Modernization between Economic Requirements and Religious Law: Islamic Banking in Malaysia

Abstract Islamic banking is an attempt to structure the economy according to certain religious values and guidelines. It provides an alternative to Western banking for Muslim countries all over the world. However, there is a wide gap between Islamic banking in theory and practice, which I discuss in the first part of this article with the case of Malaysia. The second part changes the perspective by interpreting Islamic banking in the light of the Islamic modernization project. I conclude that this project is simultaneously an attempt to engender a non-Western path to modernity and to re-embed the economy in culture. From such a perspective Islamic banking is not only an inner struggle in the Islamic world between traditional and modernist values, but also a reaction to the Western, disembedded market model.