Do Islamic banks have a domestic or international political agenda? Do they play a role in promoting radical Islam and international terrorism? The short answer is that they usually do not. Banks, by virtue of being part of the existing power structure, have a strong status quo orientation. There are, however, exceptions to that general rule. And as the next pages show, the benign view is not widely shared among authoritarian leaders who often see financial Islam as a destabilizing force.

This chapter addresses the connection between Islamic finance and politics in domestic and international contexts. Following a general discussion of the relation of money and politics, it compares the evolution of financial Islam in Saudi Arabia, Turkey, Egypt, the Sudan, and Indonesia. It later discusses the role of Islamic finance in the New World Order, and especially in the post-September 11 world, where Islamic financial institutions have often been considered “guilty by association.”

Critics of Islamic finance nonetheless focus on the potential for political mischief, whether domestically or internationally. The suspicions surrounding Islamic banks rest on a syllogism: political Islam at the domestic and international level requires financial resources, Islamic banks are committed to Islam and have vast financial resources; therefore, Islamic banks are likely to advance the political goals of potentially subversive Islamic groups.