Islamic Finance

The Islamic Finance Project (IFP), under the auspices of the Islamic Legal Studies Program (ILSP), and the London School of Economics and Political Science (LSE), jointly hosted their fourth annual daylong workshop on the 25th of February 2010 at the LSE campus in London. Leading Islamic ethico-legal scholars (more commonly known as Shari‘a scholars), Islamic economists, and Islamic finance professionals came together to address a pressing topic in the field of Islamic finance: ethics and governance.

The workshop was attended by a group of influential Islamic legal scholars, academicians, economists, bankers and industry practitioners, who were welcomed by the Directors of IFP and LSE, Dr. Nazim Ali and Sir Howard Davies, respectively. The financial crisis, which was the backdrop of the discussions, and the need to revisit risk management practices were underscored in the opening addresses. The crisis, at its core, demonstrates the dangers of “group think” and over-optimism in clouding corporate decision-making and risk reigning.

The Islamic Finance Project (IFP) organized a panel discussion at Harvard Law School on March 16, 2009 in an effort to determine the relevance and merits of Islamic finance principles, in light of current global financial crisis. Given the relative insulation of Islamic financial institutions (IFI’s) from the brunt of the crisis, IFI’s may provide insights into the development of a more stable and morally-sensitive financial framework.

A workshop entitled “Microfinance: Toward a Sustainable Islamic Finance Model” was held on April 18, 2008, at Harvard Law School before the Eighth Harvard University Forum on Islamic Finance, entitled “Innovation and Authenticity.” Despite the fact that Islamic finance is inherently social justice–oriented, Islamic financial institutions have not yet made significant forays into the area of microfinance.

Tawarruq is a debt instrument that many shari‘a scholars have approved and that the Islamic finance industry has since used extensively. Yet, as its popularity has increased, so has criticism of it.

In the past,

Islamic Finance (IF), by any standard, is a burgeoning industry. As with any industry, such fast progress demands a critical look. Particular to IF is the complex and integral relationship that Islamic law has with the field. The nature of shari‘a advisement has recently been brought into question, and there have particularly been questions about the role of Islamic economists vis-à-vis shari‘a scholars.