Typewritten Market
The power of time in defining operative contexts for the Islamic contract has established a new space for commercial practice in recent decades: from the second half of the last century, the globalisation of capital flows has affected the economic, political, and social life of Muslim countries - as much as it has done for the rest of the world economy.
Correspondingly, the realm of Codified Norm of Muslim states has become itself a partial totality (Bhaskar, 1994, p. 76), where the application of contractual rules is today radically affected by the business practice of the transnational lex mercatoria. Within this new context, as we will see, not only has the ‘aqd found another ‘new life’ (section 4.4.1), but its medium has shifted from state norms to Shari‘ah- compliance certificates (section 4.4.2; the graphical variation used here from San‘ah to Shari‘ah will be explained shortly). As a result, this transformation has given rise to a new textual polity, which can be described in terms of a Typewritten Market (section 4.4.3).4.4.1. Global capitalism and the invention of Islamic finance: a new life
for the ‘aqd between authenticity and contamination
Already at the start of the millennium, Ibrahim Warde could open a classic volume on the political economy of the Muslim world by asserting that ‘Islamic finance can no longer be dismissed as a passing fad or as an epiphenomenon of Islamic revivalism’ (2000, p. 1). In a very similar way, another seminal book on the subject, published by Frank E. Vogel and Samuel L. Hayes at the end of the 1990s, introduced the matter by noting how ‘[t]he dramatic growth of this unique form of commerce over the past twenty years coincides with expanding wealth in the Middle East and parts of Asia and with a turning away from secular Western practices’ (1998, p. 1). In 2006, Mahmoud El-Gamal could repeat the same enthusiastic remarks: ‘[i]n recent years, financial activities conducted under the banner of “Islamic finance” have grown significantly in volume and scope, attracting significant attention worldwide’ (2006, p.
xi; for a general description of Islamic finance mechanisms, see Ayub, 2007).While the Mit Ghamr Savings Bank, established in Egypt in 1963, is commonly referred to as the first example of Islamic banking in the modern world, the global dimension of Islamic finance started only during the 1970s and has developed till the present as an active segment of global capitalism, to the extent that ‘[t]he power of Islamic capital has generated numerous sites of legal contestation and negotiation, ranging from gateway financial centres, international law firms and transnational financial institutions’ (Ercanbrack, 2015, synopsis).
Simultaneously, the literature on Islamic economics (which provides the theoretical background for Islamic financial operations: Cattelan, 2018) has grown exponentially; if Rodney Wilson could note in 1997 that ‘[t]here has been more written on Islamic economics in the last two decades than in the
previous fourteen hundred years’ (Wilson, 1997, p. 115; quoted in Warde, 2000, p. 40), the number of publications in the area have further multiplied in recent years. The creation of this corpus of literature has stood side by side with the growth of Islamic finance, giving rise to a global market whose financial transactions have very little in common with the practice of proprietary, credit, or silent partnerships that existed in Islamic medieval trade (for a precise outline of this reality, see Udovitch, 1970a).
Looking at this evolution, some noteworthy similarities can be found with what in the previous section has been described as the ‘invention’ of Islamic law (Buskens and Dupret, 2015). In a certain sense, just as a ‘body’ of Islamic norms (in a visual sense) did not exist before Western legal transplants and the start of the process of codification (since fiqh tradition was grounded on the acoustic space of the revelation), so a theory of Islamic economics and a practice of Islamic finance could not be found before the 1970s.28
If it is obvious that Muslim medieval trade worked within a social context completely different from the contemporary global market, the ‘invention’ of Islamic finance has followed a path of cultural hybridisation where the rules of fiqh contract law (in particular, the prohibitions of ribd, gharar and maysir: see section 3.5.4) are applied next to the global standards of conventional capitalism.
Hence, contractual structures of classical fiqh (such as silent partnership, muddraba; full partnership, musdraka; mark up sale, murdbaha; lease, ijdra; and contract of manufacture, istisnd‘) have been ‘re-clothed’ to imitate conventional financial structures and adhere to a financial engineering mainly shaped according to common law. As she did with regard to the process of codification, the image of the Arab Girl dressed in Western fashion can offer here an anthropomorphic representation of what El-Gamal describes as ‘Shari‘a arbitrage’ (2006, p. 20), so summarising the current practice of Islamic finance in three steps.1. Identification of a financial product that is generally deemed contrary to the precepts of Islamic Law (Shari‘a).
2. Construction of an “Islamic analogue” to that financial product. Examples includes Islamic home (mortgage) or auto financing - commonly using the Arabic-nominate contracts murabaha or ijara, as well as Islamic bonds or certificates commonly marketed under Arabic names like sukuk al-ijara or sukuk al-salam. In fact, an important step in executing Shari‘a arbitrage is finding an appropriate Arabic name for the Islamic analogue product, preferably one that was extensively used in classical Islamic legal texts. Differences in contract forms and language thus justify and lend credibility to the “Islamic” brand name.
3. In the meantime, an Islamic financial structure marketed under an Arabic name must be sufficiently similar to the conventional structure that it aims to replace. Sufficient similarity would ensure that the Islamic structure is consistent with secular legal and regulatory frameworks in target and origin countries (ibidem, pp. 20-21).
There is, without doubt, a marketing strategy, as well as compelling reasons of market regulation, behind the inescapable trade-off between efficiency and legitimacy (El-Gamal, 2006, p. 20) that belongs to Islamic financial products. At the same time, through the process of ‘Shari‘ah arbitrage,’ the Islamic contract has found a new ‘cosmopolitan life’ in this new stage of its transformational practice.
No longer anchored to norms codified within national boundaries, some essential features of the ‘aqd have been embodied in the global space that belongs to the practice of Islamic finance law. It is within this operative framework that, nourished by the forces of global capitalism and the ethical demands of Muslim elites and societies, Islamic finance and its law have emerged as a transnational market that transcends state frontiers and operates according to the peculiar dynamics of legal pluralism by connecting diverse networks of interests to multiple centres of norm production, application, and adjudication (on the subject, see, in particular, Foster, 2007; Pollard and Samers, 2013).In this domain of transformative praxis, the new ‘time’ of the ‘aqd confirms a continuity-through-change that has always affected its practice (as we saw previously, the era of Verbal Trade started with the revelation changing the values of pre-Islamic society, and that of Codified Norm bore witness to its contamination by Western law). In particular, Islamic financial operations certainly repropose the appeal of a theory of property rights whose ‘spiritual truth’ derives from the ethical background of Islamic din, and that is mirrored in some ‘secular rationales’ that differentiate the Islamic market from the conventional one (on this point, see Cattelan, 2013).
Looking at the ‘authenticity’ of the ‘aqd, there are, in fact, three core elements that show the re-discovery (and vitality) of its legal tradition through Islamic finance; and namely, ‘(1) the centrality of the object in the transaction as something “real” (“tangible”) to be traded; (2) the fundamental need for an equilibrium in the exchange; and (3) asset-backed risk and investment risksharing’ (ibidem, p. 41; more extensively, pp. 41-46; on this matter, see also Cattelan, 2009). Each of these elements recalls central features of the Islamic theory of the contract that have been investigated in Chapter 3 and that the Islamic financial market has projected within the cosmopolitan space of global investments.
Hence, with regard to the need for tangible goods to be traded (whose rationale lies in the ‘real’ connotation of the ‘right,’ haqq, in Islam: see sections 2.4.4 and 3.5.3),29 we can repeat here the words of Chehata.The decisive element of the legal relation lies in the object. The object takes place between the two persons who enter into a relationship through it. This relationship, of which the object is the specific term, is constituent of the right. The title that founds the right of the subject is the reason which establishes a link of belonging between him and the object.
Once this relationship has been concretely realised, a state of adjustment and of equilibrium must rule: everything in its [due] place.
(Chehata, 1968, p. 141, my translation; already quoted at section 3.6) Second, the principle of the equilibrium between the countervalues immediately relates to the prohibitions of riba, gharar, and maysir, examined in section 3.5.4. Hence, for the prohibition of riba in terms of the need for a ‘balanced unity,’ ‘equilibrium,’ ‘symmetry,’ the passage by al-Kasani mentioned in Chapter 3 can further stress the need for this symmetry in the transactions of Islamic finance.
Equality... is the aim of the contracting parties (al-musawat... matlub al-‘aqidayn).... The entirety of the sold object is to be considered equivalent to the entirety of the price (kull al-mabi‘ yu‘tabar muqabalan bi-kull al-thaman), and the entirety of the price equivalent to the entirety of the sold object. Any increment (ziyada), whether in price or in the object which has no corresponding equivalent, would be an additional value without compensation..., and this is the meaning of usury (riba). (al-Kasani, Bada'i‘ al-Sana'i‘ f Tartib al-Shara'i‘, quoted in Arabi, 1997, p. 208)
Last but not least, since ‘[t]he balanced and disclosed correspondence between tangible countervalues necessarily results in a favour towards asset-backed and equity-based financial instruments...
[t]his preference [also] corresponds to specific risk strategies’ (Cattelan, 2013, p. 44), where risk cannot be conceived as a commodity per se (‘trading of risk is not admitted, and a number of financial instruments (that is, insurance, derivatives) that are widespread in the conventional Western market become invalid:’ ibidem). At the same time, the remuneration of business participants ‘cannot be determined ex ante., according to a predetermined ratio, but derives from a principle of risk-sharing in the profit (mudaraba) of the business, which may be extended also to the liabilities of the affairs (musharaka)' (ibidem, p. 45).If the three essential elements of Islamic financial operations confirm the vitality of the Islamic ‘aqd - even beyond the boundaries of Muslim countries - this ‘authenticity’ has been contaminated by the contemporary textual forms through which it is granted; namely, ‘the emphasis... on contract mechanisms and certification of Islamicity by “Shari‘a Supervisory Boards” ’ (El-Gamal, 2006, p. 1). The process of Shari‘ah certification, as we will see in the next section, has radically transformed the idea of Islamic law when applied to the global economy through the canons of Shari‘ah-compliance, with a shift in its social anthropology from the textual polity of fiqh legal texts in Muslim medieval trade (see end section 4.2.3), where actions were judged by rules legitimised by their own local context, to the realm of financial technology, where certifications own a legitimacy that is formulated context-less, and relies on some sort of ‘dematerialised San‘ah' (Cattelan, 2021, p. 79).
This radical shift in the anthropology (and epistemology) of Islamic law - and so, of the ‘aqd - can be implicitly suggested by the graphical variation from Sari‘ah (that this book has employed with reference to fiqh) to the simplified transliteration ‘Shari‘ah,’ in relation to the process of compliance (which will be used in the next section). In fact, far from being just a matter of style, this simplified transliteration, which is commonly employed both in international finance and academic literature, bears witness to ‘a “transliteration” of Islamic finance into the semantic forms of Western modern law..., with a predominance of a business/legal language in Latin alphabet... instead of the moral/ religious language of Sari‘ah' (Cattelan, 2021, p. 91, note 49).
4.4.2. The textual polity of Shari‘ah-compliance
Dealing more in depth with the law of Islamic finance, a valuable starting point can be found in the Encyclopedia of Islam.00
Islamic finance denotes financial transactions in compliance with Islamic principles. It is a business practice guided by Islamic law that has evolved in the context of global financial markets and is the most important application of Islamic contract law today. Moreover, it is the key area where the propositions of Islamic economics... are put into practice.
(Balz, 2014)
The contributor, Kilian Balz, refers to Islamic law in various ways (‘compliance with Islamic principles;’ ‘application of Islamic contract law;’ ‘the propositions of Islamic economics’). More precisely, after listing in the entry the general principles of Islamic banking (namely, (i) interest on loans is prohibited; (ii) speculation is unlawful; (iii) trading in debt is not allowed) and the contracts generally in use (i.e. murdbaha, musdraka, muddraba, ijdra, istiynd"), plus the issuance of sukuk (Islamic securities - certificates of investments, commonly called ‘Islamic bonds’), he immediately specifies his definition in the sense of Shari‘ah-compliance (see also Balz, 2008).
Shari‘a compliance - abiding by the prescriptions of Islamic law - is what sets Islamic finance apart from conventional finance. The review and certification process that creates the Islamic legitimacy for Islamic financial transactions and which constructs the normative framework in which Islamic banks operate is central to Islamic finance. Islamic financial transactions are normally reviewed and certified by a board of Islamic scholars (the so-called Shari‘a board), which renders an opinion (termed fatwa, in reference to traditional Islamic law).
(Balz, 2014)
Reading the Encyclopedia, it is evident that, although Islamic financial institutions identify themselves with Shari‘ah-compliance (which ‘creates the Islamic legitimacy’ of their transactions), their claim to comply with Islamic contract law seems to be made as if no radical transformation would have affected the meaning of the concept over the centuries (Balz suggests this historical variance when he notes that Islamic scholars’ opinions are named fatwd ‘in reference [in homage?] to traditional Islamic law’). But the normative space of Islamic finance cannot be properly understood, as remarked at the start of this chapter, without locating the Islamic contract in-time as a social (as well as anthropological and epistemological) construction. Hiroshige’s Bridge (Figure 4.1) and Szymborska’s People (who ‘are subject to time, but they won’t admit it:’ see section 4.1 in this chapter) come back at this point with their epistemological power.
With reference to the Verbal Trade of classical Islam (section 4.2.3), this book has underlined how fiqh legal texts located Sari‘ah in context: the process of ‘entextualisation’ worked in a ‘handwritten,’ ‘calligraphic’ way and the social value of juristic solutions was grounded on rules that were legitimised by real-life situations. Moving now to contemporary times, how much ‘material entextualisation’ in Islamic contracts and securities arises from the process of Shari‘ah-compliance? Is the Sari‘ah value of Islamic finance the same as fiqh rules or has the passing of time radically transformed the ‘aqd?
While the legitimacy of Islamic financial transactions is certainly grounded on (or rather, backed by) Sari‘ah, it seems to me that today’s Shari‘ah- compliance departs from the ‘real,’ ‘right’ (haqq) of social relations towards a ‘de-materialised SarVahf where the meaning of Islamic law is embodied in the validation of contracts rather than in human actions, and so it departs from the performance of Islamic din as Muslim bios (see back, section 2.3). In this precise sense, if, in classical fiqh, actions were judged by rules legitimised by their own context, in the process of Shari‘ah-compliance, the Islamic legitimacy of financial products is ratified through certifications owning a legitimacy that is formulated context-less (i.e. without a context). As a result, the Shari‘ah-compliance process entextualised in Islamic contracts has replaced Sari‘ah as Text inscribed in the reality of Muslim bios; correspondingly, in this new textual polity, the meaning of ‘aqd relates more to standardised products and securities rather than actual social interactions. One should also note that this shift reflects a much wider turn towards a rationalistic and purposive epistemology of Islamic law (through the maqasid al-Sari‘ah, ‘the objectives of Shari‘ah:’ see Johnston, 2004), of which the process of Shari‘ah-compliance is clear manifestation; not by chance, the reference to maqasid is widespread in Islamic finance, defining the meaning of Islamic law for individual action more in terms of efficiency than morality.
A move towards a de-materialised Sari‘ah has occurred in the social anthropology of Islamic finance within a textual polity whose paradigm ‘text’ is no longer the Text (the Qur’an) but has split into standardised legal texts (the certifications by Shari‘ah scholars embodying Shari‘ah standards) and the contractual texts of Islamic transactions.
But what does this transformation imply?
It’s difficult at this point to keep from commenting.
This picture [‘Islamic law’, our Hiroshige print] is by no means innocent. Time has been stopped here.
Its laws are no longer consulted.
It has been relieved of its influence over the course of events.
It has been ignored and insulted (Szymborska, 1996, pp. 167-168).
Indeed, while, in global Islamic finance, the authority of ‘Islamic law’ is backed by the Text of Sari‘ah, it is, more importantly, embedded in Shari‘ah- compliance texts, as both sociological and economic research has shown, while no longer echoed in the reality of Muslim bios. For instance, a publication by Funds@Work (2010) has highlighted how the ‘small world of Islamic finance’ gathers a limited number of Shari‘ah scholars whose signatures provide valuable (i.e. authoritative) certifications. Correspondingly, these signatures render valuable (i.e. economically profitable) Islamic securities: ‘the choice of scholars hired to certify these securities matter for the market valuation of the issuing company’ (Godlewski, Turk and Weill, 2014). In summary, within the space of Islamic finance, the world, where the meaning of Islamic law is inscribed, has become the financial world, a ‘world of texts’ and contracts, not of real people; financial products have replaced the social actions of actual bios; Shari‘ah-compliance has replaced SarCah; technology has replaced the Text.
The three qualities offiqh textual polity (see endnote 16) have disappeared in the world of Shari‘ah compliance and have been substituted by: (1) a textbased approach to Islamic law in relation to contractual forms, not human actions; (2) the standardisation of context-less operations; and (3) uniform outputs that are functional to the efficiency of transactions management in the governance of Islamic financial institutions. Correspondingly, the (religious) Truth of Sari‘ah, as revealed in Islamic din, has been substituted in Islamic finance law by the (procedural) truth of (Shari‘ah-)compliance, with a predominance of elements of legal and financial technology as the epistemological environment for its assertion (see section 4.4.3 in this chapter).
In fact, ‘compliance’ - from the Italian complire, ‘to complete,’ ‘fulfil,’ ‘accomplish’ - has no religious meaning and there is no Islamic legal definition of compliance. Instead, the notion belongs to the field of organisational technology: Governance, Risk Management and Compliance (GRC) is, today, a subfield of business administration with GRC defined as ‘the integrated collection of capabilities that enable an organization to reliably achieve objectives, address uncertainty and act with integrity’ (Mitchell, 2007). Hence, one can think of legal compliance as a tool of governance which aims to review, verify, and certify that the organisation’s procedures and outcomes comply with the law in the broader sense (international, national, local legislation, codes, standards, and so on). Accordingly, Shari‘ah-compliance has become today part of the technology of (Islamic) financial institutions, with a meaning that belongs more to the realm of governance rather than to (Islamic) law/religion.
Shari‘ah-compliance reflects a governance technology where the value of transactions, contracts, and securities relates to standardisation; and, within this frame, the Sari‘ah-value of fiqh ‘calligraphy’ has been replaced by a dematerialised Sari‘ah, which is ‘typewritten’ in market-values. In brief, Islamic finance has given rise to a Typewritten Market as socio-anthropological space for the contemporary life of the ‘aqd.
4.4.3. From fiqh legal texts to financial technology
In one of his books, Italian philosopher and psychoanalyst Umberto Galimberti notes how today
technology has become the environment... that constitutes ourselves in accordance with... [itsown] rules of rationality..., functionality and efficiency.... But technology does not tend towards an aim, does not promote a sense, does not open scenarios of salvation, does not redeem, does not unveil the truth: technology [simply] functions.
(Galimberti, 1999, synopsis; my translation)
Even the perception of contemporary truths (if not the Truth) is affected by the rationales of technology - as previously noted, the functionality of the maqasid purposive approach may be indirect proof of this claim in the epistemology of Islamic law (Johnston, 2004). What can we add to all this? Certainly, if Hiroshige’s ‘little picture’ is ‘by no means innocent,’ neither is the meaning of ‘Islamic law’ - and then, of the ‘aqd - in Islamic finance.31
For generations, it’s been considered good form here
to think highly of this picture [Islamic law],
to be entranced and moved.
There are those for whom even this is not enough.
They go so far as to hear the rain’s spatter [Islamic law’s conceptual power], to feel the cold drops on their necks and backs, they look at the bridge and the people on it
as if they saw themselves there,
running the same never-to-be-finished race [the compliance that ‘runs’ San‘ah]
through the same endless, ever-to-be-covered distance [the efficiency of technology],
and they have the nerve to believe
that this is really so [that Shari‘ah-compliance equals San‘ah] (Szymborska, 1996, pp. 168-169).
If, at the beginning of this chapter, we imagined being in the rain, at the end of Hiroshige’s Bridge, the race by the People of Islamic finance can illuminate, I believe, their meaning of ‘Islamic law,’ and thus of the ‘aqd in the textual polity of Islamic finance.
Just as Szymborska’s People keep running on the Bridge, so Islamic finance actors keep asserting ‘Islamic law’ in a market where their presence in-time is immersed in a social reality dominated by an ‘ever-to-be-covered distance.’ Accordingly, their only option is a ‘never-to-be-finished race:’ as ‘technology [simply] functions,’ so Shari‘ah-compliance locates their actions in a ‘race’ that ‘runs’ (in the sense of ‘operates’) Sari‘ah. In a nutshell, the ‘Path’ is no longer ‘followed’ (as it was in fiqh); rather, it is ‘put to work.’
Although some may have ‘the nerve to believe’ that Shari‘ah-compliance equals Sari‘ah, this section warns the reader about the radical transformation that the former implies for the social anthropology of Islamic law, and thus, the ‘aqd itself. While standardisation works as a law-making process where Islamic law is functional to Islamic finance operations, many Muslim believers, ‘subject to [the] time [of financial/legal technology],... won’t admit it.’ Rather, they would prefer ‘a way of expressing protest;’ more precisely, Shari‘ah-compliance as simulacrum of Islamic law. But, if Shari‘ah-compliance belongs to the world of technology, so the reference to Islamic law and to the Arabic terminology of Islamic contracts (see El-Gamal, 2006: section 4.4.1) becomes a ‘dialectical signature’ for the market: a sign of community belonging to Islam in a world of legal/financial technology to which Muslim believers (as everybody else) are subject. Reduced to a procedural step in the governance of Islamic financial institutions, Sari‘ah (Shari‘ah?) substantially ‘works’ in compliance with the standards that ‘run’ the market. As noted previously, the calligraphic trade offiqh has been replaced by typewritten certificates, contracts, and securities, giving rise to a textual polity detached from actual social relations of Islamic din as Muslim bios: in summary, to a Typewritten Market
V _ J f1-
that embodies a de-materialised Sari‘ah, where the meaning of Islamic law in-time belongs more to legal/financial technology rather than to Muslim human action.
4.5.