FAITH, ETHICS AND RELIGIOUS NORMS IN A GLOBALIZED ENVIRONMENT: FREEDOM OF RELIGION AS A CHALLENGE TO THE REGULATION OF ISLAMIC FINANCE IN EUROPE

Abstract

It is often feared that globalization is an equalizer in that it dissolves the differences between cultures, including legal cultures. At the same time we can see a counter-movement which places more emphasis on culturally or religiously based rules. A key example of this is the emergence of Islamic Finance. This trend has not only been fueled by the renewed interest in Islam since 9/11, but also due to the shortcomings of traditional financial concepts which have been highlighted dramatically in the global financial crisis. While originating in the Middle East, interest in Islamic finance is now so widespread that seminars on Islamic finance in Western financial centers are fully booked long in advance. International law firms open more and more new offices in the Middle East and, while not necessarily having entered the mainstream, in a sense Islamic finance has gained its place in the world of finance and
has therefore become a concern not only for bankers but also for lawyers advising clients on financial services. In this presentation, we will first look at the Quranic sources for the need for Islamic finance before seeing how Islamic finance operates and which financial instruments have been developed under sharia law. We will see how sharia rules impact the financial industry and how they have gained a role among financial products offered around the world before turning our attention to the challenge posed by these financial instruments to regulators unfamiliar with Islamic law. We will look at how religious freedom limits regulatory possibilities. At the center of the investigation, though, will be the question as to whether Islamic finance products live up to the promises associated with them and which consequences this has for regulators, in particular those in Non-Muslim countries.