Re-Situating Islamic Finance in Islamic Moral Economy: Essentialising Developmentalism and Sharing Economy -Testing the Moral and Political Economy Nature of Islamic Finance

Islamic finance, theoretically, is based on the ethos of Islamic moral economy (IME) with an explicit value framework; (i) based on justice, equity, human dignity, freedom of enterprise and moderation; (ii) based on developing and harnessing economic resources to satisfy spiritual, material and social needs of all members of the community and (iii) based on a moral obligation to also serve poor and destitute from share of wealth. These consequence-oriented principles of IME defines the underlying philosophy of Islamic finance in order for adjective ‘Islamic’ to have meaning in the sense of suggesting ‘beneficent or ihsani society’ in the making of Islamic banking and finance. In other words, Islamic finance is expected to develop into an alternative way of ‘financing’ rather than contribute to further ‘financialisation of economy which is considered as one of the culprit of the recent financial crisis. Therefore, in the moral economy understanding of Islamic finance the question is not using the same metaphor to move capital around but rather developing a new metaphor to lead for transformational as well as transactional change In an operational manner, Islamic finance is described through its foundational principles of risksharing and profit-loss-sharing which identify Islamic finance as equity oriented and embedded ‘financing’ proposition, which directly relates to real economy. It is such features and peculiarities that distinguish Islamic finance from conventional financial system, as through such peculiarities the ‘moral nature’ of Islamic finance is revealed. Recalling that with the global financial crisis, the problem is located with dis-embedded nature of conventional finance, which is no longer linked to the real economy. Islamic finance, therefore, in the aspirational sense of IME, represents an alternative financing paradigm through being embedded in the real economy and in the values and norms of Islam identifying that non-economic matters and principles shapes the nature, normative world as well as operation and transaction of Islamic finance.