The Birth of the Islamic Investor

Abstract

What is Islamic about Islamic finance? How does the industry’s Islamicity compare to the notions of trade and commerce in classical sharīʿa? In this essay, I explore the genealogy of Islamic finance by scrutinizing twentieth-century fatwās on share certificates. I argue that these fatwās gave rise to shareholding as a novel property relation, one that severs the shareholder’s non-financial interest in the company’s property. Twentieth-century muftīs unanimously accepted the legitimacy of shareholding, which, in turn, contributed to the rise of the Islamic investor: a profit-maximizing, socially-disinterested homo economicus whose ethical conduct is validated in reference to modern Islamic law. The unanimous acceptance of shareholding and the investor contributed to the consolidation of the central institutions of Islamic finance: Islamic banks and joint-stock companies. It also contributed to the thinning of Islamicity. Whereas the classical sharīʿa discourse produced partnerships as, at once, social and economic entities, fatwās on Islamic financial instruments reduce Islamicity to economic considerations and a set of maneuverable protocols.