Industrial Policy and Islamic Finance

Conceptualizing Islamic banking and finance: a comparison of its development and governance in Malaysia and Singapore

“…arguments such as Lai's (2015) 'industrial policy' oriented towards finance, or on the other hand, Mohamad and Saravanamuttu's (2015) 'neoliberal exceptions' and Rudnyckyj's (2014) 'afterlives of development'. With this debate in mind, and as we worked on conceptualizing commonalities and differences in the evolution of IBF, we relied on what Liow (2012) broadly calls a 'neoliberal-developmentalist state'.…”

“…Singapore have been characterized as developmentalist or developmental (e.g. Funston, 2001;Lai, 2015), as authoritarian strong states (Slater 2012); and, in the case of Singapore, as a hybrid 'neoliberal-developmental' state (Liow 2012). Malaysia has been analyzed as 'semidevelopmentalist' (Henderson, 1999;Rhodes and Higgott, 2000), as shaped by 'acquisitive corruption' and as a 'weak' state (Henderson, 1999); as 'neoliberal developmental' (Elias and Rethel, 2016), as 'post-developmental' with neoliberal strategies in which specific zones (or regions) and populations within countries are turned outwards towards an engagement with the neoliberal global financial order (Ong 2006); as formerly 'crony capitalist' changing to neoliberal after 2000 (Rethel 2010b), and as a 'competitive authoritarian' regime (Pepinsky 2009).…”

“…In this sense, we view the Malaysian state as 'semi-developmentalist' insofar as i) it retains many elements of developmentalism (see e.g. Lai, 2015) in its direction of certain economic 'projects' -among them the growth of IBF, but ii) it has been shaped by, and also legitimated through, 'ethnic politics'. We elaborate on this in the subsequent discussion.…”

“…In Malaysia, the rise and governance of IBF specifically has received considerable empirical attention concerning its emergence in the 1980s and its rapid growth in the 1990s and 2000s (e.g. Ariff and Rosly, 2011;Hadiz and Khoo 2011;Haneef 2001;Karim 2010;Lai, 2015;Liow 2009;Mohamad and Saravanamuttu, 2015;Naguib and Smucker, 2010;Nasr 2001;Rudnyckyj, 2014;Tripp, 2006;Venardos 2012;Wilson 1998 In contrast to Malaysia, there has been a distinctive paucity of both theoretical and empirical research on IBF in Singapore. Scholarly and more policy-oriented research on IBF predominantly relates to legal frameworks and governance issues arising from implementing Sharia laws on financial products and implications for compliance and risk management (Chia and Wang 2008;White 2009).…”

“…To reinforce this trajectory, BNM accelerated the growth of IBF by introducing a scheme in 1993 allowing conventional financial institutions to operate with two divisionsone charging interest, and the other Sharia-compliant (their so-called 'Islamic window'). In doing so, the establishment of these windows undermined the monopoly of BIMB (Lai, 2015), and the government viewed this 'dual system' as the most effective and rapid means of increasing the number of institutions offering IBF services at the lowest cost. Again, the move also signalled that the government 'maintained a prudent and evolutionary approach'…”