Islamic Governance, Capital Structure, and Equity Finance: Examining the Possibilities of American Financial Shari'ah Boards
In this world of misinformation and predatory ideologies, a basic economic connection may be the difference between the success and failure of American foreign policy in the Middle East. In times of conflict, establishing the commonality of shared financial values is the best way to build trust, the European Coal and Steel Community is one example, therefore it is remarkable that the world’s largest and most advanced economy has failed to develop the simple financial mechanisms—using Islamic finance and Shari’ah boards—to connect with Muslims across the globe. Even if the United States’ central focus remains combating terrorism, it is clear that the more financial information the United States can gather, the better equipped it will be to fight the war on terror. Attendant to this informational capital are significant reputational advantages that the United States would not otherwise have. For instance, an Islamic-American corporate institution could be certified by multiple clerics in Iraq, thus offering new momentum to the humanitarian mission by preventing the numerous belligerent attacks that terrorists might subject a non-Islamic American corporation. The great Edward Said would describe the current apathy towards Islamic finance in the United States as a “clear case of orientalism.” Now, America’s increasing domestic failure to develop a compatible framework for Islamic finance is verging towards negligence. Consider that economists estimate the outflow of Shari’ah capital from Gulf countries to be approximately $1 trillion, growing 20% per annum, that Gulf countries are currently set to spend upwards of $10 trillion on new infrastructure over the next decade using Shari’ah compliant financing vehicles, and that the world currently has roughly two billion Muslims, some of which will one day demand, or at least prefer, Shari’ah compliant financial products. If the United States does not develop the administrative and legal framework to cater to this market, foreign financial institutions surely will. In fact, economists currently value the Islamic finance industry in the United Kingdom at $12 billion. In stark contrast, in the United States this same market comprises only $150 million in assets. This Article will examine the necessary mechanics of establishing a Islamic-American corporation in Delaware for the purposes of conducting transactions with the Middle East, and analyze in detail the essential Islamic financial governance structure—the Shari’ah board.
Date of Authorship for this Version
Shar?’ah boards, Islamic finance
Mahmood, Rafel, "Islamic Governance, Capital Structure, and Equity Finance: Examining the Possibilities of American Financial Shari'ah Boards" (2009). Cornell Law Faculty Working Papers. Paper 50.