چكيده فارسي :
Islamic finance, theoretically, is based on the ethos of Islamic moral economy (IME) with an explicit value framework; (i) based on justice, equity, human dignity, freedom of enterprise and moderation; (ii) based on developing and harnessing economic resources to satisfy spiritual, material and social needs of all members of the community and (iii) based on a moral obligation to also serve poor and destitute from share of wealth. These consequence-oriented principles of IME defines the underlying philosophy of Islamic finance in order for adjective ‘Islamic’ to have meaning in the sense of suggesting ‘beneficent or ihsani society’ in the making of Islamic banking and finance. In other words, Islamic finance is expected to develop into an alternative way of ‘financing’ rather than contribute to further ‘financialisation of economy which is considered as one of the culprit of the recent financial crisis. Therefore, in the moral economy understanding of Islamic finance the question is not using the same metaphor to move capital around but rather developing a new metaphor to lead for transformational as well as transactional change.
In an operational manner, Islamic finance is described through its foundational principles of risksharing and profit-loss-sharing which identify Islamic finance as equity oriented and embedded ‘financing’ proposition, which directly relates to real economy. It is such features and peculiarities that distinguish Islamic finance from conventional financial system, as through such peculiarities the ‘moral nature’ of Islamic finance is revealed. Recalling that with the global financial crisis, the problem is located with dis-embedded nature of conventional finance, which is no longer linked to the real economy. Islamic finance, therefore, in the aspirational sense of IME, represents an alternative financing paradigm through being embedded in the real economy and in the values and norms of Islam identifying that non-economic matters and principles shapes the nature, normative world as well as operation and transaction of Islamic finance.
The experience of Islamic banking and finance over the years, and in particular since the financialisation stage commenced in late 1990s with the competitive strategies under globalisation, suggests that Islamic finance has been converging towards conventional finance in its operations, institutionalisation and product level (Gamal, 2007; Asutay, 2007, 2012; Zaman and Asutay, 2009). In providing evidence for this statement, empirical evidence (Aggrawali, 1999; Asutay, 2007, 2012; Nagaoka, 2007) demonstrates that Islamic banks heavily rely on fixed-income products (cost-plus) including murabahah and tawarruq as opposed to profit-loss-sharing products and risksharing oriented financing, the latter of which should however be the main principles shaping the paradigm. A survey of Islamic banking financing shows that in Malaysia about 97% of the financing is based on debt financing, while in the Gulf this figure is about 80% (CIMB, 2015). In addition, a survey of sectorial distribution of Islamic financing shows that Islamic banks mostly prefer to invest in real estate and financial sectors indicating dis-embeddedness as an emerging nature of Islamic finance (CIMB, 2015). Thus, the distinction between Islamic and conventional finance has been withering away at the expense of the ethical universe of Islamic finance, which has been giving up its aspirational values and gradually converging towards operational nature of conventional finance through mimicry. In other words, the historical experience of dis-embeddedness of the conventional sector seems to be dominating the everyday practice and nature of Islamic finance; which may be an indication of potential ‘financial troubles’, as it should be noted that it is the disembeddedness of conventional finance that it has been causing financial crisis one after another.
This paper, hence, aims at examining the consequences of the observed convergence of Islamic finance with conventional finance, as through such convergence each of the professed features of Islamic finance has been compromised. Therefore, the central argument of this paper is that due to the particular nature and principles of Islamic finance, the observed convergence creates a number of social risks, beyond the traditional financial and market risk, including legitimacy risk, credibility risk, trust risk and sustainability risk indicating the potential difficulties of sustainability of Islamic finance in its authentic paradigmatic nature.
In evidencing the stated emergent social risks categories, this study test the presence and articulation of IME in the case of Islamic banking and finance, which claims that (i) Islamic finance makes the markets safer and stronger, (ii) Islamic finance establishes better link to the real economy and hence with these better links contribute to economic growth. In addition, considering increasing convergence from Islamic finance to conventional finance, this paper aims to examine and explore the role of financialisation in this convergence. Thus, this paper tests the central principles of IME, namely embeddedness to investigate whether Islamic financing is embedded in real economy and non-economic factors, such as the cultural and religious values and norms; and whether Islamic banking and finance is based on real economy away from fictitious commodities and de-commodification. Thus, in evaluating the socio-economic performance of IBF, this paper aims to test the impact of IBF as an operational function of IME to implement the various features of Islamic axioms into their operational strategy for producing and enhancing development, economic stability and overall welfare. In doing so, peculiar nature of IME is conceptualised as ‘social risk’ areas beyond financial risk and tested with the operation of IBFs.
The observed social risk areas suggest that the trust and religious affiliation and patronage towards Islamic finance and banking may be undermined under the increased nature of such social risks leading to disembeddedness and commodification. As the development of Islamic finance sector, on the one hand, and the democratisation and civil society strengthening of the Muslim societies on the other hand, can result in the articulation of dissatisfaction with Islamic finance operations on the ground of this converged nature. In particular, political culture oriented developments may, therefore, result in questioning Shari’ah scholars’ hegemony in presenting Islamic finance as ‘Shari’ah compliant’, which may lead constituents calling for alternative products, instruments and institutions in Islamic finance with an existential reform in the form of ‘Islam-based-financing’.
This research, hence, suggests that for Islamic finance to remain a robust alternative financing paradigm as opposed to financialisation paradigm by eliminating such risk areas, it should express itself within the aspirational definition of Islamic finance as provided by IME rather than compromising its foundational claims by going back to the basics
