Why Does Islamic Finance Succeed in Some Countries More Than Others? the Politics of Shariah Authority in "Cool" Saudi Arabia and "Hot" Pakistan

Why has Islamic finance succeeded commercially in some countries and not others? Some states, particularly Malaysia, have received wide international recognition for thoughtful regulatory and tax policies that foster Islamic banking and Islamic capital markets. As of 2023, Islamic banking penetration in Malaysia sits at an impressive 42% of total national banking assets. However, that figure is 85% in Saudi Arabia—even though the Saudi central bank refused to acknowledge the very existence of Islamic finance until the 2010s. In Pakistan, where activists have agitated for Islamic finance since the 1970s and the state banned interest-based banking in the 1980s, the figure is just 20%. Drawing on 210 interviews, years of fieldwork, and analysis of primary and secondary school textbooks, this article compares Saudi Arabia and Pakistan while taking Malaysia as a reference point. It attributes their difference to the contentiousness of the field of public discourse about the meaning, authority structure, and implementation of Islamic law within the economy. This field has long been stable in Saudi Arabia but contentious in Pakistan. In Saudi Arabia, usury (ribā) appears in public as primarily a matter of individual piety. In Pakistan, by contrast, usury (ribā or sood) appears everywhere from school textbooks to popular opinion to the central bank as a vehicle for utopian macrosocial engineering, implicating domestic and global structures of inequality and subjugation. In Saudi Arabia, the implementation of Islamic finance therefore becomes a "cool" techno-juridical process that can merge smoothly into pre-existing national and international financial-market infrastructures. In contrast, the implementation of Islamic finance in Pakistan has invoked "hot" political passions that destabilize implementation efforts and obstruct easy integration into capitalist financial markets. The paper thus integrates a social-movements perspective and a political sociology of legal authority into the question of how national markets form and grow.