Studies in Islamic Finance, Accounting and Governance series
Edited by M. Fahim Khan and Mario Porzio
Chapter 5: Islamic Finance and Ethical Investments: Some Points of Reconsideration
Valentino Cattelan An apparent correspondence between Islamic finance and ethical investments is commonly argued. More precisely, Islamic finance is usually deemed to be an example of the loose realm of ethical investments, according to a genus/species logical relation (see Figure 5.1). But criticism of this assumption may provide a more comprehensive understanding of Islamic finance. Indeed, it seems to me that the depiction of Islamic finance as intrinsically ethical stems from two concurrent factors that have hindered any sensible investigation on the matter: first, a misleading conception of ‘Islamic law’ as an ethical code of behaviour; second, the idealization of Islamic finance as part of a superior social system, fostered by an enthusiastic economic scholarship.1 Leaving aside these assumptions, this chapter aims at proposing a more critical distinction between the categories of ‘ethical investments’ and ‘Islamic finance’ as bearer of an autonomous ethics. Consequently, I will argue for the opportunity to distinguish in academic research the notion of ‘Islamic finance’, as a branch of the international financial market, from the sub-category of ‘ethical investments’ supported by Islamic financial institutions. ISLAMIC FINANCE AND ‘ISLAMIC LAW’ Islamic finance, as is well-known, is based on the application of classical ‘Islamic law’ in the management of money: this implies the prohibition of interest (riba), of excessive risk (gharar), of gambling (maysir), the exclusion of investments in arms, alcohol, casinos, tobacco, pornography and pork, and a major attention on social welfare. As Vogel emphasizes, ‘one of the more striking facts about the rise of Islamic...
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