The Promise of Culturally-Specific Development: Using Islamic Finance to Grow Rule of Law in Afghanistan

ILSP 2014-2015 Research Fellow Meagan FroemmingThe Islamic Legal Studies Program will be hosting a workshop given by ILSP Visiting Fellow Meagan Froemming on March 4, from 12-1. Froemming will present her research on Islamic finance in Afghanistan. Her abstract is provided below.

This workshop is open to all HLS and Harvard University affiliates. Please RSVP no later than February 28 to [email protected] if you plan to attend. The full paper will provided upon receipt of your message. A light lunch will be available for attendees at 11:45.

Meagan Froemming, ILSP Visiting Fellow

The Promise of Culturally-Specific Development: Using Islamic Finance
to Grow Rule of Law in Afghanistan

My project explores Sharīʿah-compliant finance practice as a means to encourage economic and rule of law development in emerging and post-conflict economies. There is significant debate surrounding which factors are most likely to influence growth in rule of law in developing nations. But in the law and development literature to date, none have been applied adequately to this new and growing mode of finance in the Muslim world. A core factor that remains underexplored as it applies to the Muslim world concerns the degree of contractual integrity experienced in a given nation state’s legal system. Specifically, the role of contractual integrity in development arises with respect to offerings of Sharīʿah-compliant finance in ways that raise a number of foundational questions, most centrally: can such offerings facilitate standardization and cohesion in both the financial sector and the juridical realm? Toward answering these questions, this paper focuses on the case of Afghanistan to demonstrate that it and similarly situated countries may benefit greatly from the structural predictability and cultural relevancy that Sharī’ah-compliant financial products provide. I argue that the degree of contractual integrity experienced in a state is fundamentally constitutive of rule of law and formalized property rights there. Moreover, reliable and culturally relevant structures for enforcement of contractual rights will necessarily lead to increased predictability in law.  My paper theorizes that Islamic finance practice is largely institutional in nature and thus, as with property rights-cum-rule of law, is “designed to constrain the behavior of individuals…”  (to quote Stephan Haggard et al. in The Rule of Law and Economic Development (1973)). If true, the formalizing impact of Sharī’ah-compliant financial products on developing economies will, if employed in places where culturally relevant, effectively engender security and predictability across multiple juridical sectors in the developing nation context. From this descriptive claim, normatively, I argue that by acceding to existing demand for robust Sharī’ah-compliant financing products, the Afghan government and the international aid community can more effectively initiate integrative processes of establishing and maintaining the formal legal structures required for modern, independent statehood.