Banking, Ismaili Law, and Islamic Finance in the Daudi Bohra Jama’at, 1900-1970

Abstract

Four features marked Muslim capitalism in South Asia in the twentieth century: 1) intra-Muslim economic stratification 2) a strong showing in trade and industry, but a poor performance in banking across the board; 3) the rise of an interest-free notion of Islamic finance, which became a means of combating Muslim underbanking from its institutionalization from the 1970s; 4) the shift of a regulatory environment based on colonial law to that of postcolonial nation-states. This paper seeks to study all three themes with reference to the Daudi Bohra community and their changing views of banking and Islamic law during the twentieth century. While Bohras were successful capitalists across the Indian Ocean, and were involved with banking in the nineteenth and twentieth centuries, they did not establish banks. Arguably, this did not owe to any a priori legal animus toward interest lending as such. Traditions of Mustali Ismaili commercial law did allow for select types of interest banking, and Bohra legal scholars utilized various expedients to accommodate the types of transactions intrinsic to global capitalism. However, these traditions are scarcely understood, not least because studies of Islamic commercial law (and Islamic finance) privilege the writings of Salafi thinkers, who, unlike the Bohras and other Muslim trading groups, had little connection with the world of South Asian capitalism.