Rationalization without secularization: The evolution of modern Islamic finance, 1975-2011.

In Religious Rejections of the World and Their Directions, Max Weber argues that rationalization of the modern capitalist economy is at odds with an ongoing role in it for religions of salvation (Weber 1958: 331). Indeed, Weber offers the disappearance of the Catholic usury prohibition as an example of how "the needs of economic life make themselves manifest" (Weber 1978: 577‒578). How, then, do we explain the birth of modern commercial Islamic finance in the 1970s and its efflorescence in the past decade into a $1 trillion global industry, precisely at a moment when international finance was undergoing dramatic technicization? How has an explicitly religious project blossomed from the soil of hyper-rationalized contemporary financial capitalism by embracing the usury ban and a role for Islam in the economy, instead of rejecting them? After an Introduction that outlines what modern Islamic finance is, this paper sets out to answer that question. I assess the impact on Islamic finance's development of four global-level events of the last half-century: the Cold War, the growth of Islamism, the oil shocks of the 1970s, and the expansion of international finance. The Conclusion looks toward the future of Islamic finance. [ABSTRACT FROM AUTHOR]