that proved essential to economic development in western Europe.⁴¹

To conclude the theoretical part of our analysis, two striking obstacles to a sound financial business after European models remain: (1) the harsh restrictions on wealth transfers, risk transfers and management of uncertainty, and (2) the uncertainty caused by the debates among Shari'ah experts themselves - decisive was the lack of a comprehensible and general legal framework: “Uncertainty about the legitimacy of interest, combined with the lack of corporate law, meant that lenders as well as borrowers were usually individuals.”⁴² In practice, those and other legal controversies were, when they became urgent in the age of emerging conventional finance in the Islamic world, often treated with an “eloquent silence”⁴³, as Ibrahim Warde says. Where it was not necessary to justify the taking of interest (like in liberal economies like Jordan), authorities and financial institutions “ignored” the “riba controversy”⁴⁴. Where the riba controversy was not ignorable, interest was justified by the sheer developmental need for it, by strengthening the 'Dar Al Islam' relative to the 'Dar Al Harb' (literally the 'realm of war'), or more commonly by earmarking the interest to charitable funds, and thus 'purifying' it.⁴⁵

Yet, there was a broad opposition in the Islamic world against conventional finance. Monzer Kahf summarizes the political climate around conventional finance in the following way:

Although there were a few faint voices that distinguished between riba and interest […] the overwhelming majority of Shari'ah scholars and the Muslim public viewed the operations of these foreign banks as being based on a prohibited activity.⁴⁶

[...]

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¹ Mayer, Ann E., Islamic Banking and credit policies in the Sadat era. The social origins of Islamic Banking in Egypt, in: Arab Law Quarterly 1 (1985), pp. 23.

² Ibid., p. 24.

³ Wilson, Rodney, Islamic Banking in Jordan. Islamic Banking. The Jordanian Experience, in: Arab Law Quarterly 2 (1987), pp. 207-229.

⁴ Anwar, Muhammad, Islamic Banking in Iran and Pakistan. A Comparative Study, in: The Pakistan Development Review 31 (1992), pp. 1089-1097. See also: Khan, Mohsin S.; Mirakhor, Abbas, Islamic Banking. Experiences in the Islamic Republic of Iran and in Pakistan, in: Economic Development and Cultural Change 38 (1990), pp. 353-375.

⁵ Abedifar, Pejman et al., Islamic Banking and Finance. Recent empirical literature and directions for future research, in: Journal of Economic Surveys 29 (2015), pp. 638.

⁶ See Kuran, Timur, Why the Middle East is Economically Underdeveloped. Historical Mechanisms of Institutional stagnation, in: Journal of Economic Perspectives 18 (2004), pp. 73.

⁷ Abedifar et al., Islamic Banking and Finance, p. 638.

⁸ Ibid.

⁹ Çizakça, Murat, Finance and Development in Islam. A Historical Perspective and a Brief Look Forward, in: Zamir Iqbal, Abbas Mirakhor [eds.], Economic Development and Islamic Finance, Washington D.C., 2013, p. 143.

¹⁰ However the influence of the Islamic Law on financial inclusion outside of the Middle eastern region is not reflected.

¹¹ See Kuran, Why the Middle East is Economically Underdeveloped, p. 77f.

¹² Ibid., p. 79.

¹³ Çizakça, Murat, Finance and Development in Islam. A Historical Perspective and a Brief Look Forward, in: Zamir Iqbal, Abbas Mirakhor [eds.], Economic Development and Islamic Finance, Washington D.C., 2013, p. 133-150.

¹⁴ Warde, Ibrahim, Islamic Finance in the Global Economy, Edinburgh, 2000.

¹⁵ See Warde, Islamic Finance in the Global Economy, p. 49.

¹⁶ Ibid.

¹⁷ There is no definition of riba that is agreeable to all Shari'ah scholars. Mostly, riba is defined as the creation of an added value purely out of monetary estate, e.g. by lending it - or in a more narrow sense, by interest. For a more thorough explanation see chapter 2.1.2 or Iqbal, Zamir, Abbas Mirakhor, Economic Development and Islamic Finance, p. 347.

¹⁸ Warde, Islamic Finance in the Global Economy, p. 49.

¹⁹ See Warde, Islamic Finance in the Global Economy, p. 49.

²⁰ Ibid.

²¹ See Anwar, Muhammad, Islamic Banking in Iran and Pakistan. A comparative Study, in: The Pakistan Development Review 31 (1992), pp. 1090.

²² Wilson, Rodney, Islamic Banking in Jordan. Islamic Banking: The Jordanian Experience, in: Arab Law Quarterly 2 (1987), p. 208f.

²³ See Wilson, Islamic Banking in Jordan, p. 209.

²⁴ Ibid.

²⁵ Ibid, p. 210.

²⁶ Ibid.

²⁷ A waqf describes an endowment or a charitable trust, put into a legal entity (that is called waqf). The beneficiaries of a waqf are typically specified by "Islamic purposes" (education, mosque-building, helping the poor). See Archer, Simon, Rifaat A. A. Karim, Volker Nienhaus, Business Models in Takaful and Regulatory Implications, in: Simon Archer, Rifaat A. A. Karim, Volker Nienhaus [eds.], Takaful. Islamic Insurance. Concepts and Regulatory Issues, Singapore, 2009, p. 15f.

²⁸ Kuran, Why the Middle East is Economically Underdeveloped, p. 81.

²⁹ Cattelan, Valentino, In the name of God. Managing risk in Islamic finance, in: eabh Papers 14 (2014), p. 4.

³⁰ See Mirakhor, Abbas, Wang Yong Bao, Epistemological Foundation of Finance. Islamic and Conventional, in: Zamir Iqbal, Abbas Mirakhor [eds.], Economic Development and Islamic Finance, Washington D.C., 2013, p. 25-66.

³¹ Sheng, Andrew, Ajit Singh, Islamic Finance Revisited. Conceptual and Analytical Issues from the Perspective of Conventional Economics, in: Zamir Iqbal, Abbas Mirakhor [eds.], Economic Development and Islamic Finance, Washington D.C., 2013, p. 69.

³² See Pervez, Imtiaz A., Islamic Finance, in: Arab Law Quarterly 5 (1990), pp. 263.

³³ Ibid.

³⁴ Iqbal, Zamir, Abbas Mirakhor, Economic Development and Islamic Finance, Washington D.C., 2013, p. 345.

³⁵ Ibid., p. 346.

³⁶ Mirakhor and Yong, Epistemological Foundation of Finance, p. 36. The acronym "swt" stands for Subhanahu Wa Ta’ala(= May He Be Glorified and Exalted), see Iqbal, Zamir, Abbas Mirakhor, Economic Development and Islamic Finance, Washington D.C., 2013, p. 347.

³⁷ Ibid.

³⁸ Kuran, Why the Middle East is Economically Underdeveloped, p. 74.

³⁹ See Kuran, Why the Middle East is Economically Underdeveloped, p. 74.

⁴⁰ See Mirakhor and Yong, Epistemological Foundation of Finance, p. 38f.

⁴¹ Kuran, Why the Middle East is Economically Underdeveloped, p. 79.

⁴² Ibid., p. 73.

⁴³ Warde, Islamic Finance in the Global Economy, p. 49.

⁴⁴ Ibid.

⁴⁵ See Warde, Islamic Finance in the Global Economy, p. 50.

⁴⁶ Kahf, Monzer, Islamic Banks. The Rise of a New Power Alliance of Wealth and Shari'a Scholarship, in: Clement M. Henry, Rodney Wilson [eds.], The politics of Islamic Finance, Edinburgh, 2004, p. 18.