Financialisation of Islamic finance: a Polanyian approach on the hegemony of market logic over Islamic Logic

The significant rise of finance in emerging economies evidenced that financialisation is not limited to advanced economies. While financial capitalism spreads to every corner, financialisation appears in emerging economies in the form of variegated finance capital. Despite its theoretically counter-hegemonic construct, Islamic financial markets do not stand out of this permeation. This paper, hence, aims to explore the role of Islamic finance in making inroads into financialisation in the countries where Islamic finance has reached a significant presence. Based on Krippner’s approach to financialisation, this paper examines the financialisation of Islamic finance by concluding that the strength of finance capital resulted in variegating or grafting a morally backed financial system into the neoliberal logic. The discursive analysis supported by empirical analysis suggests that due to the observed dis-embeddedness of Islamic finance away from its genuine novelty, it has become a hybrid product of the neo-liberal agenda. This is evident in its debt-encouraging financial instruments, which worsens the gap between the real and financial economy. The contribution of this paper is evident in its contractual-level analysis, which focuses on the operational and working mechanism of Islamic banking and finance and how it has been led astray by the finance capital.