تنظیم استانداردهای شرعی: در مورد نقش، قدرت و حالت فضائی هم پیوستگی هیات های شرعی در خدمات مالی اسلامی

This paper aims to refine earlier research on the geographies of Islamic financial services (IFS) through a study of how cities are being connected through interlocking directorates in Shari’a advisory boards of IFS firms. The relevance of this analysis is discussed against the backdrop of recent critiques of mainstream ‘world cities’ research because of structuralist and universalizing tendencies. By applying a network concept to the relationalities of world cities within financial circuits, we explore the nested city/firm/actor structure behind Shari’a board membership, and reassess the connectivity of cities in the IFS network in terms of the role and spatialities of interlocking Shari’a boards. The results show that Gulf cities, most notably Manama, Dubai and Kuwait City are particularly well-connected, while also mainstay financial centres outside the Middle East, such as London and New York are networked by interlocking board memberships of a global Shari’a elite. The dominant position of Manama is traced back to its role as a standard-setting city for Shari’a-compliant investments, which materializes through the enacted presence of an array of highly interlocked regulatory bodies and mediating elites.

In November 2007, the Pakistani Taqi Usmani, president of the Bahrain-based Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) Shari’a board, pronounced a fatwa on Islamic bonds (sukuk). Taqi Usmani claimed that sukuk, in their aim to compete with interest-based bonds, which generate a guaranteed return, often resemble ‘conventional’ (that is largely Western) debt-based instruments. Most of the contemporary sukuk were therefore considered to violate the principles of Islamic economics, most notably the profit-and-loss sharing idea. As this fatwa shook the very fundaments of Islamic financial practices, it immediately launched a shockwave throughout the Islamic financial world: sukuk issuance suffered a 40% decline during the first half of 2008 when compared to the US$ 18.3 bn issued in the same period in 2007 ( Oxford Business Group, 2008, p. 100). Later in 2008, sukuk issuance was held back by the general crisis in credit that affected financial markets at a global scale. Due to a decline in asset valuation, a lack of liquidity, and the general lack of market confidence, total issuance in 2008 fell back to an estimated US$ 20 bn, compared to US$ 47 bn in 2007 ( IFSL, 2009, p. 4). Although Islamic bond markets are operating within an integrated world economy, and have hence been affected by the credit crunch (see Bassens et al. 2010a on Dubai’s debt crisis), the controversial fatwa ruling elucidates that ‘financial authority’ in ‘Islamic’ markets is influenced by extra-economic factors such as the rulings by Shari’a scholars, who stand at the crossroads of financial and religious authority (see Pemberton (2009) for an elaborate discussion of the influence of Taqi Usmani on Islamic discourse, for instance in the field of Islamic finance). For one thing, this reveals that the notion ‘international’ financial sphere is in practice often implicitly and explicitly equated with practices of Western financial institutions. While ‘international finance’ has become increasingly conscious of non-financial incentives that drive customers and investors (as exemplified by the rise of ethical or ‘green’ investments), the Middle East, and the Gulf region in particular, has long been identified for its ‘differing’ religion-based economic rationale rooted in Islam ( Kuran, 1995, Tripp, 2006 and Warde, 2000). In fact, while the ‘conventional’ financial sector is highly sensitive to decisions and measures decreed by large central banks such as the Federal Reserve and the European Central Bank, regulatory bodies such as the Basel II-committee, in addition to leading elites in the sector who primarily operate from the major global cities ( Beaverstock, 2004), financial authority within Islamic markets clearly has an additional, often religiously-inclined dimension to its geographies. Building on the Shari’a, the Islamic Law grounded in religious sources (that is Koran and hadiths, the sayings of the Prophet), Islamic economics renounces all interest (riba), gambling (maysir) and contractual ambiguities (gharar) that lead to excessive risk taking ( Iqbal and Molyneux, 2005). It also prohibits investment in certain forbidden products (e.g. pork meat, weaponry, pornography, alcohol, etc.). The prohibition of riba, which is often conceived as the prime feature of IFS, reflects the idea that money is not a commodity in its own right, but rather a bearer of risk ( Pollard and Samers, 2007, p. 314). According to Islamic economics, the interest-carrying debt-based system is characterized by serious risk asymmetries between financiers and entrepreneurs, since the former can expect a steady flow of interest from its investment, while the latter bears most (or all) of the risk. Profit-and-loss sharing between parties is therefore considered the alternative as it prevents such inequalities, which may disrupt social harmony 1 ( Ala Hamoudi, 2007). Another notable feature of Islamic economics is its concern with the development of the ‘real’ economy: in contrast with the highly volatile and detached financial economy which dominates international financial circuits, ‘real’ growth is to result from the investment in promising projects, from which the profits and losses are shared by investors and entrepreneurs alike ( Pollard and Samers, 2007, p. 314). This also explains the ‘asset-based’ character of many products and practices in IFS, for instance in the sukuk financing of large infrastructure and real estate developments in Gulf cities, like the Dubai’s government-related property developer Nakheel’s US$ 3,5 bn sukuk, which almost defaulted in November 2009 ( Bassens et al., 2010a). Despite the recent turmoil around Dubai’s debt crisis, the rising influence of Islamic economic discourse is exemplified by the overall growth of the IFS sector, which is especially booming in the Gulf region: in parallel with the steady growth of the ‘conventional’ interest-based financial sector operating from Gulf offshore centres such as Dubai and Manama, the IFS sector grew by a staggering 27.6% in 2008, in spite of the global financial crisis. Globally, the sector is now worth US$ 822 bn of Shari’a-compliant assets ( The Banker, 2009), held by fully-fledged institutions (e.g. Al Rahji Bank, Dubai Islamic Bank) or by Islamic ‘windows’ within conventional banks (e.g. HSBC Amanah), of which ca. 41% is located in the Gulf Cooperation Council (GCC) states ( The Banker, 2008). The growth of the IFS sector highlights the need for a more grounded and versatile perspective in the study of global financial networks, as there are myriad regions where ‘Western’ corporate spheres do not represent a significant – used here in both statistical and substantive terms – proportion of financial and economic activities and processes ( Grant, 2001). In this paper, we focus on the crucial role of ‘parallel’ governance networks within the IFS sector, such as the boards that bring together Shari’a scholars. In IFS firms, unlike in interest-based financial institutions, governance through corporate boards is supplemented by these so-called Shari’a boards. We thereby identify at least two major implications for the study of the spatialities of such ‘alternative’ financial networks. First, ‘agents’ are a key driver of city networks, as Shari’a scholars who hold highly specialized Shari’a knowledge and skills, lend their services to IFS firms and so doing, boast high levels of authority, since they make and break the rules of Shari’a-compliance. Second, following Pollard and Samers (2007), the concept ‘international finance’ should be ‘decentred’ to help steer it away from the focus on practices and products of ‘Western’ financial institutions, anchored solely in ‘conventional’ world cities. Addressing both critiques, this paper empirically refines earlier research on the geographies of IFS (Bassens et al., 2010b) through a study of how scholars in interlocking Shari’a boards of IFS firms are networking cities in the Gulf and beyond. This vantage point draws on the observation that through their multiple board memberships, Shari’a scholars can be identified as a source of inter-city connectivity as they link up firms and regulatory bodies across cities. Geographically, the actor-networks created in the process can be read more generally as a proxy for IFS-specific flows of capital, knowledge, and people between its key nodes. In light of this, cities boasting high interlocking levels can also be dubbed ‘powerful’ places in terms of setting IFS standards on a global scale, because these interlocks allow for the dissemination of Shari’a interpretations through the agency of influential Shari’a scholars. Through this specific analysis, the paper aims to contribute to emerging ‘alternative’ approaches within world cities research, which has begun rethinking the literature on world cities because of structuralist (Beaverstock, 1996) and universalizing tendencies (Robinson, 2002 and Robinson, 2005). Through our focus on the importance of Shari’a scholar ‘agency’ in the creation of ‘Islamic’ financial networks, we aim to contribute to reconceptualizations of more global financial and world city geographies that build on a relational perspective. This strand of research analyses IFCs and cities from their role and position in a network, rather than producing hierarchies based on attribute data such as turnover and asset value (e.g. Faulconbridge, 2004). The next section sketches some of the most important critiques voiced against contemporary world cities research, particularly in the field of finance, in more detail. The ensuing sections deal with a description of the globalizing IFS sector and the particular role of Shari’a scholars (Section 3), data collection and methodology (Section 4), and the main insights emerging from of our empirical analysis respectively (Section 5). The paper concludes with an overview of our main conclusions and recommendations for future research.

The main purpose of this paper has been to flesh out one of many alternative ways of studying world city networks, articulated in ‘other’ (non-Western) parts of the world. Our analysis of the role and spatialities of interlocking Shari’a boards in the IFS sector has thereby been framed in the context of two major critiques of research that focuses on the geographies of firms with a predominantly Western focus in terms of presence and practice. First, rather than merely focusing on cities’ insertion into office networks of IFS firms, which formed the object of analysis of an earlier study (Bassens et al., 2010b), we have based our analysis on the key actors in the (re)production of financial world city networks through a study of interlocking directorates. World cities are not networked solely by harbouring numerous corporate headquarters per se, but rather because of the associations and bridging connections made by financial, business and cultural elites who are active in and between cities. In the context of the IFS sector, this implies a clear-cut focus on the particular role of Shari’a board scholars, who are interlocking cities through their activity in various corporate and regulatory advisory bodies. The second critique, primarily formulated by Robinson (2002), is mainly conceptual in nature: she argues that by equating ‘Western’ APS-driven urbanization processes with global economic processes, urbanization/globalization research has been narrowed down to the study of a few major metropolitan centres in the Western world. We agree that world cities research has indeed been unable to explain numerous processes outside the core regions of the world economy. Therefore, we have argued in this paper that in future research on global financial circuits a ‘decentred’ approach (Pollard and Samers, 2007) may provide a more adequate framework. The focus of our paper was on the IFS sector, which is rapidly developing in the oil-rich Gulf region (e.g. Bahrain, Saudi Arabia and the UAE), in fully Islamic economies (Iran, Pakistan), and in growing Asian economies such as Malaysia. This vantage point has produced an empirical analysis which covers key cities in the IFS network, notably Gulf cities, and some ‘mainstream’ IFCs, notably Sassen’s ‘global’ cities London and New York, which play a fundamental role in interest-based financial markets, but are also increasingly interconnected with emerging global Islamic markets. The most notable results of our interlocking Shari’a board analysis can be summarized as follows. First, on the actor-level, an analysis of the interlocking activity of Shari’a scholars has shown that there is evidence for the existence of a transnational Shari’a elite. These scholars are experts in Islamic law and have considerable (religious) authority throughout the ummah. Mainly as a means to enjoy customer credibility, both fully-fledged IFS firms and Islamic windows within and beyond the Middle East, employ these renowned scholars to sit on their Shari’a boards. As such, these high-profile scholars not only exert power through traditional fatwas, but they actually shape the face of a globalizing IFS sector as well, through their role in product screening and innovation. Second, on the firm-level, our analysis has highlighted the intense Shari’a board interlocking of a limited number of regulatory bodies, which set the standards for the IFS sector. Through these interlocks, especially the Manama-based institutions AAOIFI, IIRA, IIFM, and LMC are able to influence Shari’a interpretation on a firm-level. This reflects the centralized efforts of these institutions to create a uniform Shari’a interpretation with global standards, and shows that Manama constitutes the urban core of the IFS network. However, with the IFS sector as an emerging global player still in its infancy, the development of a unified Shari’a interpretation is far from complete. In fact, the geographies of Shari’a governance networks are influenced by the tremendous variance and nuances in Shari’a interpretation along sectarian fault lines, according to the dominant ideas within the various schools of Sunni Islam, and importantly, also according to its relation with the State. This explains, for instance, why the two main ‘heartlands’ of IFS, namely the Gulf region and Malaysia, are relatively poorly connected by interlocking Shari’a boards, being respectively considered more rigorous and more progressive in terms of Shari’a interpretation. Third, on the city-level, the interlocking Shari’a board network spans the globe and is articulated in a few crucial IFS hubs, both within the Middle East and beyond. Although the global reach of the IFS-based city network described by earlier intra-firm network analyses ( Bassens et al., 2010b) is confirmed, the inter-firm interlocking network here presented is much more concentrated in a few global powerhouses, notably in Manama, London, Kuwait City, Dubai, New York and Kuala Lumpur. Manama is identified as a global reference point for the globalizing IFS sector, regionally through its interlocks with Kuwait and Dubai, and globally, through its connections with ‘conventional’ world cities, such as London and New York. Concerning the latter, multinational ‘Western’ banks play a key role in shaping the spatialities of IFS networks between mainstay world cities and emerging world cities in the Gulf in particular. These banks have been able to successfully enter the IFS sector by getting involved in networks of knowledge and authority that are crucial within the Islamic sphere, namely by employing members of the transnational Shari’a elite. Therefore, the emergence of Islamic financial circuits on a global scale (e.g. the jump to high-street finance) coincides with a high degree of interlocking of ‘conventional’ world cities in Shari’a networks, an evolution which will no doubt further shape the geographies and contents of IFS. In sum, this paper has aimed to make a contribution to the study of the spatialities of ‘global’ (that is mainstream and ‘alternative’) finance in the world economy, from which we distil at least three recommendations for future research. First and foremost, in our opinion, a relational network approach may help us grasp processes of growth and decline, taking place in and between world cities, by exploring agency-based networks of knowledge and authority. Nowadays, in a rapidly shifting economy, we think this relational understanding of competition and complementarity is crucial when assessing the future of well-established world cities (e.g. London) and emerging (IFS) hubs in the Gulf and elsewhere. Second, although the emphasis was on actor-based networks, this paper has advocated the necessity of a nested approach in the analysis of world cities, taking into account firms, regulatory bodies, individual actors, and the links between these various entities. The existence or absence of multiple actor-based ties in and between world cities lends them the ability to influence the spatialities of international finance, e.g. in the case of emerging niches such as IFS. We therefore argue that it is exactly the capability to answer to those ‘other’ existing or emerging financial circuits that puts some successful cities ahead of the game, especially in light of major geographical shifts in the global economy and its articulation in world cities and IFCs (Derudder et al., forthcoming and Taylor et al., 2009). Third, as the study of IFS shows, globalization in the Middle East in general, and Gulf cities in particular entails more than increased integration in the world economy along the lines of ‘Western’ MNCs, NGOs, and International Financial Institutions. Nevertheless, while Islamic finance theoretically promotes itself as an alternative to ‘mainstream’ finance, the practice of IFS shows that this alleged ‘separation’ (e.g. no investment in interest-bearing products/banks) is in fact non-existent. As this paper shows, Shari’a governance networks that work to regulate Islamic financial practice, establish myriads of connections between IFS and ‘conventional’ finance. Instead of supporting discourses of separation, alterity, or perhaps even exotism, the existence of these networks confirms earlier claims about how both ‘varieties of finance’ are in fact heavily ‘entangled’ (Callon, 1998 and Maurer, 2005), interconnected, and interdependent. Notwithstanding this entanglement, IFS, as a ‘decentred’ (Pollard and Samers, 2007) counter-narrative to ‘the mainstream’ and as daily practice, does however marshal financial influence of agents and firms in cities and IFCs outside what is generally understood as the core regions of the world economy. For these cities, insertion in global financial circuits, we argue, involves a process of negotiation, highlighting and reasserting existing religious and cultural value and knowledge systems (see also Jessop and Oosterlynck, 2008), which find their way in shaping the political economies of emerging cities in the region, and the financial circuits in which they are inserted.