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Copyright (c) 2007 The University of Chicago
Chicago Journal of International Law

SYMPOSIUM: ISLAMIC BUSINESS AND COMMERCIAL LAW: Contemporary Islamic Finance: From Socioeconomic Idealism to Pure Legalism

Winter, 2007

7 Chi. J. Int'l L. 581


Walid S. Hegazy *


Ever since the first wave of European armies reached the Mediterranean shores of the last Islamic empire in the late eighteenth century, 1 Western influence has dominated many important aspects of Muslim life, most notably in the areas of trade and finance. Traditional Islamic contracts and financial instruments that once prevailed in Muslim commercial markets have been replaced by Western financial instruments and institutions. The wholesale adoption of the French civil code (or the Napoleonic Code) by most Middle Eastern countries is unambiguous evidence of the magnitude of such European influence. By the beginning of the twentieth century, many pro-independence political movements began to form strong resistance to Western influence and colonial insensitivity to Islamic culture and social values. Some movements, such as the Egyptian Muslim Brothers Movement (Harakat al-Ikhwan al-Muslimin), joined their demands for political independence with demands for adopting homegrown and Islamic-inspired social and economic reforms. One of these demands called for the abolishment of the Western banking system on the ground that it violated Islamic principles, most notably the prohibition of usury. The allegations that Western banking involved usurious practices stimulated important discussions and debates among Muslim jurists and economists over the legitimacy of Western financial institutions and the viability of Islamic financial alternatives. These discussions and debates constitute the underlying theoretical foundation for contemporary Islamic finance practices.

Two main approaches to such discussions can be distinguished. While some writers focused on highlighting the social and economic benefits of an Islamic system ("socio-economic ...
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