Integrating the social maslahainto Islamic finance

Ismail CebeciOxford Centre for Islamic Studies, Oxford, UK

Abstract

Purpose – The purpose of this paper is to analyse the extent of the contribution of the current Islamicfinancial system to society in terms of social responsibility (SR) required by the concept of socialmaslahah.

Design/methodology/approach – The paper adopts a critical analytic approach in considering thereasons of the failure of the social dimension of Islamic financial intermediation based on real figuresof selected Islamic banks.

Findings – Concepts of SR and corporate social responsibility (CSR) are not enough to describeIslamic Banks’ responsibilities. Also, this failure cannot be understood only with reference to the“external environment”, i.e. competition-driven, capitalistic market conditions; but it is also closelyrelated to the transformation of Islamic finance into an almost exclusively murabaha-based Islamicbanking, which promotes more individual maslahah than social maslahah. Compared to the murabaha,other product structures such as mudaraba and musharaka seem to be better instruments forexpanding welfare and alleviating poverty.

Practical implications – There is a close relationship between Islamic banking contracts and socialcontribution of Islamic banks. This paper provides some practical solutions in this context. Also,empirical evidence derived from several conventional and Islamic banks supports these arguments.

Originality/value – This paper is the first to analyse the reasons for the social failure of IslamicBanks and to recommend substantial solutions in this scope and also offers practical help topractitioners of Islamic banking on the issue of social contribution of the Islamic banking business.

Keywords Islam, Banking, Social responsibility, Society, Ethics, Islamic finance, Islamic banking,Contracts, Murabaha, Maslahah

Paper type Research paper

1. IntroductionIslamic finance has grown considerably over the past three decades in terms of its capitalvolume and organizational structure. Its potential contribution to social development isan equally crucial question. Despite (or rather, because of) its initially idealistic socialobjectives such as helping reduce underdevelopment and economic inequalities, anddespite the existence of exemplary institutions of Islamic civilization, such as themudaraba and the waqf, which historically performed certain welfare anddevelopmental functions, it is still debated if Islamic finance has created a structurethat systematically contributes to social development in the Muslim world.

This paper presents a critical examination of Islamic finance in terms of itscontributions to social development and what might be called “social maslahah (SM)”,a concept that requires corporations to go beyond social responsibility (SR). In this

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The author thanks Oxford Centre for Islamic Studies and Harvard Law School ILSP – IslamicFinance Project for creating an intellectually stimulating environment for his studies on Islamicfinance, as well as the writing of this particular article. He also thanks Nurullah Ardic ofIstanbul Sehir University for his helpful comments on the earlier versions of the paper.

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Accounting Research JournalVol. 25 No. 3, 2012pp. 166-184q Emerald Group Publishing Limited1030-9616DOI 10.1108/10309611211290158

context, it first introduces the concept of SM and seeks to answer the question of towhat extent “SR” and “corporate social responsibility” (CSR) correspond to the former.The paper then discusses various reasons for the failure of Islamic banks in providingSM adequately. In this context, it focuses on both external (e.g. interest-based,capitalistic market conditions) and internal factors, particularly on the advantages ofthe mudaraba and musharaka over the murabaha with respect to SM. Finally,it presents a set of measures to be taken by Islamic financial institutions to enhancetheir functions in terms of the SM. The paper supports its analyses and argumentswith empirical evidence as much as possible.

2. SM and Islamic financeToday, not only Islamic banks operate in many countries, but also offices of a number ofmajor banks in Western capitalist societies operate in accordance with Islamic principles.The total capacity of Islamic banks is estimated to be approximately 1.3 trillion dollars(IF, 2012). Despite its initially idealistic social objectives, such as helping reduceeconomic inequalities, alleviate poverty, and despite the existence of exemplaryinstitutions of certain welfare functions, and of the social banking experience particularlyin Egypt in the early years of this business (Najjar, 1972), Islamic finance is yet to create astructure that systematically contributes to the enhancement of welfare in the society.

This paper argues that such a contribution can be made through realizing what I call“SM” which can be defined as providing permanent values and enduring benefits for thegeneral public via a set of sustainable and measurable activities/projects focusing – atan individual or institutional level – on the development of society, including acontrollable, manageable and clearly determined process. More specifically, social orcollective maslahah refers to an institution’s direct and enduring contributions to socialdevelopment through its own structure and mechanisms (in this case, the constitution of,and the transactions made by, an Islamic bank), rather than simply contingent and“charity-like” activities sponsored by an institution, which are often conducted forpublic relations and marketing reasons. This concept requires Islamic banks to pursuemuch more serious social objectives through longer-term and larger projects than theypresently do; however, it does not suggest to create a financial system that acts like alarge-scale, state-like political-economic structure that seems to entail the entire legal,political and economic life, which is what Elmelki and Arab (2009, p. 126) seem tosuggest when they compare Islamic banks with conventional ones:

What distinguishes an Islamic bank from a conventional one is that the Islamic bank keepsin view certain social objectives intended for the benefit of society. The Islamic banks aim toestablish distributive justice free from all sorts of exploitation. From the Islamic point of view,business transactions can never be dissociated from the moral objectives of the society. Islamicbanking aims [to expand] the social justice through forbidding all forms of economic activitieswhich are morally or socially injurious, ensuring ownership of wealth legitimately acquired,allowing an individual to retain any surplus wealth and seeking to prevent the accumulation ofwealth in a few hands to the detriment of society as a whole through its laws of inheritance.Islamic banks are mainly concerned about justice and fairness and prohibit the extracting of asurplus value in an unfair way through the practice of paying and receiving interest regardlessof the purpose for which loans are made and the rates at which interests are charged.

Although I agree on their emphasis on social objectives as a distinguishing feature of Islamicbanking, the rest of the argument exeggerated, for such requirements as “establishingdistributive justice” go beyond the scope of Islamic finance.

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In this connection Haniffa and Hudaib (2007, p. 99) present a more refined andreasonable list:

[. . .] there are five distinctive features that differentiate Islamic Banks (IBs) from theircompetitors (conventional banks): (a) underlying philosophy and values; (b) provision ofinterest-free products and services; (c) restriction to Islamically acceptable deals; (d) focus ondevelopmental and social goals; and (e) subjection to additional reviews by the Shari’ahSupervisory Board (SSB). Hence, Islamic banks, as economic and social institutions, mustportray aspects of those five traits, drawn from both Shari’ah and business ethics.

Many Islamic banks themselves declare in their mission statements that one of theirprimary goals is to contribute to the well being of the society. For example, Al Rajhi Bank,which is one of the first Islamic banks in the world, says: “Our responsibility to ourcommunity has always been at the forefront of our obligations and is one of the mainobjectives of the Bank (Al Rajihi, 2011).” Likewise, HSBC Amanah (2011), which is one ofthe important Islamic financial institutions in the west, declares that:

[. . .] In exercising all its banking or developmental activities, the Islamic bank takes intoprime consideration the social implications that may be brought about by any decision oraction taken by the bank. Profitability – despite its importance and priority is not thereforethe sole criterion or the prime element in evaluating the performance of Islamic banks,since they have to match both between the material and the social objectives that would servethe interests of the community as a whole and help achieve their role in the sphere of socialmutual guarantee. Social goals are understood to form an inseparable element of the Islamicbanking system that cannot be dispensed with or neglected.

In justifying their claim for contribution to the well-being of society, Islamic banksoften emphasize the concepts of “SR” and “CSR” presenting them as an integral part oftheir mission. For instance, Al Baraka (2011), which has several branches in differentcountries, states that:

We consider the role of CSR in our organization to be essential to the application of theprinciples derived from divine power and on which our business activities in all the countriesin which we operate are based.

Now I do not deny the importance of SR and CSR and their potential contributions toIslamic finance; however, I contend that Islamic banks should go beyond theseconcepts and objectives in order to be able to fulfill their SM functions and help, on abroader level, Islamic economics materialize its social objectives and the maslahah.There are three principal arguments behind my contention.

First, SR entails responsible investment, good customer service, employee welfarepolicies, environmental policies and charitable activities. I contend that Islamic banksremain satisfactory in this sense. In fact, recent research has shown that the majority ofIslamic banks are doing well in terms of their SR functions at this basic level(DinarStandard and DarAlIstithmar, 2010). However, I believe that SR and CSR in theirmodern sense do not suffice for contributing to the welfare of society in the Muslimworld in a meaningful, enduring and sustainable manner.

This is because, second, the social and historical contexts significantly affect thestructure and functions of financial institutions; therefore, one should not ignore thefact that such institutions in the Muslim world might substantially differ from the onesin the Western world in these respects. Compared to Muslim countries,institutionalization in general has gone much further in Western societies as

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a response to various challenges posed by complex structures of the modernity, whichalso has implications for financial institutions. For example, governments and variousnon-governmental organizations serve different functions that directly contribute tothe economy, including, among others, allocating resources to and providing guidancefor entrepreneurs and young people who would act as “human resources” of thecapitalist economy. Most Muslim societies, however, lack such an institutionalstructure, which results in the decline of productivity and inefficient use of human andmaterial resources. Therefore, I find it insufficient when Islamic banks follow“Western” banks in the field of CSR by publishing books and giving charity (Table I).It is in this sense that I argue that though SR and CSR are positive notions in general,they do not open up a social space large enough for realizing the social objectivesembraced by Islamic economics in general, and Islamic finance in particular.

At this point, let us take a look at a sample of SR and CSR projects developed byseveral Islamic and conventional banks from Turkey, UAE, Saudi Arabia, Malaysia,the UK and the USA.

Third, my analysis of SR and CSR is based on an examination of the extent to whichtwo of the goals attributed to Islamic finance by Elmelki and Arab, are materialized:the benefit of society and preventing the accumulation of wealth in a few hands.Clearly, these are among the basic Islamic principles, which are also required tobe followed in order for Islamic banks to realize SM. However, we see that theseprinciples, which also lead to the realization of the SM, cannot be put into practicethrough SR or CSR only. For such large-scale and broad objectives as preventingthe accumulation of wealth in a few hands are too big to materialize by publishingcultural books and periodicals, and granting scholarships to a few students and

SR projects Bank

Sample SR and CSRprojects of Islamicbanks

Organizing cultural activities through “cultural clubs”and sponsoring competitions (e.g. Islamic calligraphycompetition)

Albarakaturk (TR)

Renovating historic buildings and artifacts, recruitinginterns from among college graduates

Kuveytturk (TR)

Charity Kuveytturk (TR)/ADIB (UAE)

Sponsoring a football league, sponsoring periodicals,cultural publications, conferences and short films

Bank Asya (TR)

Sponsoring sport activities, traffic week and Umrah ADIB (UAE)Patronage and sponsorship of educational and socialprojects

Al Baraka (KSA)

Supporting musical and sports activities, scholarship CIMB Islamic(Malaysia)

Sample SR and CSRprojects byconventional banks

Providing scholarships to students, distributing freebooks, cultural publications, and sponsoring the chessassociation, a forest, and a museum

Is Bankası (TR)

Environmental targets, financial education, customerrelations, employee care, charity

LLoyds TSB (UK)

Nonprofit grant funding, (sports, art, etc.)sponsorships, volunteer grants

Bank of America(USA)

Notes: Information on these projects is compiled from the banks’ web sites

Table I.A comparison betweenthe SR projects by IB’s

and conventional banks

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researchers, etc. Moreover, given the fact that few other institutions in Muslimcountries match the financial power and international networking that the Islamicbanks enjoy today, which further increases these banks’ reponsibilities, any seriousattempt to realize the above-mentioned broad principles must consider the essentiallink between these principles and the structural elements of Islamic finance, such as thetypes of contracts that Islamic banks rely on (see also below for further discussion).

It should also be emphasized that I am aware of the fact that Islamic banks are notcharity institutions and that they have activities with SR functions, as alreadymentioned above. However, these functions are far from creating SM by failing toproduce permanent values and continuing benefits for the wider society throughsustainable, measurable projects focusing on a particular social problem. The mainproblem with Islamic banks in this context is that these institutions, which haveconsiderable information, experience, capital and international organization, have failedto satisfactorily mobilize their financial resources and customers in social improvement,fair distribution of income and leading in investment, and thus remained largelyincapable of contributing to the society with lasting mechanisms in an enduring manner.

3. Why has Islamic banking failed in SM and what is the solution?Below I discuss in detail the main factors that are accountable for this failure. I focus onboth external ones such as the institutional and cultural contexts and legal and politicalconstraints, and internal ones such as dominance of the murabaha as a basictransaction mechanism and lack of academic support as guide for Islamic banks.I argue that the majority of the staff of Islamic banks and their clients have largelyadopted the capitalistic mindset that emphasizes profit maximization, which hinderstheir social functions. I also argue that many of the scholars and practitioners ofIslamic finance see the structural problems of the system; especially those related toSM, as merely technical, managerial problems and thus offer little help to solve them.The following section includes, therefore, a number of suggestions for the socialfunctions of Islamic banks. Here I emphasize the need for a comprehensive and holisticbut also multi-dimensional and diversified outlook for the current crisis.

A number of factors may have played a role in this failure, which can be grouped as“external” and “internal” factors. Let us look at some of them in more detail.

3.1 External factorsThe “external” factors principally include what might be called the “institutionalcontext” and the “cultural context,” both of which are closely related to the fact thatcontemporary Islamic financial institutions have to operate in the capitalistic worldeconomy. The “institutional context” refers to national and international institutionsthat are largely shaped by the capitalist mindset. For instance, Islamic banks, just likeconventional ones consider competition and profit maximization as their mostimportant priorities. Likewise, they have to operate in an interest-based system,national or international, thereby making transactions that are often difficult todifferentiate from those involving interest. (For instance, financial penalties accrued incase of late payment are not easy to separate from interest.) To operate independentlyof this framework does not seem possible for Islamic banks in the short run, becausethey lack sufficient economic and political power to shape the public opinion and createan institutional context compatible with Islamic finance.

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Naturally, then, it is extremely difficult for Islamic banks to develop and executeimportant social projects in such an environment where they encounter certainstructural problems. Moreover, they do not have a sound customer base that is ready toabandon certain practices entrenched in the current capitalist system. Therefore, itwould not be fair to blame solely Islamic banks for failing to fulfill their promises. By thesame token, it is a difficult task for Islamic banks to achieve SM goals in the short run.

As a part of institutional context, administrative and bureaucratic constraints alsonegatively affect Islamic banks’ SM functions. In many countries, Muslim andnon-Muslim ones alike, Islamic banks have to face negative attitudes of politicalauthorities and the constraining effects of existing laws (Attiyah, 1990). Since theselaws are made to facilitate the operation of capitalistic market relations, and stateauthorities usually have a negative view on the requirements of the Islamic financialsystem, Islamic banks often find it difficult to survive in such a hostile environment,let alone fulfill their social functions. For instance, the fact that Islamic banks havelegal problems in some countries forces them to operate as a conventional bank.Otherwise, they would have to worry about their very survival under suchcircumstances, which are heavily conditioned by the interests of the global financialcapital. For instance, in Turkey Islamic banks experience great difficulty in this respectbecause the financial laws under which they have to operate have been designed solelyfor interest-based financial institutions. For example, Turkish Law (no. 5411, article 48)considers funding the “Islamic” banks provide for procurement of commodities as“credit” (TMSF, 2005). Similar legal problems are also encountered in the west, even inthe UK where Islamic finance has developed the most. For example, one of the mostimportant issues for the Financial Services Authority (FSA) in the UK is that of Islamicdeposits. The British legal definition of a deposit is: “a sum of money paid on termsunder which it will be repaid either on demand or in circumstances agreed by theparties” (FSA, 2006). In other words, money placed on deposit must be capital certain.For a simple non-interest bearing account there is no problem, for the bank safeguardsthe customer’s money and returns it when the terms of the account require it to do so.However, with a savings account there is a potential conflict between UK law, whichrequires capital certainty, and Sharia law, which requires the customer to accept therisk of a loss in order to have the possibility of a return.

Second, the cultural, or ideological, context refers to the fact that the majority ofMuslims, the main clientele for Islamic banks, have already been heavily influenced bycapitalistic market relations on a global scale. This implies that most Muslims are notmuch different from the regular, one-dimensional homo economicus of the capitalistsystem in terms of their expectations (such as not accepting the possibility of economicloss as well as profit in a joint venture transaction)[1] and ethical priorities in economiclife. This is a significant obstacle for Islamic banks in terms of creating a mechanismthat reserves room for SM in a competition-driven environment.

Third, SM is closely related with social and institutional structures. On the onehand, today’s Muslims have a considerably different life styles than in pre-capitalistperiod; on the other hand, finance and economy in the modern world are intricatelyconnected to the governments and the international system. This implies that thefinancial sector is an integral part of the policies (including the social welfare ones)pursued by states and international organizations, which is indicated by the workingsof the conventional capitalist banking in the global economy. Islamic finance, however,

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does not operate in such a broad, integrative financial and political system – a factwhich is closely related to the abscence of a viable ulama class, as well as that ofpolitical bodies and international organization that could provide such broad policies.Thus, the lack of a comprehensive, integrative system of social policies negativelyaffects Islamic banks’ performances in the field of SR.

Finally, in terms of its operationality, Islamic banking – due to ban on interest(Qur’an, 2: 275, 276, 278, 279; 3: 130; 4: 161; 30: 39; Bukhari, Muslim, Abu Dawud) –is based on the principle of exchanging money with labour, goods and services,thereby producing a surplus value and profit. Accordingly, money cannot producesuch value so long as it remains in a static position. Due to this principle, unlikeclassical banks, Islamic banks do not grant money in exchange for money; rather,they produce surplus value by managing the money they receive through variouslegal contract models, such as trading, partnerships, and renting. This, in turn,creates an opportunity for the application of different contract models in Islamicfinance. This situation brings to Islamic banking certain advantages over the moderncapitalist banking system in terms of its social dimension due to the dynamism thatthe former necessarily contains. Despite this structural advantage, however, Islamicbanking has so far largely failed in terms of fulfilling its social functions, asdiscussed above.

3.2 Internal factorsAs for the “internal” factors they are essentially related to the fact that Islamic bankinghas usually followed the capitalist banking system as a model for its owninstitutionalization. That is to say, they have been forming their institutional build-upincreasingly on the basis of this model, which in turn produces a quasi-capitalistmindset as well as concrete mechanisms. Moreover, their personnel consists mostly ofthose who had standard, Western-style higher education, many of whom probably hadalso worked for conventional banks previously. A significant indicator of this tendencytoward more capitalistic institutional frameworks is the fact that the murabaha, whichhas been modified to adapt to modern conditions and market relations, hasincreasingly been dominating the Islamic financial system at the expense of othertransaction types.

A significant factor leading to the neglect of SM is what might be termed as an“minimalist” or “micro” understanding of the fatwa institution. Although it is clear thatthe fatwas used to justify policies and decisions of the Islamic banks are producedcarefully and that they conform to the specific rulings of the Sharia, these individualfatwas do not usually produce a comprehensive and meaningful whole, because theyare mostly produced by the ulama with a myopic and minimalist view of the individualcases brought to them.

An important point that should not be missed here is that Islamic economics andIslamic finance are not fiqh al-mu’amalat (Islamic juris prudence of transactions)[2].Though the fiqh forms the basis of their activities, these activities are usually builtupon the permissions ( jaizs) obtained from researchers and purely technical rulesconcerned only with legal validity, which do not exactly correspond to the needs of theindividuals and their normative world. As Kilian Balz (2008, pp. 12-13) remarks,modern Islamic finance has been stuck with technical rules and legal frameworks,leading to the ignorance of ethical considerations:

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Pre-modern Islamic law, in broad terms, employed two categories to rate human acts. Oneconcerned its legal validity (ranging from sahih “valid” to batil “null and void”) and the otherits ethical or religious assessment (ranging from wajib “obligatory” to haram “forbidden”.Where Islamic legal rules have been enacted as state law, as is the case with Islamic codes, therating normally is reduced to questions of legal validity.

In fact, as is well known, Islam does not just consist of a set of rules and regulations,but the Qur’an and the prophetic hadiths contain many provisions regarding moralvalues. However, we observe that many Islamic banks do not refer to Islamic moralprinciples in their statements[3]. The fact that the practitioners of Islamic banking haveusually been treating the fiqh questions as technical, legal problems, thereby largelyignoring their social-welfare related aspects, can also be demonstrated through aglance at the resolutions of the International Islamic Fiqh Academy (IFA). The IFA(2007) officially issued a total of 174 resolutions between 1985 and 2007; about half (82)of them were on either Islamic economics or Islamic finance. However, only two ofthese resolutions were directly related to the social functions of Islamic banks (i.e. theresolutions on the development of human resources [R #164] and on the role of thezakat in alleviating poverty [R #165]. This indicates that though Islamic economicsand Islamic finance are deemed very important in the lives of contemporary Muslims,their SM-related aspects are not treated equally.

Another significant factor influencing the difficulty in realizing its social objectiveshas been the ineffectiveness experienced in the transition from Islamic economics toIslamic finance;[4], i.e. failure to create an efficient and mature process ofinstitutionalization. In other words, although the theory of Islamic economics hadmany social objectives (Siddiqi, 2007, pp. 99-100) at macro and micro levels in its initialperiod during the 1950s and 1960s, institutionalization necessary to realize these endshas been achieved only by Islamic banks at the micro level. Other, accompanyingpublic and private institutions that could share the functions of Islamic finance havenot been established in the Muslim world. For this reason, the burden of responsibilityto materialize the broad ideals of Islamic economics (and expectations from it) has beenshouldered solely by Islamic banks.

Furthermore, the fact that Islamic finance was born out of a rather rapid financialgrowth provided by “petrodollars” produced by oil exports, rather than as a result of a“natural” process of economic expansion, also seems to have negatively affected its SMfunctions. In other words, because most Islamic banks were almost suddenly created asa result of the circulation of oil-based finance capital, rather than emerging graduallyas a product of the industrialization process (as was the case with Western banks), inmany cases they were not supported enough by necessary economic, legal and socialinfrastructure. Thus, for instance, had the Mit Ghamr model of Islamic banking beensuccessful before Dubai took over Islamic finance, these banks could have been muchmore successful in terms of providing SM.

Moreover, an important element of the “internal” factors that have hindered theimprovement of the SM-based Islamic banking is the lack of academic and/or scholarlysupport for such an improvement. Studies on Islamic finance from the perspective ofboth modern economics and Islamic law have so far largely ignored the domain ofsocial functions, which has in turn resulted in the fact that we have very little, if any,discussion on, let alone solutions for, the fundamental structural problems

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of Islamic banking. There are three specific reasons for the lack of scholarlycompetence on SM-based Islamic finance.

First, Islamic finance is an interdisciplinary field of study, pertaining to modern law,economics and management, as well as Islamic fiqh. As such, most academicinstitutions do not treat it as a compact, bounded disciplinary sub-field in its own right.This results in scarcity of experts on contemporary Islamic finance, who are educatedin both Islamic studies (the fiqh in particular) and economics as well as in managementand finance law.

Second, although the discussions on economic provisions in the classical fiqh literatureare mostly about relatively simple and monophasic transactions among actual personswithin a Muslim society, these provisions are directly applied today to large, impersonalinstitutions in predominantly non-Islamic (even “un-Islamic” in many respects)institutional contexts. We often observe the deployment of a contract recognized byIslamic fiqh as part of a modern transaction with no attention to its legal and socialcontext. For example, the contract of representation (or power of attorney) (wakalah),which is recognized by the fiqh, is frequently used in modern financial transactions inorder for one of the parties to avoid the risk brought by the transaction. The logic behindthis application of traditional transaction mechanisms to modern, capitalist markets is asuperficial one, which ignores the intellectual and historical backgrounds of both Islamicand modern-capitalist structures. Such an endeavor has produced both in theory andpractice a synthetic amalgam of very different parts, rather than a compact whole. Thismixture of pre-capitalist and capitalist elements thus lacks cohesion and a socialperspective because the elements of the fiqh are sought mostly as a potential source ofIslamic justification ( jawaz) for modern financial mechanisms. Moreover, this Islamicjustification is considered only in strictly legal terms, thereby largely ignoring the socialaspects of Islamic fiqh. In other words, the academic/scholarly endeavours that focus onIslamic finance invoke Islamic law only in so far as it provides modern mechanisms withstrictly legal provisions by abstracting them from their social contexts.

Third, we observe that many of the policy recommendations the scholars putforward for Islamic banks remain restricted to the domain of purely charity-basedmechanisms, such as the zakat (alms), sadaqa (voluntary charity) and the qard hasan(gratuitous loan) (Elmelki and Arab, 2009, p. 129; Farook, 2007, pp. 39-40). The problemwith this picture is that these charity mechanisms are realized usually by the personalinitiatives of bank staff and customers, rather than establishing a structuralmechanism for social projects. Thus, it might be more useful to focus on the types andworkings of specific transactions, such as the mudaraba (partnership between investorand entrepreneur), the musharaka ( joint venture), the murabaha (cost-plus financing),the ijara (renting/leasing), the salam (“prepay”; agreement to pay now for goodsdelivered later), the istisna’ (“work contract”; product manufacturing contract withagreed delivery and price), etc. rather than being preoccupied with charity-basedmechanisms only.

As a result of these economic and socio-cultural factors, therefore, the Islamicbanking system has abondoned most of its social goals and idealistic discourse thatwere initially quite widespread as part of an optimistic outlook. This way Islamicbanks have largely failed to create an original system, parallel to the failure of Muslimsto present an alternative life style to the capitalistic West. Consequently, different typesof economic transactions derived from the Islamic tradition have been adapted to the

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capitalist market relations. This process has in turn created great obstacles for aSM-based banking practice because the capitalist system is based on fierce competitionand a mindset conditioned by pure credit and profit maximization. I argue, therefore,that an Islamic financial system based on the imitation of contemporary capitalisticmechanisms cannot fully realize its initial goals of creating a SM-based financialenvironment. Moreover, since Islamic banks are supposedly based on religiouspremises, the process of transforming into capitalist banks might lead to animage-maintenance problem for them in Muslim countries.

I further argue that both the practicioners of, and the researchers on, Islamic bankingusually see – perhaps as a result of pressures of the capitalist work environement – thestructural problems of this system merely as management problems, which preventsthem from seeing the big picture. For this reason, the functions and even the veryexistence of Islamic banks will remain problematic until the essential issues relating toIslamic economics, including its assumptions and main principles on human nature,politics, technology, etc. have been discussed and clarified. Because these fundamentalissues are still vague for many, the significant problems the Islamic banks encounter arecontinued to be reduced to those of the managerial problems of a regular financialinstitution trying to survive in a capitalistic enviroment.

4. Dominance of the MurabahaThe dominance of the murabaha constitutes the “specific factor” influencing the failureof Islamic banks in terms of improving their SM-based institutionalization, because ithas been used as the basic instrument in the process of transforming into capitalisticfinancial institutions. As a form of financial transaction, legally recognized in Islamiceconomics and law, the murabaha refers to a process in which the client requests froman Islamic bank (usually due to lack of cash) to buy a commodity and sell it to him/her(the client) on credit terms; then, if the bank approves the request, it buys the commodityand sells it to the client, who in turn pays it back in instalments. The modernizedmurabaha as a model to be used by Islamic banks was first theorized by Sami HasanHammoud (1976) under the title “Murabaha li al-amir bi al-shira” (mark-up sale upon theinstructions of the potential purchaser) in Egypt in 1976 – a development that roughlycorresponded to the emergence of the “Islamic banks.” In his analysis, Hasan Hammoudderived the modernized form of the murabaha from a case discussed by Imam al-Shafiin his Kitab al-Umm, and presented it as a practical solution to the requirements of thenew economy. For him the murabaha was more efficient and more comprehensive thanboth the musharaka and the mudaraba – and a better alternative to the exchange typesof capitalistic, interest-based banks. In time, the murabaha has become an establishedand commonly used practice due to its several advantages. For example, in murabahacontracts, transactions could be done faster, certain provisions of the fiqh were adaptedthrough it, and certain measures were taken to ensure that all the risk was shoulderedby the client – rather than shared between the bank and the client.

Therefore, the murabaha, which has important implications for SM (or lack thereof),has dominated the practice of Islamic banking particularly in terms of the intensity ofits use and of the mindset it has nurtured. Although Islamic banking was initiallythought to be based more on the musharaka and the mudaraba (Siddiqi, 2007,pp. 102-3), rather than on the murabaha[5], today it has become almost entirelya murabaha-based financial system. For example, in the case of the Islamic banks

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operating in Turkey, between 70 and 80 percent of their funds are offered formurabaha-based production support, and 5-10 percent of them are offered on the basisof mudaraba. Moreover, they state that they use much of the funds that they havecollected in either trade or productive services, by providing corporations withproduction support (Turkiye Finans, 2011; Bank Asya, 2011). Furthermore, the factthat these banks do not provide detailed information on the distribution of the contracttypes that they utilize in their annual reports invigorates this image.

An important factor that has negatively affected the feasibility of both themusharaka and the mudaraba has been the attitudes of the customers: Islamic bankshave suffered a lot of losses, particularly in their initial decades, due to backing out oftheir clients, many of whom reported financial losses only. As a result, while themurabaha has become the most commonly used mechanism, other transactions suchas the mudaraba and the musharaka have almost disappeared today.

Second, in terms of forging a particular mindset, the murabaha has been deeplyaffecting the way the practicioners of Islamic banks, managers and employees, thinkabout their profession. For, as mentioned, compared to other mechanisms, themurabaha is more short-term, less risky, and more practical in terms of crediting; italso provides liquidity more efficiently than others (Zayd, 2004, p. 27). Because of sucheconomic advantages, it has gained the status of the most preferred transaction type,which then created a ready soil for a kind of capitalistic mentality to flourish.Therefore, the spread of the murabaha as the most preferable banking method and theconversion of Islamic finance into a quasi-capitalistic banking are the two processesthat have gone hand in hand mutually feeding and nourishing each other.

On the other hand, although the murabaha has turned into a mechanism thatconstraints the domain of social functions, it does not in itself contradict the principle ofSM. For it is suitable for application in different spheres of life, including such SM-basedareas as health, education and environment (Rabia, 2000, p. 134). However, themurabaha has become an obstacle for such an application due to three main reasons.

First, the murabaha has largely been cut off from the real trade and marketconditions by minimizing the financial institutions’ risk- and labour-sharingresponsibilities, which in turn has made the murabaha merely a kind of paper work.Yet many of those who favor the murabaha in the literature discuss risk-taking andlabour-sharing by the financial institution as advantages of this mechanism. When themodern murabaha was presented as an alternative financial mechanism, the bank wassupposed to be actively involved in the entire transaction process, by taking part insearching for the commodity and providing it to the customer, in communicating withthe seller and purchasing the commodity, in the transportation phase, and in thesharing of the potential risk. However, the bank’s role has been minimized in theprocess of applying this theoretical model in practice as well as with differentmodifications in the model itself throughout several decades since the 1970s. For thisreason, Islamic banks’ involvement in the murabaha-based transactions in terms ofresearch, effort and risk-taking is at a minimum level, which also constitutes one of themost frequently discussed – and criticized – aspects of Islamic finance today.Moreover, this lack of involvement in real-life transactions leads to a lack ofspecialization by Islamic banks in different investment areas, which greatly reducestheir potential contribution to economic development in their host countries as well asto develop different SM-based projects that might serve their societies.

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Second, the murabaha has become an obstacle in terms of SM-based banking alsobecause of the fact that profit maximization is thought to be the only goal of thismechanism (Rabia, 2000, p. 151), which excludes its potential contribution to socialdevelopment (Sairally, 2011). The principal factors that help the murabaha to be amethod based solely on profit maximization seem to include severe competition,market conditions, and the profit-based expectations of the clientele, all of which implya primarily capitalistic mindset and institutional context. For both the financialinstitutions and their clients have been considering their transactions as aprofit-generating mechanisms, almost completely ignoring their (potential) social uses.

Third, once the murabaha has turned into such an institution, it has dominated themarket by causing the exclusion of other transaction mechanisms, including themudaraba, the musharaka, the salam, the istisna’, the ijara, etc. This domination hasdisturbed the balance between these mechanisms, which has in turn shaped the basicstructures of Islamic banks. For each mechanism entails different kinds of functions –including social and welfare functions. The musharaka, for example, helps toaccomplish large-scale projects by making it possible to combine various kinds ofsmall-scale capital accumulation; the mudaraba helps to bring together capital andmanagement skills. These mechanisms entail various social contributions to thewell-being of different groups within a society. Thus, once the entire field of financialactivities is dominated by the murabaha, different social functions carried out by othertransaction mechanisms disappear.

5. The advantages of the mudaraba and the musharaka in terms of SMI propose that the domination of the murabaha is ended in Islamic finance bydiversifying the sector through including and improving other transactionmechanisms (the mudaraba, the musharaka, the salam, the istisna’, the ijara, etc.)from a more comprehensive perspective. This is because these other mechanisms,which were in fact initially planned to be major elements of Islamic banking, especiallythe two more prominent ones, the mudaraba and the musharaka, seem to be moreeffective in terms of realizing social functions (see also below). Islamic banking maythus be balanced (vis-a-vis the murabaha’s domination) by expanding its operations soas to include other transaction methods, particularly the two prominent onesmentioned above[6].

There are at least seven different potential advantages of the mudaraba and themusharaka over the murabaha in terms of SM:

(1) In the musharaka and the mudaraba the Islamic bank has more power andauthority in determining the conditions of the project or transaction, unlike inthe murabaha where the institution plays a passive role and its impact is quitelimited because the client possesses the sole authority to choose the commodityand the seller to buy from. For this reason, in the musharaka and the mudarabaIslamic banks might be more active with more power in terms of moreeffectively marketing to their customers the SM-based projects that theythemselves propose.

(2) The musharaka and the mudaraba encourage, even force, the institution to have aclose contact with the real market conditions, unlike the murabaha, whichconfines their operation to money transactions and paper work. The former twomechanisms, if properly applied, will require Islamic banks to actually deal with

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trade, real sector, and different commodity types as well as to get involved withtheir customers’ projects and to propose their own projects to them. All theserequirements will most likely help them enhance their skills in different financialareas, improve their social perspective, and increase their social effects. It will bevery common, for example, to see Islamic banks looking for profitable projects aswell as proposing their own projects. With the murabaha dominating the sector,on the other hand, the operations of many of the Islamic banks have becomemerely an armchair profession with little contact with real economic life andlittle concern for social and welfare functions. Thus, by focusing predominantlyon the murabaha, Islamic banks have largely lost their investment skills(Zayd, 2004, p. 31). This development in turn has a negative impact on financingproduction and long-term investments. Unlike the murabaha, the musharaka andthe mudaraba have a certain advantages in the long run that prevents suchproblems for both the financial institution and its customers. For, unlike themurabaha, these two by default make it impossible for the institution to remainpassive, as the bank cannot just take measures to reduce the risk for itself but isforced to get involved during the entire process in order not to suffer financiallosses. This, in turn, may provide Islamic banks with more impetus andexperience for the projects that contributes to social development.

(3) The mudaraba and the musharaka are more suitable in terms of sharingresponsibility among the partners of an investment project and therebyreducing risk for them. For these mechanisms inherently make it impossible tobe risk-free for either side of the transaction because in the mudaraba theinvestor bears the whole loss and in the musharaka the partners share the loss.In the murabaha, on the other hand, this is not the case: Islamic banks in manycountries have by now taken certain measures (such as the institution of theguarantor and collateral security, giving all the responsibility to the costumerfor the problems associated with the commodity) to guarantee the repayment oftheir credits, thereby making their transactions almost completely risk-free.Therefore, in the current practice, all the risk is shouldered by one side (theclient) whereas in the mudaraba and the musharaka the risk is diversified andshared by all parties of the contract.

(4) The murabaha as an exchange contract is by definition a single transaction,unlike the other types, which are based on partnerships and projects. Thus, thelatter are more suitable to include various mechanisms such as buying andselling, renting, and contract of representation, which implies that they havemore potential for producing social effects. By the same token, the mudarabaand the musharaka are more suitable for SM-based projects that require largeinvestments and long-term commitments, such as the construction of hospitals,schools, and factories, which will create new employment opportunities andenvironmental projects. Obviously, such projects include a lot of socialfunctions, which are more difficult to realize with a murabaha-basedmechanism because of its inherent constraints, e.g. it only allows for thepurchase of commodity. The murabaha by itself, then, is not suitable for suchmulti-faceted and complex projects, which most SM-based projects are.Similarly, the mudaraba and the musharaka have the inherent ability toaccommodate multiple partners while the murabaha generally remains limited

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to two partners/sides only. This difference implies significant consequences interms of the size of transactions and their social effects. For example, large-scalesocial projects like schools and hospitals require the cooperation of multiplecompanies and sometimes contributions by hundreds of people, which is notpossible in the murabaha-based system.

(5) Since the murabaha requires the customer to either have money or guarantee topay their debt, it tends to limit the potential that could be realized by allowingdifferent talents to flourish in the society. Others, especially the mudaraba, on theother hand, helps realize this potential by supporting those who have knowledgeand skills but insufficient financial resources, thereby contributing to the socialdevelopment of the society as a whole. Similarly, the salam and the istisna’ helpthe producers who do not have enough accumulated capital to undertake theirown projects; and the ijara makes it possible to use a commodity without buyingit for those who wish to do so. By facilitating the investments and trade forbusinessmen and farmers, therefore, these contract models increase productivityand indirectly contribute to the welfare of the society in general.

(6) A significant element of the Islamic financial system, which has importantimplications for social cooperation and solidarity is an Islamic insurance typecalled the “takaful.” Parallel to the insurance agreement, this mechanismconsists of three principal elements, including partnership, mobilizing financialresources, and sharing risk or monetary loss. It therefore fulfills certain socialfunctions, as such, is also based on the mudaraba and the musharaka.

(7) Finally, because most of the Islamic financial institutions that exclusively focuson the murabaha-based mechanisms have become rather like capitalistic banks,they suffer some problems in terms of maintaining their “Islamic” image forcertain (more religiously-oriented) groups in the Muslim world (Zayd, 2004, p. 32).An increase in their mudaraba- and musharaka-based operations might also helpwith this image problem, which stands as a great obstacle in the way of findingnecessary support from the society at large for their SM-based projects.

Due to these advantages of the mudaraba- and musharaka-based mechanisms, I proposethat both the practitioners of, and the specialists on, Islamic banking make an effort toincrease the proportion of such mechanisms in the theory and practice of Islamic finance.To achieve this goal, they must develop ways to make these alternative mechanismsmore attractive for both banks and their clients. Moreover, a quote might be imposed toinclude these mechanisms in their transactions. However, it is clear that the practitionersof Islamic finance might be reluctant to apply these measures, which requires the ShariaBoards and the ulema to encourage them in this direction.

As for the general SM conditions of Islamic banking, I have three concreterecommendations to improve them.

First, the Islamic legal tradition contains some institutions such as the differentforms of the waqf created to meet emergent needs (e.g. cash waqfs found in theOttoman practice) and novel forms of contracts (e.g. bay’ al-wafa (debt guarantee sale)),which emphasize collective maslahah and could serve as models for modern daytransactions. In this context, some of the provisions found in the classical fiqh that arechangeable on the basis of dynamic customs could be updated and revived in light ofnew needs and modern developments, such as the widespread use of information and

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communication technologies in commercial transactions. It is always preferable to holda long-term SM in this regard than a narrow, overly legalistic approach.

By the same token, second, the increasingly global scale of the existing financialsystem should be considered as an essential element of understanding Islamic financefrom a SM perspective. Scholars and specialists working on providing solutions to theproblems faced by Islamic banks from the perspective of Islamic fiqh must consider thesocial implications of fatwas as well as their legal aspects. For instance, they shouldalways keep in mind that these institutions are corporate bodies; that is to say, they arevery different than actual persons working with small amounts of financial capital.Although there is not much difference between the two types of agents from a strictlylegal perspective (as both of them enter into similar types of contracts and areencountered by similar laws), they are extremely different in terms of their capacity tocarry out social and welfare functions. A number of provisions in the Islamic law couldalso be updated from this perspective, as the Islamic fiqh is quite flexible in terms ofproducing new legal mechanisms or contracts and classifications. The essentialprinciple here is that unless there is a clear violation of a basic principle of Islamic law,new contract or transaction types, and new partnership mechanisms are allowed – andmaybe even necessary under new circumstances.

Finally, it might be useful to create and institutionalize an international socialplatform, which might be called the “SM Forum for Islamic Banking,” whose taskwould be to produce various projects for Islamic banks. It would bring togetherspecialists (academics and professionals) from diverse fields, including sociology,psychology, and law as well as economics, fiqh, and the Islamic finance itself. Thisforum must be an inclusive one in terms of both professions/fields and nationalities ofits members because SM is a concept that touches upon many different aspects ofsocial and psychological life, and thus requires a comprehensive perspective and amindset that emphasizes “the social” as well as market conditions and economicrelations. The forum might also contain various national and international committees(and sub-committees) organized around different themes and/or sectors (e.g. education,health, irrigation, etc.) that will produce and oversee a number of SM projects suitablefor different institutional and cultural contexts.

6. ConclusionThese recommendations and various problems discussed above clearly indicate thatIslamic financial institutions still have a long way to go in terms of fulfilling their SMfunctions in a sustainable (as opposed to contingent or transitory) manner because theylack certain structural mechanisms for this task. I have discussed several importantfactors that are accountable for this failure; the most pressing one among them is thedomination of the banks’ financial activities by the murabaha-based mechanisms.I have argued that a possible increase of the share of other, more flexible mechanisms,particularly the mudaraba- and musharaka-based operations, would help Islamicbanks both to escape from the trap of transforming into capitalist banks and to betterfulfill their social and welfare functions.

I have also discussed other factors that have led to this failure, including theunfovarable conditions and institutional and cultural contexts in which Islamic bankshave to operate, various administrative and legal constraints they encounter, and alack of academic or intellectual competence producing a holistic perspective that could

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guide them in a hostile environment. Improving SM through structural mechanismsrequires Islamic banks to diversify their transaction types, rather than focus solely onthe murabaha by emulating contemporary capitalist financial institutions. They alsoneed to be able to operate in a more flexible and broader legal and economicframeworks in order to undertake meaningful SM-based projects. I have thus discusseda number of more or less concrete recommendations that might help overcome thecurrent crisis of Islamic banking in this respect.

However, I have also argued that the ideal situation for SM functions of Islamic banksrequires the existence of a healthy social, cultural and legal infrastructure. For this reason,SM is too large a task to be achieved by Islamic banks themselves only. Moreover, a look atthe situation from a broader perspective shows that these social problems associated withIslamic banks reflect the general conditions of the Muslim world writ large. In fact, manyMuslim countries and institutions suffer a lack of well-established connections andcontinuities between various economic activities and social policies pursued by politicaland corporate bodies. Likewise, we do not see many social projects to combat poverty,violence and other structural problems in Muslim regions designed from a holisticperspective in a way that is integrated with the activities of larger economic and politicalinstitutions. In this context, Muslim societies need to create other socio-economicinstitutions, which can produce projects and organise their planning in line with the broadobjectives of Islamic finance (and economics) in the middle and long run in order toincrease the productivity of Islamic banks in realizing their social functions and alleviatingpoverty, thereby contributing to social development in their societies. A first step requiredto reach such a goal must include a revision of the internal structures of Islamic banksthemselves, and a balancing of the distribution of their transaction mechanisms.

An important factor that lies at the root of such chronic and structural problems isthe prevelance of a mindset that conceives these problems in a strictly mechanical andlegal manner, thereby largely ignoring the social and human side of economic relations.This is very much a product of the impact of modern, capitalist relations that tend tonurture one-dimensional relations among one-dimensional institutions and individuals,which challenges and disturbs their natural state, which involves complexity andmulti-dimensionality. Only a comprehensive, relational, and holistic outlook thatemphasizes the connections between the economic and social spheres of life could helpto significantly improve SM functions by offering structural and sustainable solutionsto Islamic banks as well as other Muslim institutions.

Notes

1. For instance, this was the case when a bank called the “Ihlas Finans” collapsed in Turkey in2001. Many of its shareholders who lost their money did not accept their loss and sued thecompany instead.

2. In this context, Siddiqi states (2004): “There is also a need to distinguish between theobjectives of Islam as a way of life and the objectives of Islamic Law. The former involvesaspects of personality and society the latter does not cover. Also, the former has a larger boxof tools than available to the latter. Envisioning Islamic economy in twenty-first century isbetter done with reference to goals of Islam as a way of life rather than being done withreference to the goals of Islamic law. This will enable us to handle issues like poverty andinequality that a law-based approach has failed to handle.” Siddiqi (2007, p. 101) “also notesthat in the current mechanism Shari‘a scholars’ role is rather technical, whereas the mainproject from which Islamic finance branched out was civilizational.”

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3. This is particularly true for the so-called “participation banks” in Turkey. However, oneshould note that this lack of Islamic references is also related with the fact that these banksare bounded by secular laws, particularly the “finance law” in Turkey.

4. Asutay (2007, p. 168) states that despite the fact that Islamic economics providesfoundational axioms that proposes an ethical system of economics and finance based on theontological and epistemological sources of Islam, Islamic finance does not support, nor is itsupported by, the normative assumptions of Islamic economics.

5. In a parallel argument Warde (2009, p. 168) says: “Because murabaha-type transactions donot bring significant social and economic benefits to the community, have a short-termorientation and tend to mirror conventional finance, Islamic scholars have accepted themgrudgingly.”

6. Mudaraba is a contract, with one party providing 100 percent of the capital and the other partyproviding its specialist knowledge to invest the capital and manage the investment project.Musharaka is the Islamic contract for establishing a joint venture partnership. In musharaka,two or more parties contribute capital to a business and participate with the related profits andlosses. Ijarah contract is basically the transfer of a valuable use (usufruct) while the ownershipremains with the lessor with all its liabilities involved. Salam is a sale whereby the sellerundertakes to supply some specific goods to the buyer at a future date in exchange of anadvanced price fully paid at spot. Istisna means to order a manufacturer to manufacture aspecific commodity for the purchaser. Takaful refers to participants mutually contributing toa common fund with the purpose of having mutual indemnity in the case of peril or loss.

References

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DinarStandard and DarAlIstithmar (2010), Social Responsibility Trends at Islamic FinancialInstitutions, 2009-2010, available at: www.dinarstandard.com/maqasid/Islamic_Financial_Institutions_2009_CSR_ Trends_Report.pdf (accessed December 16).

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Further reading

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Asutay, M. (2008), Point of View: Islamic Banking and Finance -Social Failure, available at:www.newhorizonislamicbanking.com/index.cfm?section¼features&action¼view&id¼10699 (accessed August 5, 2011).

Balz, K. (2010), “Breaking the formalist deadlock – Islamic finance and socially responsibleınvestment”, in Ali, S.N. (Ed.), Islamic Finance, Innovation and Authenticity, Harvard LawSchool, Cambridge, MA, pp. 247-64.

Bank of America (2012), Find Grants and Sponsorships, available at: http://about.bankofamerica.com/en-us/global-impact/find-grants-sponsorships.html (accessed September 24).

Cebeci, I. (2010), Modern Islam Iktisadi Literaturunde Murabaha Tartismalari, Istanbul.

CIMB Islamic (2012), Our 3 Pillars, available at: www.cimbfoundation.com/index.php?ch¼fd_pillar_comm&pg¼fd_pillar_comm_showcase&ac¼59 (accessed September 20).

Dusuki, A.W. (2008), “What does Islam say about corporate social responsibility (CSR)?”,Review of Islamic Economics, Vol. 12 No. 1, pp. 5-28.

Farook, S. and Lanis, R. (2011), Banking on Islam? Determinants of Corporate SocialResponsibility Disclosure, available at: www.dinarstandard.com/maqasid/CSR%20Exposure%20Draft.pdf (accessed August 5).

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Hammad, N. (2005), al-‘Uqud al-murakkaba fi al-Fiqh al-Islami, Damascus.

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Laldin, M.A. (2012), “Empowering CSR, SRI and SE in Islamic finance”, in Ali, S.N. (Ed.), IslamicFinance, Innovation and Authenticity, Harvard Law School, Cambridge, MA, pp. 133-58.

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Maali, B., Casson, P. and Napier, C. (2006), “Social reporting by Islamic banks”, ABACUS, Vol. 42No. 2, pp. 266-89.

Qaradawi, Y. (1987), Bay‘ al-murabaha li al-amir bi al-shira kama tujrihi almasarif al-Islamiya,Cairo.

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Siddiqi, M.N. (2000), “Islamic finance and beyond: premises and promises of Islamic economics”,Proceedings of the Third Harvard University Forum on Islamic Finance, Cambridge, MA,October 1-2, 1999, pp. 49-53.

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About the authorIsmail Cebeci graduated from the Islamic Law department at Marmara University, Istanbul, in1998. He completed his MA in the same department in 2001 with his paper on the “Sheikh al-Islams’Fatwas in the Late Ottoman Period.” After studying Arabic literature in the graduate school atMarmara University for two years, he switched to the graduate program in Islamic Law at thesame university in 2004, where he was awarded a PhD degree in 2010 with his dissertation, titled“A Critical Analysis of Murabaha Debates in Modern Islamic Economics.” During his graduatestudy, he spent one year at Syracuse University in New York, and two years at Jordan Universityin Amman, during which he took graduate-level classes on Islamic economics andfiqh al-muamalat. He also visited the Islamic Development Bank, the Albaraka main library,and the Majma’ al-Fiqh al-Islami in Jeddah, Saudi Arabia. He has recently taught Islamic Law andIslamic Economics in Istanbul, Turkey. He also worked as a Lecturer in Arabic at MarmaraUniversity. Between September 2010 and January 2012 he was a Visiting Fellow at Oxford Centrefor Islamic Studies where he also taught Islamic Finance to graduate students. In the spring term(2012) he was a Visiting Scholar at ILSP, Harvard Law School. Currently he is a Researcher atOxford Centre for Islamic Studies. Ismail Cebeci can be contacted at: cebecii@hotmail.com

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