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Abstract
A growing body of critical scholarship has examined the recent growth of Islamic finance (IF), unpacking its ethical assertions and highlighting its close affinities with conventional financial instruments. Receiving less attention, however, is the relationship between the global expansion of IF and the emergence of new financial actors and zones of accumulation. This article situates the evolution of global Islamic circuits alongside processes of capital accumulation in the Gulf Cooperation Council (GCC), arguing that contemporary IF is deeply bound up with the internationalisation of capital groups headquartered in the GCC. This is evident in the internationalisation of GCC Islamic banks, which has given the Gulf a powerful foothold in new markets and a variety of sectors that are typically considered ‘non-financial’. Simultaneously, the expansion and geographical diversification of Islamic debt (sukuk) issuance is refashioning the Gulf’s relationships with other global spaces, a process that looks set to intensify given the widespread push to utilise IF in development financing. Seen from this perspective, the global growth of IF sits in a mutually constitutive relationship with patterns of capital accumulation in the Gulf, as well as the region’s burgeoning weight within (and new linkages to) the global economy.
Disclosure statement
No potential conflict of interest was reported by the author.
Notes
1 At its most basic, Islamic finance refers to financial operations that accord with principles laid out in Islamic law. Although often reduced to ‘interest-free’ banking, the scope of these principles is in reality much broader: the avoidance of riba (an unjustified increase in money capital), maisir (speculation or gambling) and gharar (risk or uncertainty), and a focus on activities considered religiously permissible (halal).
2 ITR, Towards Sustainability, 11.
3 IMF, “Islamic Finance”; World Bank, Global Report on Islamic Finance.
4 World Bank, Islamic Finance Newsletter, xi.
6 Marois, “Emerging Market Bank Rescues.”
7 Fine, “Neoliberalism as Financialisation,” 59.
8 LiPuma, “Social Life.”
9 Rethel, “Whose Legitimacy”; Bassens, Derudder, and Witlox, “‘Gatekeepers’ of Islamic Financial Circuits”; Pollard and Samers, “Governing Islamic Finance.”
10 Warde, “Global Politics, Islamic Finance”; Rudnyckyj, “Spiritual Economies.”
11 Bassens, “Emerging Markets.”
12 Rethel, “Whose Legitimacy,” 89.
13 Dumenil and Levy, Crisis of Neoliberalism.
14 IFSB, Islamic Financial Services Industry, 9.
15 Christophers, Leyshon, and Mann, Money and Finance after the Crisis, 12.
16 Krippner, “Financialization of the American Economy.”
17 Martin, Financialization of Daily Life; LiPuma, “Social Life.”
18 Aalbers, “Financialization of Home”; Dos Santos, “On the Content of Banking.”
19 Lapavitsas, Profiting without Producing.
20 Ertürk, “Governance or Financialisation”; Marois, “Emerging Market Bank Rescues”; Rethel, “Financialisation and the Malaysian Political Economy.”
21 Kaltenbrunner and Painceira, “Subordinated Financial Integration”; Karwowski and Stockhammer, Financialisation in Emerging Economies.
22 Karacimen, “Financialization in Turkey”; Dos Santos, “Cause for Policy Concern.”
23 Hanieh, “Absent Regions”; Painceira, “Developing Countries”; Becker et al., “Peripheral Financialization and Vulnerability.”
24 Samers, “Marriage of Convenience,” 1174.
25 Pitluck, “Islamic Banking and Finance,” 682.
26 Abdullah and Chee, Islamic Finance.
27 Rethel, “Imaginary Landscapes of Islamic Finance.”
28 Chapra, “Global Financial Crisis”; Nienhaus, “Islamic Finance Ethics.”
29 Ahmed, Asutay, and Wilson, Islamic Banking and Financial Crisis, 6.
30 World Finance, “Vatican Praises ‘Ethical’ Sharia Banking.”
31 Ismail, Rethinking Islamist Politics.
32 Hamoudi, “Muezzin’s Call,” 435.
33 Bassens, Derudder, and Witlox, “‘Gatekeepers’ of Islamic Financial Circuits,” 343.
34 Kamla, “Critical Insights into Contemporary Islamic Accounting”; Chong and Liu, “Islamic Banking”; Zaman, “Interest-Free Islamic Banking.”
35 Hamoudi, “Muezzin’s Call,” 460.
36 Ibid., 423.
37 Tripp, “Islam and Moral Economy,” 104.
38 Samers, “Marriage of Convenience.”
39 Rethel, “Whose Legitimacy”; Fang, “Islamic Finance in Global Markets.”
40 Lai, Rethel, and Steiner, “Conceptualizing Dynamic Challenges.”
41 Pollard and Samers, “Governing Islamic Finance,” 722.
42 Bassens, “Emerging Markets.”
43 Brenner, Peck, and Theodore, “Variegated Neoliberalization”; Hanieh, “Variegated Finance Capital.”
44 Naceur, Barajas, and Massara, Can Islamic Banking Increase Financial Inclusion?
45 Warde, “Global Politics, Islamic Finance.”
46 Smith, “Kuwait Finance House.”
47 Malley, “Jordan: A Case Study.”
48 Hoggarth, “Rise of Islamic Finance,” 118.
49 Warde, “Global Politics, Islamic Finance,” 47.
50 Rudnyckyj, “Spiritual Economies,” 105–6.
51 Henry and Wilson, Politics of Islamic Finance; Balkan, Balkan, and Öncü, Neoliberal Landscape.
52 Bassens, “Economic and Financial Dimensions,” 59.
53 Powell, Towards a Marxist Theory; LiPuma, “Social Life.”
54 World Bank, Islamic Finance Newsletter, 2.
55 Warde, Islamic Finance in the Global Economy.
56 Bassens, Derudder, and Witlox, “‘Gatekeepers’ of Islamic Financial Circuits.”
57 IFSB, various years.
58 https://www.imf.org/external/themes/islamicfinance/
59 Hanieh, “Variegated Finance Capital,” 6.
60 Although the IF sector is small in Oman compared to other GCC states, the country announced a strategic turn to the sector in 2014, and registered the second fastest growth in Islamic banking assets in the world in 2016. ITR, Towards Sustainability, 33.
61 Hanieh, “Variegated Finance Capital.”
62 Ibid.
63 Islamic law requires sukuk certificates to represent ‘undivided shares in the ownership’ of particular assets, and thus a ‘true sale’ must take place between the initial owner of the assets (the obligator) and the investors (the sukuk holders). For this reason, sukuk issuance generally involves the establishment of an SPV by the obligator as a means to take ownership of the sukuk’s underlying assets on behalf of the investors.
64 Interview with lawyer of GCC-focused construction firm, London, January 2018.
65 Calculated by author from Bankscope database. The banking system of Iran has not been included in this calculation (or others in this section), as it differs from Islamic banks found elsewhere and is almost completely domestically oriented.
66 Hanieh, Money, Markets, and Monarchies, 191.
67 The first, third and fourth largest Islamic banks in Pakistan are majority owned by Gulf investors, while the second largest is 14% held by Dubai Bank.
68 Hanieh, Money, Markets, and Monarchies, 195.
69 ITR, Towards Sustainability, 41.
70 Hanieh, Money, Markets, and Monarchies, 195.
71 Saadi, “Bahrain’s Al Baraka.”
72 Calculated by the author from Indonesia Financial Services Authority, “Shariah Banking Statistics,” various years, http://www.ojk.go.id
73 Reuters, “Indonesia Looks to New Roadmap.”
74 DIB, “Financial Statement,” 1.
75 The Central Bank of West African States, which covers eight countries in the West African Economic and Monetary Union, is currently working on Islamic finance regulations, and several banks are preparing to offer Islamic products in Mali, Senegal, Benin and Ivory Coast. In Central East Africa, Islamic banking has recently been introduced in Uganda, Kenya and Tanzania. The Russian central bank adopted an Islamic Finance Roadmap in 2016–17, and several banks are preparing to launch Islamic products aimed at Russian republics with large Muslim populations (such as Chechnya, Bashkortostan and Tatarstan).
76 Islamic law forbids conventional bond structures where money is advanced to the borrower (bond issuer) and then repaid over time with interest; instead, sukuk structures typically require some kind of collateral that the lender takes an ownership share in, earning income from the revenue generated by that asset. In the vast majority of cases – particularly for sovereign sukuk – this collateral takes the form of land, buildings or other types of real estate; this is one significant reason why Islamic banks have been so conspicuously involved in the purchase of real estate both in the GCC and farther afield.
77 Calculated by the author from IIFM, Sukuk Report, 6; and World Bank, Mobilizing Islamic Finance, 5.
78 Calculated by the author from Marmore MENA Intelligence reports, various years, https:// www.e-marmore.com/
79 S&P, “Global Sukuk Market Outlook,” 3.
80 Hanieh, Money, Markets, and Monarchies, 219.
81 IMF, Kuwait: Selected Issues, 6.
82 Hanieh, Money, Markets, and Monarchies, 219.
83 Moreover, in this manner, sovereign sukuk reinforces the relationship between an expanding volume of public debt and the growth of Islamic financial institutions – in effect, government revenues are recirculated into Islamic banks through the latter’s holding of sukuk.
84 These include some of the GCC’s largest firms active in sectors such as oil and gas (Saudi Aramco), energy and utilities (Saudi Electricity company; Dubai Electricity and Water, ACWA), telecommunications (Ooredoo), retail (Majd Al Futtaim), aviation (Etihad Airways; Emirates Airlines), ports (DP World) and real estate (Emaar Properties; Dar Al Arkan; DAMAC).
85 IIFM, Sukuk Report, 118.
86 HM Treasury, “Government Issues First Islamic Bond.”
87 Calculated by the author from an examination of all non-GCC sukuk (sovereign and corporate) issued between 2016 and February 2018 (data from sukuk.com).
88 DIB, “Financial Statement.”
89 Khaleej Times, “Dubai to Become Capital.”
90 Dubai sukuk listings reached $36.7 billion, compared to Malaysia with $26.6 billion listed on Bursa Malaysia and the Labuan free trade zone, the Irish Stock Exchange with $25.7 billion and the London Stock Exchange with $25.1 billion. http://www.nasdaqdubai.com/products/dubai-tops-sukuk-listing
91 IFN, volume 12, issue 37, 1.
92 Ibid., 4.
93 S&P, “Global Sukuk Market Outlook,” 4.
94 Maierbrugger, “Why Islamic Finance Fits Well.”
95 World Bank, Mobilizing Islamic Finance, 7.
96 Ibid., 1.
97 Ibid., 2.
98 ISRA, Islamic Commercial Law Report.
99 World Bank, Mobilizing Islamic Finance, xi.
Additional information
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Adam Hanieh
Adam Hanieh is a reader in development studies at SOAS. His most recent book is Money, Markets and Monarchies: The Gulf Cooperation Council and the Political Economy of the Contemporary Middle East (Cambridge University Press, 2018).