Islamic Banking and Finance: Alternative or Façade?

Islamic Banking and Finance (IBF) is a global $822 billion industry depicted by practitioners and clients as an alternative to conventional finance. Social scientists normatively invested in critiquing financialization (the distancing of credit or capital gains from ‘real’ economic activity) and usury (exploitative banking relationships) have investigated IBF as a potential case of a Real Utopia. Many are disappointed by what they discover. This article argues that although isomorphic social mechanisms push IBF to resemble conventional finance in numerous complex and subtle ways, IBF remains a substantively distinctive and valuable intellectual project. The paper explores the definitional anxiety surrounding IBF, surveys and critiques the social science literature, and argues why IBF so closely resembles conventional finance. The case of IBF demonstrates some of the difficulties alternative financial systems face in global financial markets.