Please join us for the first Spring Quarter meeting of the Money, Markets, and Governance workshop, on Tuesday, Apr. 5th, 4:30PM – 6PM.
Unless otherwise announced, the meeting will be held at the Social Science Research Building room 404.
Associate Professor of Sociology, Illinois State University;
Visiting Scholar, University of Chicago
Can We Tether Finance to the Productive Economy?
Experimental Monetary Practices in Islamic Finance
Discussant: Karen Rhone
PhD Candidate, Department of Political Science, University of Chicago
Abstract: Islamic banking and finance is an ongoing Southern experiment to critique conventional finance and to construct morally superior new monetary practices and representations that are “Shariah-compliant.” This essay focuses on the emic practices and representations of a key concept in this South-South dialogue—riba—so as to address an etic research project of interest to secular social scientists: Is it possible to tether all financial activity to the productive economy? If we can, is that socially consequential?
To investigate these two questions, this essay explores three cases of novel monetary practices that are designed to elude ribaby tethering financial activity to the productive economy. The first case describes the non-problematic ease of tethering equity markets in Shariah-compliant stock markets. The second case describes the controversial monetary practices of ‘inaand tawarruqthat arguably fails to tether finance by too-briefly “recycling” it using a productive economic asset such as palm oil or platinum. Between these two cases—the first uncontroversial and unproblematic, the second controversial and yet difficult to resolve—we find our third case, sukuk, a moral replacement for interest-bearing sovereign or corporate bonds. The work of investment bankers and Shari’ahscholars to co-produce sukuk—a diverse category of new monetary economic practices—demonstrates both the viability and the curious mootness of tethering finance to the productive economy.
The essay concludes that tethering equities is simple and potentially socially consequential, while tethering debt is extremely difficult, organizationally expensive, and may be a moot economic exercise. I’m still puzzling over the implications of this for financialization theories.