The Rational Islamic Actor? Evidence from Islamic Banking

Seda Demiralp, Işık University

The rise of Islamic banking creates an interest in its own right as a rising branch in financial intermediation, particularly in the post-crisis era. On the other hand, it also deserves attention of the students of Islamism due to its possible connection with Islamic movements. In addition, economic behavior’s suitability for empirical analysis allows us to bring new empirical evidence to the popular but rather speculative debate on the motives of Islamic actors. A better understanding of the preferences of Islamic economic actors, particularly the relative weight of religious and pragmatic interests, helps to gauge the direction that Islamic movements can take in a certain context. Our study on Islamic banks and their customers reveals important conclusions about Islamic actors and challenges some dominant assumptions. First, in contrast to popular views that consider Islamic financial actors as financiers of radical Islam, we find that these have pragmatic motivations and they may adapt to liberal systems to seize economic incentives. Our findings contradict exceptionalist assumptions that portray Islamic actors as essentially different, and particularly, more ideological than their counterparts. We find that many Islamic actors pursue self-interest as their non-Islamic counterparts and they are open to reconsider their behavior if the otherwise preferable option becomes too costly. Finally, we argue that this finding has political-economic implications as it may reflect Islamic actors’ chances to become part of liberal systems. If “rational” behavior is a prerequiste of liberalism, as suggested by important studies, then one can argue that Islamic actors can satisfy this requirement. On the other hand, it also deserves attention

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