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‘Gatekeepers’ of Islamic financial circuits: Analysing urban geographies of the

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 Entrepreneurship & Regional Development
2011, 1–19, iFirst

‘Gatekeepers’ of Islamic financial circuits: Analysing urban

geographies of the global Shari’a elite
David Bassens*, Ben Derudder and Frank Witlox

Geography Department, Ghent University, Krijgslaan 281 (S8), Ghent 9000, Belgium
Downloaded by [University of Gent], [David Bassens] at 07:01 18 August 2011

This paper analyses the importance of ‘Shari’a scholars’ in the Islamic

Financial Services (IFS) sector, which has been a growing global practice
since the 1970s. Based on Shari’a Law, IFS firms provide banking, finance
and insurance respecting faith-based prohibitions on interest, speculation
and risk taking. Although IFS firms operate across a variety of scales and
involve a range of actors, this paper focuses on the transnational capacities
of Shari’a experts employed by IFS firms. These scholars use their extensive
knowledge of Shari’a Law to assess the ‘Islamic’ character of a firm’s
operations, and assist the development of Shari’a-compliant products. As
they embody necessary entry-points into Islamic circuits of knowledge and
authority, members of what we dub the ‘global Shari’a elite’ can be
regarded as ‘gatekeepers’ of Islamic financial circuits. Drawing on a
comprehensive data source we present a geographical analysis of Shari’a
board membership, nationality and educational background of 253 Shari’a
scholars. The results show that the global Shari’a elite connects a limited
number of IFS hubs (e.g. Dubai, Kuala Lumpur, Kuwait City, Manama,
and London) to knowledge and authority networks falling outside
‘mainstream’ business and service spheres.
Keywords: Islamic finance; transnationalism; international financial
centres; advanced producer services; Gulf region

1. Introduction: Elites within ‘Islamic’ financial circuits

In a highly globalized world, cities are considered key drivers of regional
development. Historically, cities have always been sites of regional capital accumu-
lation and production to varying extent, be it often within particular national
frameworks. In this context, cities were dubbed as veritable ‘growth machines’, as
they were seen as loci for the instrumentalization of a hegemonic agenda of
‘economic growth’ by local urban elites (Molotch 1976). In the past few decades,
however, we have witnessed the growth of a literature on what are usually called
‘world cities’ (Friedmann 1986) or ‘global cities’ (Sassen 2001), which has extended
these ‘nation-based’ views on cities by conceiving them as equally being inserted in
global flows of capital, goods, people, information, ideologies, etc. In this view,
urban growth and decline are understood as a result of both the degree of insertion
(exclusion) into (from) global urban networks, the so-called world-city-networks
(WCN, see for instance, Derudder et al. 2010), and the extent to which city-based
agents are able to influence and control these flows from their networked position

*Corresponding author. Email: [email protected]

ISSN 0898–5626 print/ISSN 1464–5114 online

ß 2011 Taylor & Francis
DOI: 10.1080/08985626.2011.577820
http://www.informaworld.com
 2 D. Bassens et al.

(Allen 2010). Crucially, advanced producer services (APS) firms, such as banking/
finance, accountancy, law, management consultancy and advertising – and the highly
skilled elites they employ, have been identified as crucial producers of post-industrial
economic growth and integration into global (urban) networks of capital, goods,
knowledge and people (Sassen 1995, 2001; Beaverstock 1996; Taylor 2004).
Of course, global APS and business service firms are instrumental in opening up
‘emerging world cities’ for global capital and integrating them in the global economy.
However, as argued elsewhere (Robinson 2002, 2005; Massey 2007), the single focus
on APS may obfuscate economic activity, driven by entrepreneurs operating outside
‘mainstream capitalism’ (of which APS firms have often been considered a key
representative), but which may very well be economically significant in terms of
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urban development. For instance, advanced businesses with an ‘Islamic’ character

and associated high-skilled entrepreneurs developing ‘at the borders’ of mainstream
capitalism have received comparatively little attention. These ‘Islamic businesses’
have – one way or the other – made compliance to or respect for the sensitivities of
Islamic faith a fundamental aspect of the products and/or services they offer and/or
the rationale behind the firm’s organization and functioning. In this paper, we focus
on the Islamic financial services (IFS) sector, which offers Shari’a-compliant
banking, finance and insurance services to an ever-growing regional and global
clientele. In 2008, the sector grew with a staggering 27.6% in spite of the global
financial turmoil during the second half of the year; the global sector is now worth
US$822 billion of Shari’a-compliant assets (The Banker 2009).
In particular, this paper’s attention goes out to global ‘Islamic’ circuits of capital,
knowledge and people, which have emerged in concordance with the globalization of
the IFS sector and which are fuelling the development of key IFS hubs, in and
beyond ‘core’ Islamic markets. In the absence of precise inter-city data, these Islamic
circuits have previously been assessed by mapping office networks of IFS firms as a
proxy for Islamic flows of capital, knowledge and people (Bassens, Derudder, and
Witlox 2010a). Importantly, ‘inanimate’ capital flows are sustained by networks of
real-life agents, such as business professionals (bankers, fund managers, accountants,
rating agents, etc.), 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).
Because the actual pool of influential scholars is very limited – many scholars
even end up sitting in multiple boards – they can be considered scarce but necessary
entry points into global Islamic circuits. As a result, firms (and by extension cities)
hosting the Shari’a elite will have a better chance to operate competitively in global
Islamic financial markets. In terms of the development of specific IFS hubs, the
employment of Shari’a scholars enables cities to tap into circuits that go beyond
‘mainstream finance’, thus opening up access to investment flows with a Shari’a-
compliant character. This will influence the success of cities to attract other sources
of capital, for instance originating in Saudi Arabia, Iran or other states or regions
with a strong ‘Islamic’ political economy. Apart from being global Islamic
entrepreneurs themselves, for instance in their role as Shari’a board members,
these scholars can thus be regarded as ‘gatekeepers’, but also as ‘facilitators’ of
Islamic entrepreneurship for the firms that employ them because they allow them to
operate in Shari’a-compliant markets.
 Entrepreneurship & Regional Development 3

The main objective of this paper is to open up the multi-layered urban

geographies of the so-called ‘global Shari’a elite’ and take these results as a starting
point to understand the emergence of cities as hubs on Islamic financial circuits. This
is done through a geographical analysis of the Shari’a scholars in terms of (1) their
Shari’a board membership, mapping the cities in/from which they are operating; (2)
their nationality, analysing the origins of the global Shari’a elite; and (3) presenting
an overview of their educational background. By combining these three dimensions,
we aim to illustrate how a number of cities are developing as hubs on transnational
circuits of Islamic knowledge and people that go beyond mainstream APS. The
remainder of this article is structured as follows. We begin with a short introduction
to the rationale, history and current status of IFS and a discussion of the crucial role
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of Shari’a scholars therein (Section 2), before we delve deeper into the ‘Islamic’
circuits of Shari’a knowledge and authority supported by these scholars (Section 3).
We conclude by reviewing the main results and pinpoint some avenues for further
research on IFS hubs (Section 4).

2. ‘Banking on faith’: IFS as a globalized Islamic business

2.1. Islamic economics
During recent decades, ‘Islamic’ businesses have become a familiar global phenom-
enon. With other sentiments such as pan-Arabism withering away in the 1970s, the
Middle East in particular has experienced a general ‘Islamic revival’, reflecting the
reaffirmation of Islam as a societal and political force. In this context, many Muslim
societies experienced what Olivier Roy (2002, 97–99) calls ‘the privatization of
religion’: the individual – and we would add commercial – ‘reappropriation’ of
Islamic discourse and its symbols, arguments, rhetoric or norms, by entrepreneurs in
a variety of sectors. Examples include the Islamic fashion clothing industry
(Gökariksel and Secor 2009), Islamic NGOs and charities (Kaag 2008), private
schools, etc. Also, financial transactions have become increasingly subject to Islamic
faith-based principles. As a result, Islamic banks, funds, insurance firms and others
have been established to cater to customers with Shari’a demands. Since many of
these firms operate in global markets, the IFS sector can be considered as a highly
sophisticated and globalized form of Islamic business.
The increased demand for Shari’a-compliant finance is strongly related to the
emergence of Islamic economics during the twentieth century (Bassens, Derudder,
and Witlox 2011b). This discourse, from which the practice of IFS has been
engendered, emerged within a context of regional and national struggles for political
power throughout the Middle East, and the associated search for a distinct ‘Islamic’
identity (Kuran 1995, 1997). Preached by influential thinkers such as the Iraqi Shi’i
jurist Muhammad Baqir al-Sadr (1931–1980), or the Pakistani ideologist Sayyid
Abul A’la Maududi (1903–1979) and others, it was advanced as an all-encompassing
model for social, economic and political life, a so-called ‘the Third Way’ between
capitalism and Marxism (Ala Hamoudi 2007). Islamic economics was thought to
avoid the inegalitarian excesses of modern capitalism, while at the same time
unleashing the energies of entrepreneurs and merchants (Hefner 2006, 17).
Moreover, in a world where Muslims were falling increasingly under the influence
of Western ideas, Islamic economics was seen as a vehicle for (re)establishing Islamic
authority, making its economic aspects subordinate to its Islamic character
 4 D. Bassens et al.

(Kuran 1997, 302). As such, Islamic economics was aimed at freedom from colonial
rule, exploitation and oppression through a return to Islam, which stood for the
elimination of poverty and the reduction of unequal distribution of wealth
(Siddiqi 2007, 99–100).
The religious foundations for this Islamic ideological reassertion were provided
by the prime sources of Islam, that is the Quran and the sayings of the Prophet
Mohammad, the so-called hadiths. These two sources constitute the basis of the
Shari’a, the Holy Law of Muslims. However, importantly, these sources also need a
degree of interpretation, explaining the need for reasoning based on analogy, and the
consensus of Islamic religious scholars (ulama), Shari’a scholars who are considered
esteemed experts in Islamic Law and carry influential voices in terms of its
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contemporary implementation. Drawing on these sources and their interpretation,

Islamic economics proclaims a resolute focus on the ‘real’ economy, renouncing
interest (riba), gambling (maysir) and contractual ambiguities (gharar) that lead to
excessive risk taking (Iqbal and Molyneux 2005). Also, investment in certain
forbidden products (e.g. pork meat, weaponry, alcohol, etc.) is not allowed. In
theory, profit-and-loss sharing (PLS) is put forward as the main alternative for the
debt-based ‘mainstream’ economy. This implies that investments should refrain from
unacceptable profit and loss asymmetries that can lead to societal disruptions, as
could occur when an investor gets a fixed return (e.g. interest paid on loans or bonds)
whether or not the underlying business is actually making a profit.
The first attempts to establish interest-free Islamic financial institutions were
directly inspired by the Islamic economic rationale as they were aimed at providing
financial services to the less prosperous, propagating the ideas of a just and equitable
society. In the Middle East and South(east) Asia, from the 1950s and 1960s on, the
first projects originated in rural areas of Pakistan, Egypt, and Malaysia (Warde
2000, 73; Tripp 2006, 136). Pakistan saw one of the first experiments of an interest-
free credit network in the late 1950s. In Egypt, the Bank of Local Deposits in Mit
Ghamr had a short existence (1963–1968) in promoting rural development. In
Malaysia, the Tabung Haji fund was established in 1963 to invest the savings of
prospective pilgrims to Mecca in a Shari’a-compliant manner. Mostly from the 1980s
onwards, also in non-Muslim countries such as the US, multiple projects arose, such
as the American Finance House – Lariba (Los Angeles), which were aimed towards
the empowerment of urban Muslim communities by providing them with interest-
free modes of home and small business finance, car loans, deposits, etc. (Chiu,
Newberger, and Paulson 2005).
These initial projects were inherently small-scope and very localized, whereas a
crucial development in the globalization of the IFS sector was the creation of the
Islamic Development Bank (IDB), an inter-governmental bank under the auspices of
the Organization of the Islamic Conference (OIC), in 1975. Predominantly driven by
the oil-producing states Saudi Arabia, Libya, the UAE and Kuwait, the IDB was
established to collect interest received from non-Muslim countries as well as from
zakat (almsgiving). It would direct these moneys as development funds towards poor
areas in the Middle East, boost reciprocal trade and become a clearing house for
international payments between Muslim countries in the spirit of Muslim solidarity
(Warde 2000, 75; Tripp 2006, 137). Furthermore, during the 1970s, the oil boom gave
rise to ‘a loosely knit interconnected international network of Muslim members of
the business community’, involved in both the petrochemical and financial sectors,
 Entrepreneurship & Regional Development 5

allowing them to gain experience in Western regulatory and business environments,

such as London and New York and other world cities (Maurer 2005, 28). Following
the establishment of the IDB and fuelled by windfall oil money, a number of
commercial, mostly Gulf-based IFS firms (e.g. Dubai Islamic Bank, Bahrain Islamic
Bank, etc.) laid the basis of the now globalizing sector. Some of these Gulf-based IFS
firms have ‘gone global’ by establishing branches throughout the Muslim World
and beyond (Bassens, Derudder, and Witlox 2010a). Lately, also conventional
interest-based banks have established strategic alliances with these emerging
multinationals, or have opened up ‘Islamic windows’ to answer to a growing
demand for Shari’a-compliant products. Outside the Middle East, Malaysia has
developed as the key Islamic market, mainly since the 1980s, for instance through the
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establishment of a dual banking system, a process embedded in the rolling-out of the

Islamic state (Warde 2000, 123–128; Nasr 2001).

2.2. The ‘gatekeeping’ role of Shari’a scholars in IFS

The growth and globalization of IFS is thus strongly related to entrepreneurial
decisions at the institutional level, such as the entrance of conventional banks
operating from ‘mainstream’ financial centres. However, the globalization of IFS
also highlights the role of a particular class of ‘gatekeepers’ to the growing sector. A
global elite of Shari’a scholars, in particular, consisting of highly influential people
from clerical and layman backgrounds, performs a crucial role as they lend their
services to the sector. For one, this is because Shari’a governance has become a
pressing issue since the connection to ‘mainstream’ finance appears to erode ‘Islamic’
norms (Agha 2009). As a result, there is a widening gap between the Shari’a as a
body of Islamic Law, which governs various aspects of a Muslim’s life according to
numerous interpretations, and the sometimes opportunistic application of these
interpretations in the field of IFS. Through the employment of Shari’a scholars, who
oversee the practices of the financial institution and the development of new
products, entrepreneurial IFS firms aim to bridge these gaps between Shari’a-
compliance issues on the one hand, and technical and profitability issues of financial
products on the other.
Except for Iranian banks, which are de jure Shari’a-compliant given the Islamic
nature of the Iranian economy, all Islamic banks employ Shari’a scholars, who are
either clerics or laymen with expertise in Islamic jurisprudence (fiqh). In most cases, a
board of Shari’a scholars, called a Shari’a (supervisory) board or Shari’a committee,
acts as an independent body within the higher echelons of the Islamic financial
institution’s organizational structure. Similar to the board of directors, the Shari’a
board can be interpreted as an extra mediator between the assembly shareholders
and the higher management of the institution. Similar to financial auditors, Shari’a
boards ‘certify’ that the bank’s activities have been in accordance with the Shari’a
(Warde 2000, 227). For Islamic entrepreneurs, this is a crucial concern in terms of
customer and investor credibility. As a service to IFS firms, then, Shari’a scholars
assess the financial products devised by the banks and reassure the customers,
shareholders and investors that their practices are ‘truly Islamic’ (Tripp 2006, 144).
Throughout their activities, they negotiate with textual and historical sources of
Islam – in this case Shari’a Law – and reconstruct and transform what constitutes
 6 D. Bassens et al.

‘the Islamic’ as a discursive and practical category, giving rise to new forms of
economic activity on a global scale.
As it comes to the actual activities of the Shari’a scholars, we see that they are
involved in multiple aspects of Islamic financial practice, interacting with various
departments of the firm. As an example we draw on the stated activities of the Dubai
Islamic Bank Shari’a board, retrieved from its annual report (Dubai Islamic Bank
2009), and presented in Table 1.
As illustrated, the tasks of the Shari’a board are multiple, including the screening
and monitoring of investments and fees, the supervision of the firm management,
and the calculation of zakat rates on profits. Especially, the purification of the
accounts and portfolios is characteristic for Islamic financial practice. This implies
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the calculation and deduction of ‘impure’ elements, e.g. riba, from the earnings
before the investor collects the dividends, to ensure that the latter are completely
Shari’a-compliant (DeLorenzo 2004). The consensus/discussion-based nature of
their work explains the necessity of face-to-face meetings between scholars on the
board, but apart from these ‘formal’ meetings, close and repeated face-to-face
interaction with the IFS firm’s portfolio managers, brokers, accountants and
auditors is also crucial. Next to certifying the bank’s activities, scholars also have an
important role in terms of product development. In general, one of the tasks of
Shari’a board members is to create contract templates which the financial institution
can use for its transactions (Hegazy 2005, 138). In the case of the growing field of
Islamic securitization, when arranging Islamic asset-based/backed notes (sukuk), 
Shari’a scholars communicate throughout the structuring process with a team of

Table 1. Overview of Dubai Islamic Bank’s Shari’a board activity (Dubai Islamic
Bank 2009).

1. Issuing fatwa’s:
Attending questions and queries received from the bank’s various departments and issuing a
set of decisions and appropriate fatwa’s.
2. Reviewing the bank’s activities:
– Finance structuring and preparation of its documentation
– Investment and funds portfolios

– Issuance of sukuk
– Syndication financing
– Banking services fees
3. Training:
Developing a training plan for Shari’a foundation courses.
4. Product development:
Developing existing products and new products with cooperation of the bank’s management.
5. Shari’a supervision and auditing:
Reviewing Shari’a supervision and auditing reports for the bank’s activities and operations
during the year and identifying the profits from transactions which are not in compliance with
Shari’a principles.
6. Review of accounts and records:
Reviewing the bank’s accounts, records and documents.
7. Review of financial statements:
Reviewing the bank’s zakat account, which is to be withdrawn from the shareholders’ funds.
 Entrepreneurship & Regional Development 7

investment bankers and lawyers of the arranging bank. Although these teams have
the technical knowledge to design a desirable product, close interaction with Shari’a
scholars is deemed necessary to find a Shari’a-compliant solution.
This firm-level of Shari’a governance, however, is not without debate within the
IFS sector itself. Indeed, the conflicting interests of being profitable and competitive,
while adhering to accepted views on Shari’a-compliance, have in many cases led to a
trade-off where interpretations have become increasingly liberal as to the point that
products only differ from conventional ones in name and technique. The fact that
Shari’a board members are appointed by the general assembly and remunerated for
their services has been up for discussion in this context. Nevertheless, although forms
of ‘Shari’a arbitrage’, as El-Gamal (2007) calls it, take place, where scholars are
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simply rubber stamping corporate decisions, there is evidence that IFS as a whole
(and certainly within the Gulf region) is experiencing a streamlining of variegated
Shari’a interpretations. On the one hand, this happens through the dominant vision
of Shari’a scholars in regulatory bodies such as Accounting and Auditing
Organization for Islamic Financial Institutions (AAIOFI), Liquidity Management
Centre, International Islamic Financial Markets, Islamic Interbank Money Market
and The Islamic Fiqh Academy. AAOIFI, in particular, has produced the most
centralized effort to issue standards that all Islamic financial institutions should
comply with (Hassan and Dicle 2007, 37). These standards include (1) accounting
and auditing rules for the IFS sector; (2) governance rules, defining how Shari’a
board supervision should be organized at the firm level (including appointment,
composition, and reporting of the Shari’a board); (3) a code of ethics for financial
auditors and employees; and (4) standards concerning the actual financial practices,
products, investments, etc., that fall under the concepts of Islamic banking, finance
and insurance (see website AAOIFI, http://www.aaoifi.com, accessed 7 August
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. Given their role in IFS, the
insertion of firms and cities in Islamic financial circuits remains strongly related to
the networks and activities of the Shari’a scholars it hosts. The next section analyses
the various dimensions of the urban geographies of the global Shari’a elite.

3. Urban geographies of the ‘global Shari’a elite’

3.1. Data source
In order to get a grip on the urban geographies of Shari’a scholars, we retrieved our
information from the Failaka report (Failaka 2008), which provides an up-to-date
source on Shari’a board membership and their national and educational back-
grounds. The report contains information on 253 scholars in 215 Islamic financial
institutions. The dataset covers not only fully fledged IFS firms, but also the broader
affiliations of the sector with ‘mainstream’ financial circuits. The latter clearly shows
that ‘conventional’ interest-based finance aims to tap into the emerging IFS market
through Shari’a-compliant ‘Islamic windows’ within their existing frameworks. Most
of the firms in the sample, however, are Islamic institutions in the strict sense, such as
 8 D. Bassens et al.

Islamic banks, asset management groups, funds and takaful (insurance) companies,
which together account for ca. 63% of the firms in the dataset. The second largest
group (ca. 29%) consists of Islamic windows in conventional banks, offering Shari’a-
compliant services. Further, a number of regulatory bodies (e.g. AAOIFI, Liquidity
Management Centre, International Islamic Financial Markets, Islamic Interbank
Money Market, The Islamic Fiqh Academy, etc.) which are of crucial importance for
the IFS sector as a whole, are included in the sample (4%). Finally, the last group
(4%) consists of business service firms that help sustain the daily functioning of the
globalizing IFS sector. Examples of the latter include the international market
advisors such as Dow Jones Islamic Financial Markets (DJIM), Dubai Financial
Market, but also major APS firms such as Standard & Poor’s, who actively seek to
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tap into this market.

Drawing on this data source, the next three sections present the various aspects of
the geographies of the global Shari’a elite, respectively, analysing (1) the distribution
of scholars across a number of IFS centres; (2) the national background of these
scholars and (3) their educational background.

3.2. Operational Islamic financial centres

To instigate the discussion of the Shari’a elite, we provide an overview of the cities in/
from which Shari’a scholars are working through a spatial analysis of Shari’a board
memberships. To this end, we composed a Shari’a scholar index, which calculates the
standardized number of Shari’a scholars operating in/from a city (the highest value
being 1.00). Figure 1 provides an overview of the distribution of Shari’a scholars at
the city-level, featuring cities with the largest presence of the Shari’a scholars in the
dataset (0.10). Based on this, we can make some general observations concerning
the global distribution of Shari’a scholars and pinpoint major operational IFS
centres.
First, as a general pattern, the Shari’a distribution closely follows the geographies
of IFS markets, in terms of Shari’a-compliant assets and IFS firm location (Bassens,

Figure 1. Main operational IFS centres (0.10).

 Entrepreneurship & Regional Development 9

Derudder, and Witlox 2010a, 2011b). The biggest share (ca. 43%) of the world’s
Shari’a-compliant assets is located in the Gulf, followed by the non-Gulf region of
the Middle East and North Africa (MENA) region, which hosts another 38%
(The Banker 2009). Outside of MENA, Asia is the largest market with ca. 13% of the
global Shari’a-compliant assets. These trends are reflected by the global distribution
of Shari’a scholars, as key financial centres in these markets are evidently the main
centres in/from which they operate. Overall, Kuala Lumpur, the main hub for
Malaysia’s large domestic market, is leading the list, hosting as much as 69 scholars.
In the Gulf, Kuwait City and Manama are the leading cities. For Manama, this
reflects the presence of regulatory bodies such as AAOIFI, the Islamic International
Rating Agency, the International Islamic Financial Markets and the Liquidity
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Management Centre, which are trying to produce a comprehensive set of Shari’a

standards for the IFS sector. Also, Dubai, Kuwait City, Jeddah, Doha and Riyadh,
host a large number of Shari’a scholars. As these cities are the top locations to tap
into the growing regional demand for Shari’a-compliant products, they are the prime
locations for fully fledged IFS firms. On the one hand, retail markets see increased
demand for Islamic products such as current and investment accounts, Islamic credit
cards, home mortgages, car-leasing schemes, insurance products and many more.
Officially, policy treats IFS from a ‘level playing-field’ perspective, but often
government-related enterprises take active stake in large regional Islamic banks (e.g.
the Dubai-based Noor Islamic Bank) to cater to this growing demand. On the other
hand, in terms of ‘wholesale finance’, IFS can be considered a causal factor in the
creation of the Gulf’s urban spaces. As a means to absorb regional oil-related
 have become an important structure to finance the Gulf’s massive
liquidity, sukuk
property and infrastructure developments, such as those executed by Dubai’s GRE
Nakheel (Bassens, Derudder, and Witlox 2010b). Globally, Islamic funds and
investment banks are gaining ground in channelling private and sovereign invest-
ment flows between the Gulf and North American and European markets, especially
in markets that involve ‘tangible assets’ such as real estate.
Second, diverging from this ‘expected’ pattern, the city distribution of Shari’a
scholars also has a clear-cut ‘global’ character: scholars are not only based in cities in
the Gulf region and Southeast Asia, but also in key cities in Western Europe and
Northern America, outside what is generally regarded as the core Islamic markets.
On the one hand, full-fledged have IFS have moved out from their regional bases
and are entering global capital markets, operated from world cities across the globe –
cities which are becoming crucial sites to perform IFS at a global scale. 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 (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.
London is currently developing into the European hub for Shari’a-compliant
money. This happens through the above-mentioned fully fledged IFS firms and also
through Islamic windows (e.g. HSBC Amanah) that are designed to cater to the
potential UK Muslim market and at the same time make their entrance in the world
 10 D. Bassens et al.

Table 2. Shari’a distribution per nationality.

Nationality Number Percentage

Malaysia 61 24
Saudi Arabia 30 12
Kuwait 23 9
Bangladesh 16 6
Pakistan 14 6
Bahrain 10 4
Egypt 10 4
Indonesia 9 4
Lebanon 9 4
Qatar 9 4
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Syria 9 4
Other 53 21
Total 253 100

of high-street finance. Furthermore, institutions such as the London Metal Exchange

are performing a crucial liquidity management role in the day-to-day practice of
Islamic finance. New York’s importance, on the other hand, is not so much a result
of a large presence of IFS firms (only two in this database), but rather reflects the
role of facilitating firms/institutions (DJIM, MSCI Islamic Indices, Standard &
Poor’s) and Islamic windows within the conventional sector. Therefore, the
emergence of Islamic financial circuits on a global scale and the associated jump
to high-street finance coincides with a high degree of interlocking of mainstream
financial centres in Shari’a networks, an evolution which will no doubt further shape
the geographies and contents of IFS (Maurer 2005, 27–42).

3.3. Origins of the global Shari’a elite

While the above analysis provides a first approach to the size of the global Shari’a
elite in major IFS centres, the data source can also be further analysed in terms of the
nationality of the scholars. As shown in Table 2, the global Shari’a elite is a
multinational group of scholars originating from the MENA, South(east) Asia,
Northern America and Europe. Almost a quarter of the 253 scholars are Malaysians,
while other major groups are from Saudi Arabia (12%), and Kuwait (9%). Next, to
refine our analysis, we provide specific city patterns in terms of the transnational
linkages of their Shari’a elite. Here we present a brief analysis of two leading cities
that are representative for their regional market, namely Kuala Lumpur (Table 3)
and Dubai (Table 4).
In many ways, the geographical pattern of both cities is archetypical for their
insertion in Islamic finance practice. Kuala Lumpur is a major centre, but while it
attracts an array of transnational linkages, a large number of its linkages are
‘domestic’ in character. Indeed, a lot of the Shari’a scholars operating in/from Kuala
Lumpur are Malaysian nationals, while another select group has its origins in the
MENA (and especially in the Gulf), and some scholars from Northern America. On
the other hand, as it reads from Dubai’s pattern, Shari’a governance is exclusively a
service provided by non-nationals: most of Dubai’s scholars are Malaysians, while
 Entrepreneurship & Regional Development 11

Table 3. Kuala Lumpur’s transnational Shari’a linkages.

Nationality Scholars Percentage of total

Malaysia 16 23
Saudi Arabia 12 17
Kuwait 10 14
Pakistan 6 9
Bahrain 4 6
Indonesia 4 6
Sudan 4 6
Qatar 2 3
South Africa 2 3
Canada 1 1
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Egypt 1 1
Ghana 1 1
Lebanon 1 1
Libya 1 1
Syria 1 1
Turkey 1 1
UAE 1 1
US 1 1
Total 69 100

Table 4. Dubai’s transnational Shari’a linkages.

Nationality Scholars Percentage of total

Malaysia 12 34
Kuwait 5 14
Bahrain 3 9
Saudi Arabia 3 9
Egypt 2 6
Pakistan 2 6
Syria 2 6
US 2 6
Canada 1 3
Iran 1 3
Libya 1 3
Sudan 1 3
Total 35 100

Kuwaitis and Saudi Arabians constitute other important groups. Because of these
transnational linkages, firms operating from Kuala Lumpur or Dubai can tap into
multiple Islamic capital circuits supported by knowledge and authority networks of a
range of scholars from varying national backgrounds.
A general conclusion from these city-level patterns is that, except for Kuala
Lumpur, cities may count as leading operational IFS centres, even if few Shari’a
scholars in these cities actually have their origins in the respective nations these cities
are located in (compare with Figure 1). This is the case not only for Gulf cities such
as Manama and Dubai, which can be considered ‘core’ IFS hubs, but also ‘the
 12 D. Bassens et al.

outsiders’ London, New York and Johannesburg. In London, for instance, almost
half of the Shari’a class are Malaysians (i.e. 16 out of 33), while other important
groups consist of Gulf states citizens (9). Only one London-based scholar actually
has the British nationality. This trend to import Shari’a governance suggests that
some of the leading hubs are in fact in a situation of relative dependency, as they
adhere to visions brought in from abroad. On the other hand, since Shari’a scholars
will reproduce dominant visions of their home-countries (e.g. the dominance of
Wahhabi interpretations in Saudi Arabia), the existence of these transnational
networks can also work as a mechanism that support Islamic capital flows between
the home-country and the city where the scholar is employed.
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3.4. Shari’a education centres

The specific authority of Shari’a scholars is a product of their connection to circuits
of ‘Islamic’ or rather Shari’a knowledge received among others from education at
high-profile universities throughout the Muslim world. This particular dimension is
what sets these scholars apart not only from ‘mainstream’ financial elites, but also
from other actors working in IFS firms, be they bankers, analysts, financial
engineers, etc. As such, Shari’a scholars not only produce transnational linkages
between their home countries and the places where they perform their tasks as
Shari’a board members. Rather, their particular educational background connects
IFS centres with knowledge produced at universities teaching various aspects of
Shari’a and Islamic finance. Quite a few of these scholars are actively involved in
education themselves, as professors at various universities throughout the Muslim
world, and as popular lecturers at academic and business conferences on Islamic
finance throughout the world. This illustrates that employment of Shari’a scholars
provides access to ongoing academic debates concerning Shari’a interpretation and
development of new Islamic products.
Based on the academic curricula of 100 influential scholars provided by the
Failaka report, this section presents an overview of the major Shari’a education
centres across the globe. As can be read from Table 5, which lists the major
universities where the global Shari’a elite got their bachelor’s, master’s and PhD
degrees, the authority of Shari’a scholars is often founded in their education with
famous teachers or at renowned institutions in the Islamic world. Particularly, the al-
Azhar university in Cairo, whose fatwas and interpretations are among the most
influential in Sunni Islam, is the main source for knowledge and authority of the
global Shari’a elite. Also, Malaysian institutions rank high on the list, respectively,
featuring the University of Malaya and International Islamic University of Malaysia.
Given the importance of both institutions in the education of the global Shari’a, this
may suggest that Malaysian Shari’a interpretations, which are usually being
considered less rigid (Warde 2000, 123–128), may come to dominate Islamic practice
at a global scale. At the same time, however, this trend is kept in check by other
influential interpretations such as the Wahhabi one, which is disseminated through
scholars educated at Saudi universities such as the Imam Muhammad ibn Saud
University in Riyadh and the Islamic University in Medina.
Furthermore, Figure 2 shows an aggregated view on Shari’a education centres at
the city level through the construction of an education centre index (1.00
representing the highest number of bachelor, master and PhD degrees). As can be
 Entrepreneurship & Regional Development 13

Table 5. Top Universities for Shari’a education.

University City Number of degrees

Al-Azhar University Cairo 29

University of Malaya Kuala Lumpur 15
Imam Muhammad ibn Saud University Riyadh 13
International Islamic University of Malaysia Kuala Lumpur 12
Damascus University Damascus 9
Darul Uloom University Karachi 8
Islamic University Medina 7
University of Edinburgh Edinburgh 5
University of Ein Shams Cairo 5
University of Jordan Amman 5
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Figure 2. Leading Shari’a education centres.

read from the figure, most of the above trends are replicated. However, looking at
the city-level, it appears that a substantial group of Shari’a scholars have also studied
outside the Muslim world, and hold degrees from UK universities (notably those
based in London and Edinburgh) and to a lesser extent from US academic
institutions. In London, for instance, although one-third (13) of the total number of
degrees held by Shari’a scholars (44) was obtained in Cairo; 8 out of 44 degrees were
provided by UK universities, either in London itself (3), or outside the city (5).
Compared to the results from the nationality analysis presented in Section 3.3, it
appears that even though most scholars are non-nationals, there is a significant
group of scholars with education in the UK. The existence of interlocks with UK
educational institutions is related to the broader insertion of London in global
Islamic financial circuits, a sign that the contents of IFS practices at a global scale are
increasingly being shaped by institutions and actors outside the core Islamic markets
of the Gulf and Malaysia.
However, as is illustrated by Tables 6 and 7, other IFS centres are inserted
differently in Shari’a education networks. These tables show the geographical
 14 D. Bassens et al.

Table 6. Kuala Lumpur’s Shari’a education hinterworld.

City Number of degrees Percentage

Cairo 19 25
Kuala Lumpur 9 12
Karachi 7 9
Riyadh 6 8
Damascus 4 5
Jakarta 3 4
Kuwait 3 4
Medina 3 4
New York 3 4
Amman 2 3
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Cardiff 2 3
Mecca 2 3
Montreal 2 3
Birmingham (UK) 1 1
Cambridge (UK) 1 1
Islamabad 1 1
Khartoum 1 1
Los Angeles 1 1
Makassar (Indonesia) 1 1
Manama 1 1
St Andrews (Scotland) 1 1
Tallahassee (US) 1 1
Stillwater (US) 1 1
Total 75 100

Table 7. Dubai’s Shari’a education hinterworld.

City Number of degrees Percentage

Cairo 10 23
Kuala Lumpur 7 16
Damascus 5 11
Karachi 5 11
Riyadh 3 7
Edinburgh 2 5
Amman 1 2
Cambridge (UK) 1 2
Cardiff 1 2
Rabat 1 2
Glasgow 1 2
Kuwait 1 2
London 1 2
Los Angeles 1 2
Montreal 1 2
New York 1 2
Salt Lake City 1 2
St Andrews (Scotland) 1 2
Total 44 100
 Entrepreneurship & Regional Development 15

pattern of the educational anchoring of the scholars employed in Kuala Lumpur and
Dubai, respectively. Apart from the overall importance of Cairo in both patterns,
Shari’a governance in Kuala Lumpur is very much grounded in national institutions
based in the city itself. This again confirms the ‘domestic’ character of Shari’a
governance in Malaysia found in the previous nationality analysis. This feature is
closely related to the proactive attitude of the Malaysian ‘Islamic’ state vis-à-vis
Islamic finance, a disposition which has produced a supportive regulatory frame-
work and national institutions since the 1980s (Warde 2000, 123–128). The situation
is totally different in Dubai as Shari’a knowledge is brought in exclusively via non-
national institutions in the MENA region, Malaysia, the UK and the USA. Echoing
its role as an offshore centre, Dubai is much more dependent on views and
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interpretations that are ‘imported’ from non-national foreign-educated scholars.

While doing so, Dubai has been successful in marking its place in Islamic finance, the
lack of influential domestic educational facilities and Emirati scholars may well
restrict the city’s influence on content-wise developments and innovations in Islamic
financial markets in the future.

3.5. Discussion: Implications for IFS hubs

The particular insertion of cities in networks of Shari’a knowledge production and
authority has implications for growth strategies of IFS hubs in both core Islamic
markets and beyond. In this field, much could be learned from Kuala Lumpur’s case,
whose Shari’a scholar links show the firm embeddedness of its IFS sector within
domestic educational institutions. To be concrete, as the dominance of Malaysian
scholars in other IFS hubs suggests, the strength of domestic circuits of Shari’a
knowledge and authority can serve as starting point for a leading global role in
Shari’a governance, as an ‘exported service’ to other IFS hubs across the world.
However, while Kuala Lumpur can benefit from exporting Shari’a expertise, other
IFS hubs are mostly marked by import strategies.
In Gulf cities, for instance, urban development is strongly related to how
successful city leadership is in attracting entrepreneurship and associated flows of
capital and knowledge from abroad. A dominant strategy is to attract elites
employed by ‘mainstream’ APS and producer firms, who often have European or
American origins. This is perhaps best exemplified by the trajectory of Dubai
(Bassens, Derudder, and Witlox 2010b). As skills and knowledge in the city are
considered scarce, ruling elites have set out to import these from abroad – a vision
which in Dubai is structurally implemented through a dozen or so zones (e.g. Jebel
Ali Free Trade Zone, Dubai International Financial Centre, Dubai Media City,
Dubai Internet City, etc.), enjoying tax exemption, streamlining with international
law, etc. (Davis 2006). As a result, foreign firms and associated highly skilled workers
have established themselves in Dubai and other cities along the Gulf, boosting these
places with skills, know-how, and capital. Recently, however, this dependence on
foreign expertise is increasingly conceived as problematic, since these ‘global elites’
showed to be very flexible in leaving the region as soon as the global crisis hit the
region. Although governments have started to promote ‘indigenization’ programmes
(e.g. Emiratization in the United Arab Emirates) that aim to stimulate employment
of nationals in various sectors (e.g. banking/finance), the transfer of skills and
knowledge between these highly skilled foreigners and national populations is still
 16 D. Bassens et al.

highly erratic (Malecki and Ewers 2007, 477). The fluctuating presence and
knowledge spill-over of ‘mainstream’ elites highlights the need to explore the
multiple circuits in which Gulf cities could perhaps be more firmly enrolled in. As the
current analysis has illustrated, however, the trend to import expertise from abroad
is also replicated in the field of IFS. Therefore, rolling out domestic educational
facilities will no doubt be a necessary step for further growth in the field of IFS.
The fact that this might prove a successful development strategy is reflected in the
growth of London as an IFS hub, a city which is benefitting from the development of
Islamic finance curricula in UK-based academic institutions.
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4. Concluding remarks and avenues for further research

While the insertion of cities in a shifting global economy is undergoing large-scale
changes, notably in terms of APS provisioning (Taylor et al. 2009; Derudder, Hoyler,
and Taylor 2010), this paper has illustrated that a number of cities are becoming
powerful hubs in different economic spheres through the growth of regional or niche
markets, and especially through their role in the globalizing IFS network. The study
of Islamic business networks adds to ‘urgent’ lines of research (Samers 2001) that
provide an ‘alternative’ (Lai 2009) or ‘decentred’ (Pollard and Samers 2007) view on
the emerging forms of global entrepreneurship. As such, this paper has aimed to
deepen of our understanding of the role of high-skilled workers operating at the
border of ‘mainstream capitalism’, i.e. in networks that intersect with, but also
surpass ‘mainstream’ service and business networks.
The analyses presented in this paper illustrate how the urban geographies Shari’a
scholars structure the insertion of a number of IFS hubs in global Islamic financial
circuits. The scholars act as gatekeepers to the globalizing IFS sector, a disposition
which can be read (1) technically, from their fundamental role in designing and
screening innovative Islamic financial products which are rapidly becoming the
‘appropriate’ way of doing business with(in) in core Islamic markets; and (2)
geographically, from the way a small group of highly connected and globalized
scholars – which we have called the global Shari’a elite – is operating across a variety
of scales, linking up IFS firms, regulatory bodies, stock markets, APS firms and
academic institutions, thereby establishing new and viable connections between key
IFS hubs. The resulting urban geographies have both institutional and actor-level
dimensions. Institutionally, the employment of the global Shari’a elite is shaped by
needs for Shari’a governance by banks, APS firms, exchanges, etc., among which
‘conventional’ firms play a growing role. To some extent, the geographies of
operational Shari’a centres thus tend to reproduce existing power structures within
global financial circuits, making ‘mainstream’ financial centres such as London and
New York important hubs. In terms of individual actors, the development of IFS
hubs is strongly structured by the national and educational background of the
scholars they host. For one, because Shari’a interpretation varies geographically,
these individual backgrounds will influence how IFS hubs can tap into specific
regional or national IFS markets. Furthermore, as scholars in most cities are
educated in major institutions abroad (except for Kuala Lumpur), this implies that
most IFS hubs are dependent on imported Shari’a knowledge and authority. As a
result, the dominant role of mainstream financial centres, which is institutionally
reproduced by the market entrance of conventional banks, is somewhat diminished
 Entrepreneurship & Regional Development 17

from these decentralizing actor-level dynamics. Even though Shari’a education is

taking off in non-Muslim academic institutions (and mostly in the UK), education in
IFS markets remains firmly rooted in a limited number of institutions within the
Muslim world (e.g. in Cairo and Kuala Lumpur).
However, the present analysis has also elucidated the need for further research on
IFS geographies. On the one hand, research should focus more thoroughly on how
Shari’a knowledge vested in a range of ‘Islamic financial elites’ (Shari’a scholars, but
also bankers, lawyers and others) translates into the design of services, products and
investment categories within IFS. Importantly, as entrepreneurs, the ability of these
actors to operate in multiple institutional contexts allows them to mould and
transform existing products and services to fit the sensitivities of a specific market.
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On the other hand, research on IFS markets could in our view benefit greatly from
an integrated approach, combining insights from retail and wholesale markets, to
further grasp the processes that add to the growth of IFS hubs. From a retail
perspective, the growth of IFS markets is a product of households and large and
small entrepreneurs looking for banking, finance and insurance services (home
mortgages, credit cards, trade and project finance, etc.) that sustain economic
development, while simultaneously respecting Shari’a Law. These localized retail
markets serve as input for wholesale markets, for instance through the repackaging
of these contracts and products as Shari’a-compliant investment notes (sukuk)  and
other wholesale products. As a consequence, wholesale financial services, produced
by ‘global’ Islamic financial entrepreneurs are inherently related to the specific
demand of urban dwellers and their economic and extra-economic needs. Addressing
Islamic entrepreneurship in such an integrated manner will no doubt facilitate a
firmer grounding of studies of the ongoing (re)production of IFS hubs from below
(Smith 2001).

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