M.R. Kroessin, PhD Candidate, IDD, University of Birmingham

1. Re-thinking development: ‘Islamist’ banking and the case of the Islami Bank’s Rural Development Scheme in Bangladesh M.R. Kroessin, PhD Candidate, IDD, University of Birmingham

2. ‘Islamist’ banking and development in Bangladesh Objective of this paper: • Exploration of the development narrative of a leading Islamic bank in Bangladesh, and its power relationship with mainstream actors. • Does this particular interpretation of Islamic teachings make a difference in the conceptualisation of development and the associated practice? Methodological considerations: • Located within a critical reading of the post-development critique of development • Key selected power relations at work within discursive practices of the development field in Bangladesh, deploying a Foucauldian notion of power and discourse • Case study of the Rural Development Scheme of the Islami Bank Bangladesh Limited (IBBL) via an ethnographic stakeholder analysis (interviews with key informants within IBBL and externally and observation through 6-months internship) Paper overview • Islamic economics: Growth without interest or hidden agenda? • Development: benign and value-free? • The Bangladeshi development rollercoaster: socialism, capitalism and political Islam • Islami Bank Bangladesh Limited: financial institution, social development agency or political force? • IBBL’s Rural Development Scheme: Material or spiritual growth? Or both? • Mapping out IBBL’s policy footprint: a heavy boot treading lightly • Conclusion

3. ‘Islamist’ banking and development in Bangladesh Islamic economics: Growth without interest or hidden agenda? The rise of Islamic economics • Post-colonial struggle to create distinct Muslim identity (Kuran, 1995) • Islamic revivalism and political Islam (e.g. Al-Banna and Qutub’s Ikhwan al Muslimeen and Mawdudi’s Jamaat-e-Islami) focused on political and economic sphere • Islamisation of knowledge to establish Islamic intellectual authority in ‘Western’ secular disciplines, particularly economics Objectives of Islamic economics - Moral and just economic system free from exploitative practices such as interest, speculation, gambling, hoarding etc. • Ethical business practices set out in Islamic law (Shariah) derived from the Qur’an and the Sunnah (sayings of the Prophet Mohammed) • but not restricted to only business practices but the establishment of a just society as the purpose of the Shariah in itself: “The primary norm in an Islamic society is the elimination of crime, establishment of morality and protection of private property, not economic progress or public participation in decision-making” (Khurshid Ahmed, c.f. Qureshi, 1983) • for Islamic revivalist movements, Islamic economics are part and parcel of wider socio-political ‘reform’

4. ‘Islamist’ banking and development in Bangladesh Development: benign and value-free? • Development arose as a concern in the post-colonial era and a range of policy recommendations have been made over the last 50 years (modernisation, dependency theory, neo-liberalism, human development, post-Washington Consensus) • Development is a field in flux with rapid turn-over of alternatives (Pieterse, 2001) • Development is underpinned by a discourse, values and assumptions (e.g. Sen’s ‘Development as Freedom’) • Post-development scholars (e.g. Escobar 1995, Sachs 1992) suggest that ‘development’ is a continuation of the same exploitative socio-economic strategy by Northern industrialised powers as was colonialism • Inspired by Foucault, post-development scholars argue that development is a discourse that orders and creates the problem that it seeks to address. The development field is comprised of policies and practices, underpinned by a value discourse that bestow legitimacy upon the dominant perspective

5. ‘Islamist’ banking and development in Bangladesh The Bangladeshi development rollercoaster: socialism, capitalism and political Islam Bangladesh is a case in point for the fluidity of dominant perspectives in development policy: • Mujib revolution (1971 – 1975): socialism, secularism, Bangali cultural nationalism • Ziaur Rahman regime (1975 – 1981): Bangladeshi nationalism, Islamisation (e.g. constitutional amendment), economic reforms (de-nationalisation of banking sector) • Ershad regime (1982 – 1990): economic liberalism and Islamisation (Islam becomes state religion) • Democracy under Khaleda Zia’s BNP (1990 – 1996 and 2001 – 2006) und Sheikh Hasina’s Awami League(1996 – 2001 and from 2008): economic liberalism, political Islam (Jamaat-e-Islami was part of BNP coalition government) and a possible return to more state control of the economy (PRSP discontinued in favour for 5-Year Plan) • Contested readings of history: struggle for/against independence from Pakistan remains a prism through which political elites view contemporary issues

6. ‘Islamist’ banking and development in Bangladesh Islami Bank Bangladesh: financial institution, social development agency or political force? Background: • IBBL first Islamic bank in South-East Asia, founded in 1983 via Presidential decree by General Zia in fulfilment of commitments made by Mujibur Rahman who ratified the Islamic Development Bank charter in 1974 • start-up capital provided by the Islamic Development Bank (OIC-owned IFI based in Jeddah) and senior business, religious and political leaders from the Jamaat-e-Islami (the current Chair is also a leading JI politician) • in 2008 the largest private commercial bank of Bangladesh financing approx 20% of BD’s exports focused on employment creation and import substitution • previously committed to the Islamisation of Bangladesh’s economy but now focusing on commercial excellence

7. ‘Islamist’ banking and development in Bangladesh Islami Bank Bangladesh: financial institution, social development agency or political force? Development vision: • self-portrayal of IBBL as a development finance institution rather than just a bank • general adherence to Shariah in economic sphere (no interest, no speculation) and private life (no gambling, alcohol, wastefulness, religious observance etc) – strongly promoted within staff and clients • traditional Islamic welfare system through collection and distribution of zakat (alms) and awqaf (endowments funding public services) aided by the Islami Bank Foundation (hospitals, education etc.) and the Rural Development Scheme (microfinance plus) • (re)-creating a just economic and social system – linking back to the (historical construct of) the ‘ Golden era of Islam’

8. ‘Islamist’ banking and development in Bangladesh IBBL’s Rural Development Scheme: Material or spiritual growth? Or both? Background: • micro-finance programme with 500,000 (mainly female) members in over 10,000 villages • Islamised scheme modelled on Grameen approach to social collateral lending minus interest (murahabah - hire purchase or musharakah – profit and loss sharing) • essentially economic but also social development through promotion of Islamic values through loan officer who gives weekly lectures on prayer, fasting, dress code (hijab) together with Qur’an recital (loan and religious observance are part and parcel) but … • whilst this type of social mobilisation should not be problematic in a Muslim majority country (Hindu members are instructed about their own religion!) some leading managers see this Islamic education/propagation (dawah) as the real purpose of the scheme and moreover as actual development • development is defined through the purpose of the Shariah (maqasid-ul-shariah) which firstly seeks to promote and protect faith (Islam) and then intellect, health, progeny and wealth • alternative to ‘Western’ focus on material well-being (former IBBL MD)

9. ‘Islamist’ banking and development in Bangladesh Mapping out IBBL’s policy footprint: a heavy boot treading lightly Nationally • No academic interest in Shariah compliant banking or micro-finance (despite innovation and potential controversy) • Regulated by Bangladesh Bank but tense relationship (branch operating licences, Islamic banking legislation) • not involved in policy fora except reports to the Credit and Development Forum and the Islamic Banks Consultative Forum (chaired by IBBL chair) • IBBL depts not geared up to engage with public policy or media • RDS by name plugging into the English mainstream development discourse but no meaningful engagement • Islamic Economics Research Bureau, small think tank is a focal point Internationally • IBBL as the leading PCB has no links with the IFIs • but all major international stakeholders outside mainstream: IDB Jeddah, Islamic Finance House Kuwait etc • Resonance with those who share IBBL worldview

10. ‘Islamist’ banking and development in Bangladesh Conclusion: - Islamic (and mainstream) development discourse embedded in different assumptions about the ideal type of society, economy and political system • for IBBL development is the creation of an economic and socio-political system which is just and thereby must be governed by the Shariah given by Allah as the Creator of all • constitutes power relationships with those opposed to this discourse (prism of BD’s independence) • constitutes the power relationships ‘within’ through the creation of a vanguard which is Islamically educated and (relatively) free from material needs on IBBL’s terms • Does religion make a difference in development practice? IBBL development truths overtly challenging mainstream conceptualisation of society, economy and politics, if not deemed by those in power today as even subverting the dominant paradigm of a secular post-’liberation’ Bangladesh and Washington Consensus policies on free (financial) markets and liberal democracy. • By focusing almost exclusively on the ‘Muslim world’ in its external relations and linking its development vision to the Golden era of Islam an inversion of ‘alternative’ and ‘dominant’ is also perceived by IBBL where mainstream becomes an economy without interest and all other aspects of life are governed by the Shariah which has only recently been challenged by colonialism, Mujibsim and capitalism.