Setting Shari’a standards: On the role, power and spatialities of interlocking Shari’a boards in Islamic financial services

Abstract

This paper aims to refine earlier research on the geographies of Islamic financial services (IFS) through a study of how cities are being connected through interlocking directorates in Shari'a advisory boards of IFS firms. The relevance of this analysis is discussed against the backdrop of recent critiques on mainstream 'world cities' research because of structuralist and universalizing tendencies. By applying a network concept to the relationalities of world cities within financial circuits, we explore the nested city/firm/actor structure behind Shari'a board membership, and reassess the connectivity of cities in the IFS network in terms of the role and spatialities of interlocking Shari'a boards. The results show that Gulf cities, most notably Manama, Dubai and Kuwait City are particularly well-connected, while also mainstay financial centres outside the Middle East, such as London and New York are networked by interlocking board memberships of a global Shari'a elite. The dominant position of Manama is traced back to its role as a standard-setting city for Shari'a-compliant investments, which materializes through the enacted presence of an array of highly interlocked regulatory bodies and mediating elites.

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“…7. The Western bias of the WCN approach remains even if the interlocking network concept has also been applied to analysis of so-called Islamic financial services, most recently by Bassens et al (2009). 8.…”

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“…Based on an analysis of Lexington (Kentucky) in the global economy, he calls for a more complex and process-based view of contemporary urbanism that would allow the globalization-urbanization nexus to be studied in and through a diverse range of cities (see also McCann and Ward, 2010). In terms of processes, Bassens et al (2011) …”

‘Gatekeepers’ of Islamic financial circuits: Analysing urban geographies of the global Shari’a elite

“…that fall under the concepts of Islamic banking, finance, and insurance (see website AAOIFI, http://www.aaoifi.com, accessed August 7, 2010). On the other hand, these Shari'a standards are disseminated through the Islamic sector via the rulings of an emerging global Shari'a elite consisting of Shari'a scholars sitting on the Shari'a boards of (multiple) Islamic banks in the region and beyond (Bassens, Derudder, and Witlox, 2011a). So, while Shari'a arbitrage is taking place, and however ambiguous the position of Shari'a scholars may be, Shari'a scholars remain crucial gatekeepers for Islamic circuits.…”

“…On the other hand, firms and elites in 'global cities', such as London and New York, become increasingly aware of the growing amount of capital flowing through these Islamic circuits. These Islamic windows, stock exchanges, law firms, and other institutions thereby employ Shari'a scholars, who make the rules of IFS and therefore act as gatekeepers of these globalizing networks (see Bassens, Derudder, and Witlox 2011a). By getting involved in networks of Shari'a knowledge and authority, banks such as HSBC, Deutsche Bank, Barclays, and others have thus been able to successfully enter the IFS markets.…”

“…), who produce and disseminate highly-specific 'Islamic' financial knowledge through their business networks. Among these 'Islamic financial elites', 'Shari'a scholars' or 'Shari'a experts' can be considered crucial agents because of their authority in setting Shari'a standards (Bassens, Derudder, and Witlox, 2011a).…”