The Paradox of Islamic Finance: How Shariah Scholars Reconcile Religion and Capitalism

In just fifty years, Islamic finance has grown from a tiny experiment operated from a Volkswagen van to a thriving global industry worth more than the entire financial sector of India, South America, or Eastern Europe. You can now shop with an Islamic credit card, invest in Islamic bonds, and buy Islamic derivatives. But how has this spectacular growth been possible, given Islam's strictures against interest? In The Paradox of Islamic Finance, Ryan Calder examines the Islamic finance boom, arguing that shariah scholars—experts in Islamic law who certify financial products as truly Islamic—have made the industry a profitable, if controversial, hybrid of religion and markets.

Critics say Islamic finance merely reproduces conventional interest-based finance, with the shariah scholars' blessing. From an economic perspective, they are right: the most popular Islamic products act like conventional interest-bearing ones, earning healthy profits for Islamic banks and financial heavyweights like Deutsche Bank and Goldman Sachs. Yet as Calder shows by delving into the shariah scholars' day-to-day work, what seem like high-tech work-arounds to outsiders carry deep and nuanced meaning to the scholars—and to the hundreds of millions of Muslims who respect their expertise. He shows that the shariah scholars' conception of Islamic finance is perfectly suited to the age of financialization and the global efflorescence of shariah-minded Islam.

The Paradox of Islamic Finance draws on 15 years of fieldwork and 291 interviews conducted with interviewees in 20 countries—especially Pakistan, Saudi Arabia, Malaysia, the UAE, and the United Kingdom. Interviewees included shariah scholars, Islamic bankers, lawyers, shariah auditors, securities regulators, and central bankers. Calder's research assistants also interviewed 130 members of the general banking public in Pakistan and Saudi Arabia. He attended weeks of training seminars, interned at an Islamic-finance law firm, and even shopped at Islamic banks around the world.