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In the 1980s, Malaysia adopted the policy of state‐led Islamization. The ruling UMNO party co‐opted ABIM, fashioned itself as an Islamically oriented party, and adopted many Islamist ideas. The state created Islamic institutions, and supported Islamic cultural, political, and economic activities. It used Islamization to expand its power and to penetrate the Malay society. The state also embarked on rapid economic growth to address racial tensions. It used its control of Islam to manage Islamic politics and define Islamic values with a view of economic growth and accommodating globalization.

This book examines whether Islamic banks perform better than their conventional counterparts in times of financial crisis, as well as the extent to which systems for managing risk have to be adapted for Islamic financial institutions given the unique features of their assets and liabilities and the need for Sharī’ah compliance. It considers the challenges faced by Islamic financial institutions in an international system that requires banks under Basel III to have more capital and liquidity to cope with future shocks. Aside from risk management and risk mitigation, the book discusses governance issues and their implications for institutional stability and sustainability.

There has been a lack of concrete ideas about how to integrate Islam in Europe, in part because for decades no serious thought was given to the question. Since September, 11, 2001, however, security concerns have forced governments to think again about the situation of the Muslim minorities. Proposals to spend public money on Islamic institutions now appear on the desks of lawmakers, often accompanied by recommendations from the police. Policymakers, however, struggle with two contradictory assumptions that make policymaking seem very problematic. One is that Islam runs counter to fundamental Western values, particularly when it comes to the position of women, and is intolerant of dissent and individual choice. On the other hand, Islam is also perceived to lack coherence and unity because it is a congregational religion, a community-based faith centered around collective worship but without a clerical hierarchy and no common theology.

This chapter explores corporate governance, accountability and transparency in Islamic financial institutions (IFIs), with emphasis on internal Sharī’ah audit practices in Bank Islam Malaysia Berhad and Bahrain Islamic Bank. It first considers risk management in IFIs before proceeding with a discussion of operational risk and comparing an external Sharī’ah audit with a Sharī’ah compliance audit. It demonstrates the use of the Sharī’ah internal control list/questionnaire in Bank Islam Malaysia and Bahrain Islamic Bank to show that it can be adopted by the external Sharī’ah auditors to audit the IFIs.

In the wake of the terrorist attacks on the United States, the UN Security Council passed a resolution targeting transnational sources of terrorist funds. As the US and multinational institutions such as the IMF encouraged the Middle East governments to adopt policies of economic liberation, a new capitalism emerged based on Islamic values and beliefs. This book focuses on the emerging connections between Islamic capital, with particular attention to Islamic finance and Islamist political movements in the Middle East and North Africa. It includes not only the funds deployed by Islamic financial institutions but also the assets of the Muslim entrepreneurs who are associated with Islamically oriented businesses. The political associations as well as the political and economic constraints faced by Islamic banking are discussed also. The book is divided into two parts: first it provides thematic essays that serve as ground-work for the country-specific political analyses of Part II. In this introductory chapter, the growth of Islamic markets and the political opportunities and constraints faced by Islamic banks are examined.

This chapter examines the extent to which Sharī’ah reports can be used as an effective tool in risk management, with emphasis on non-compliance risks. Drawing on the experience of the ten leading Islamic banks, it considers how banks conform to the guidance issued by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) on Sharī’ah reporting. It shows that the banks differ in terms of conformity to the AAOIFI guidance, from 100 per cent for the Al Baraka Group of Bahrain to 18.2 per cent for the Kuwait Finance House parent company. The chapter argues that the Sharī’ah Supervisory Board, which is responsible for the governance structure of Islamic financial institutions, plays a key role in the management of Sharī’ah non-compliance risk.

Many criticisms have been made against the means of wealth mobilisation by conventional banks. For Kuran (1986), the interest used by conventional banks profits only certain sectors of the economy as it transfers wealth from the poor to the rich. While Islam encourages legitimate trade and commerce, hoarding is however prohibited and zakāh is imposed on unutilised wealth. In addition, while legal ownership is recognised as an individual right in the Muslim world, it is maintained that all ownership must be subject to moral obligations. In this context, Islamic banks are expected to be sensitive to the needs of the society, promote social welfare, establish funds for social development, and make contribution towards the poor and the needy. This chapter highlights the experience of two Islamic financial institutions in Malaysia, the Bank Keriasama Rakyat Malaysia Berhad (Bank Rakyat) and Bank Islam Malaysia Berhad (BIMB), in mobilising wealth. These two institutions were chosen due to their distinctive differences in operations, target customers and usage of the Shariāh principles. The chapter begins by providing an overview of Islamic banking in Malaysia. The section that follows elaborates on the history and development of the Bank Rakyat and BIMB, followed by a discussion on their deposit and lending activities. The last two sections of the chapter discuss other activities undertaken by the two institutions, and the issues and challenges they face.

This chapter shows how market reform has limited the ability of Islamic institutions and secular charities to meet basic needs in Kazakhstan and Kyrgyzstan. Interviews conducted with representatives of these groups and with ordinary citizens confirmed that these organizations provide limited material assistance. Further supporting this point, the survey data show that few citizens turn to them for assistance. Other societal groups that have not been the focus of previous studies and speculation also do not provide substitutes for state resources. These include foreign charities, foreign companies, local businesses, professional associations, political parties, aksakals (respected male elders), and secular educational establishments. The paucity of resources available from societal groups encourages citizens to seek assistance from government officials, and to use illicit means when doing so.

Sharī’ah governance is an additional layer of governance within the internal structure of corporate governance in Islamic financial institutions (IFIs) and serves as an important mechanism for addressing Sharī’ah non-compliance risk, a specific type of risk exclusive to IFIs. This chapter examines Sharī’ah governance practices in thirty-five IFIs in Malaysia, the United Kingdom and the Gulf Cooperation Council (GCC) countries. More specifically, it considers the banks’ internal arrangements for Sharī’ah governance, disputes procedures and the legal authority of Sharī’ah boards, their work and operational procedures, and their competence, confidentiality and independence. The chapter highlights serious deficiencies in Sharī’ah governance, which are worse in the United Kingdom and the GCC than in Malaysia.

This chapter looks more closely at the interplay between Jewish and Islamic courts. It discusses instances in which Jews chose to bring cases to Islamic legal institutions even when they could have remained in Jewish courts, and when Muslims similarly chose to use Jewish legal institutions rather than stay in Islamic ones. The chapter also argues that Jews' and Muslims' movement across jurisdictional boundaries caused judicial officials from both communities to accommodate the realities of legal pluralism. Islamic law and Jewish law converged toward each other—Islamic law by accommodating the existence and validity of Jewish legal institutions, and Jewish law by accommodating the presence of Muslims in Jewish courts.

This chapter examines the outcomes of Sharī’ah governance in Islamic financial institutions, with emphasis on financial products that have raised objections from Sharī’ah board members, particularly eina (back-to-back sales that are commonly used for housing finance) and tawarruq (method of providing cash advances). It illustrates how the financial crisis has demonstrated the imprudence of such financing methods and argues that eina and tawarruq do not contribute anything to maslahah, the goals of the Sharī’ah.

Following the Russian conquests of the 16th century, ulama became the foremost social authorities for Volga-Ural Muslims. Tsarist efforts at governing the Muslim population increasingly focused on them in the 18th century, with greater tolerance and state support for Islamic institutions alongside a co-optation of scholars’ authority. In 1788, the Orenburg Spiritual Assembly was founded, placing all ulama under a hierarchy controlled by the state. The Spiritual Assembly offered stability and permanence to Islamic institutions, allowing for a flourishing in Islamic scholarship, but it also transformed the ulama and application of Islamic law. This chapter addresses Muslims’ shifting relationship to the Russian state and the structural changes to Islamic institutions, and how this impacted scholarship. Focusing specifically on ulama in the 18th and early 19th centuries, it places Qursawi’s life and career within this context, particularly his education, the formation of his thought, and his condemnation in Bukhara for heresy.

This chapter examines a second kind of pathway, one concerning ideas and practices of religion and politics. In India, British rule both validated religious governance of family affairs and drove Islamic leaders to carve out their own spaces for teaching, learning, and the administration of Islamic law. In postcolonial Britain, the same logics of religious governance and autonomy facilitate efforts to transpose Islamic institutions to London or Birmingham. British Islamic actors have employed three distinct processes to create these spaces: they reproduce South Asian religious differences in Britain, they adapt Islam to the opportunity structures found in Britain, and they maintain transnational ties to religious or political movements elsewhere. To some degree, these three processes—reinforcing boundaries, adapting locally, maintaining transnational ties—figure in all Islamic actors' practical schemas for shaping British Islam.

This chapter focuses on the Assarrafs and the ways in which they engaged Muslim notaries public and shariʻa courts to sustain their quotidian business dealings. It shows that Jewish merchants like Shalom and Yaʻakov Assarraf used local Islamic legal institutions frequently because of their extensive commercial relations with Muslims. The absence of a formal banking system and the increasingly short supplies of cash, especially in rural areas, meant that Jewish merchants sold most of their wares on credit. In order to ensure that extending credit would be profitable, Jewish merchants relied on shariʻa courts to document and enforce the debts they accumulated. Islamic legal institutions were thus central to how Jewish merchants did business.

The study of waqf is a field that has known intensive scholarly work, this institution having for many decades been explored by legal scholars and historians who have scrutinized waqf law and the provisions that regulated it. The literature on this subject is consequently extensive and has allowed historians to understand waqf better than many other Islamic institutions. As explained by this chapter, tension between a waning imperial government and increasingly powerful provincial groups was accompanied by conflicts over mutual rights and responsibilities. In times of change, furthermore, various groups—including state actors—attempted to put forth competing definitions of waqf, reshaping its meaning to suit their purposes. In the fascinating cases of guild waqfs examined by this chapter, artisans made use of waqf as an institution that fulfilled their collective need at a particular moment of uncertainty and economic insecurity.

This chapter discusses how Islamic institutions are keeping Muslims from fully integrating into English, or British, society. Some Islamic institutions deeply trouble at least some non-Muslims in Britain; others do so much less. Shariʻa councils are accused of threatening legal unity, oppressing women, and encouraging Islamic radicalism and domestic violence. But other institutions, despite the clear role of shariʻa, are relatively accepted. The chapter then considers two kinds of Muslims. Liberal or “moderate” Muslims fit in by adapting to English behavior and by embracing what are claimed to be modern British ideas about gender roles. By contrast, conservative Muslims don't shake hands, live by themselves in Leicester or Dewsbury, and might promote extremism. Ultimately, shariʻa councils and Muslim schools have become the major objects of broad British fears about domestic Islam. Both seem to cross boundaries in a way that threatens the unity of Britain, or of England.

Much of the recent debate concerning Muslims and Islamic religious education has been confined to security issues. Simplistic reductionism and predetermined assumptions that regard Islam as a fixed religion and Islamic institutions as hotbeds of terrorism disregard the specific and complex local and political histories that have shaped and continued to influence various transformations in the fundamental ideology of many Islamic religious institutions. Through a study of Darul Uloom (House of Knowledge) Deoband, an influential religious seminary in Uttar Pradesh, India, considered next in standing only to Cairo’s Al-Azhar, this chapter analyses various transformations in the approach and concern of a supposedly ‘orthodox’ religious institution. Can an orthodox institution simultaneously play moderate and progressive roles? Does Deoband have a progressive vision for the Muslim community? In this chapter, I have shown the ways a supposedly orthodox institution of Islamic learning has been trying to maintain its religious authority in a rapidly changing world.