islamic finance sits awkwardly in a modern business school ft.com
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26/07/2013 02:31Islamic finance sits awkwardly in a modern business school - FT.com
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FEATURE OF THE WEEK July 21, 2013 11:30 pm
Timur Kuran: Islamic finance sits awkwardly in amodern business school
Islamic finance sitsawkwardly in a modernbusiness schoolBy William Barnes
UK business schools and universities lead the non-Muslim world in the teaching of Islamic finance, with atleast nine institutions teaching an MBA or similar whichrefer to Koranic principles. These include Durham,Aston, Bangor, Salford and Cass Business School. Onlybusiness schools in the Gulf, Malaysia, Pakistan andIndonesia rival the UK in offering pedagogy based on aseventh-century religious code.
Yet Timur Kuran, professor of economics and politicalscience at Duke University and a leading authority on Islamic economics, argues that Islamicfinance is a faith-based fabrication that sits awkwardly in a modern business school.
What is Islamic or sharia finance?
Islamic economics requires financial transactions to be free of interest. The replacement ofinterest with “profit and loss sharing”, say its proponents, serves to direct capital to its mostproductive users, as opposed to individuals with the best connections, collateral, or social status.
Why do you consider it bogus?
Islamic banking, in its current form, will go down in history as a mighty deceit based on anoperational principle that is simply unfeasible. Islamic banks give and take interest as a matter ofcourse, though under the guise of commissions, fees, penalties or profit shares. The holder of a“halal” credit card pays a penalty on unpaid balances; this penalty is proportionate to the size ofthe balance, which makes it equivalent to interest.
The sharia code was suited to the Middle Ages, when it assumed its classical form. At least onmatters of economics and finance, it has not advanced measurably since then. To regaineconomic usefulness, it would have to be modified so extensively as to make it unrecognisable.
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26/07/2013 02:31Islamic finance sits awkwardly in a modern business school - FT.com
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Can supposedly objective centres of learning such as international business schoolsteach economics constructed around rules derived from a holy book?
We need to distinguish between studying a doctrine or phenomenon and training practitioners.Within academia the proper place for training practitioners of Islamic finance is divinity schools,where beliefs may be treated as sacred and left unquestioned. It is not the place of an economics,business or law programme to teach future bankers the tricks of disguising interest. As a globalphenomenon involving hundreds of billions of dollars, Islamic finance may be studied andshould be studied, dispassionately within multiple core disciplines and professional schools.
But global sharia assets could reach $1.8tn this year. Can business schools ignorethis large sector?
It should not be ignored. Business schools should use the tools of the social sciences tounderstand the social, political, economic and of course religious forces that account for itsgrowth.
Presumably Islamic finance and economics dominate the curriculums of businessschools across the Muslim world?
Not at all. The overwhelming majority of the Muslim world’s business schools teach theeconomics taught at the world’s leading business schools. A few require a sprinkling of Islamiccourses. It is generally understood that these courses have little practical value.
What development in the teaching of Islamic economics can you foresee?
Funding for Islamic economics programmes is tied to oil wealth. If oil prices stay high,legitimacy-seeking Arab oil producers will continue to finance such programmes. The role thatfundraising now plays in academia practically guarantees the promoters of Islamic economicswill find university administrators willing to accommodate their requests.
26/07/2013 02:31Islamic finance sits awkwardly in a modern business school - FT.com
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