Institutional capture, poor governance, and financial plunder now characterise Bangladesh's Islamic banking sector. While there are many reasons for this, including the collapse of banking systems and poor regulatory oversight, the intellectual and political roots run much deeper. The so-called "Fundamentalist Economy" paradigm developed by Abul Barakat, the former president of Bangladesh Economic Association, has been one of the most influential paradigms influencing the thinking of policymakers and scholars. His 2015 publication in the Bangladesh Journal of Political Economy, titled "Political Economy of Fundamentalism and Fundamentalist Militancy in Bangladesh," was followed by a similar English-language publication, titled "Religious Fundamentalism: Towards a Political Economy Theory," in the same Journal in 2019. Both publications identify themselves as political-economic analyses of religious extremism, imperialism, militancy, and domestic political power. The difficulty lies in the fact that the analyses go far beyond studies of extremism and place Islamic banks, insurance companies, NGOs, education institutions, hospitals, trusts, foundations, media organisations, real-estate corporations, and other business ventures into the single category known as the "fundamentalist economy." This categorisation is not only a matter of academic labelling but also carries significant political implications.
By placing economic institutions with an Islamic identity into the same analytic categories as extremism, militancy, and the pursuit of state power, Islamic finance, faith-based entrepreneurship, Islamic social service, and lawful commerce can easily be depicted as aspects of a covert political conspiracy. Given the extremely polarised nature of Bangladesh's political environment, this kind of narrative poses a special danger. As such narratives portray institutions founded by entrepreneurs whose motivations derive from religion or by individuals associated with Islamic political parties as politically illegitimate despite operating under the law, they provide a fertile ground for institutions like Islami Bank Bangladesh Limited to be both captured and looted.
As can be seen in the case of Islami Bank Bangladesh Ltd, Barakat's thesis helped create a climate in which Islamic financial institutions could be demoralised before being captured for political and commercial purposes.
Barakat's thesis influenced public discourse regarding Islamic banking in three ways. Firstly, repeated summaries and discussions of his work (and the reproduction of his concept) provided additional momentum to the idea of a "fundamentalist economy." Through public discourse, the term "fundamentalist economy" gradually gained an aura of legitimacy. Secondly, portions of the policy/security literature identified religious extremism as a serious threat while expressing methodology-related caution regarding Barakat's statistical methodologies and assumptions. For instance, the International Crisis Group cited Barakat's earlier estimates but noted that they relied on conceptual approaches/assumptions rather than on institutional verification using clear, transparent data. That caution is critical. Estimates of the potential for extremist activities should not be used as a basis for publicly voiced suspicions until there is evidence from audited institutional data, ownership records, documentation of fund flows, and legally enforceable evidence to prove wrongdoing.
Thirdly, recent commentaries on politics have started to ask whether the "fundamentalist economy" narrative served as a justification for politically linked intervention in Islamic institutions.
This article does not discount the threats posed by extremism, illegal financing, misusing charitable entities, or diverting funds towards violent means. Responsible scholars/policymakers will neither dismiss nor underestimate those threats. However, Barakat's framework eliminates vital distinctions. It locates Islamic banking near political Islam, political Islam near militancy, and faith-based social initiatives near illegal financing. This produces a hazardous lexicon. When an Islamic bank or social entity is designated as a component of a "fundamentalist economy", its capture can be defined as reform; its exclusion as secularisation; and its elimination as a common good.
Given that it preceded the English version and was more closely associated with internal debates over Bangladesh's political structure, the Bengali version is particularly relevant. Barakat stated that the Bengali version represented a synthesis of twenty years of research on the economics of fundamentalism, politics of fundamentalism, religio-militancy, and imperialism. He contended that religious communalism in Bangladesh assumed an aggressive posture, that religio-political forces were creating an economic foundation/base to support organised militant activity to take control of state power. In the English version, he developed this argument more theoretically by establishing relationships between religio-fundamentalism, capitalism, imperialism, rent-seeking, militancy, and institutional power domestically.
There is nothing wrong with researching the politico-economic dimensions of extremism. The problem is that Barakat's broad definition encompasses nearly all forms/types of institutions with an Islamic identity. By way of illustration: an Islamic bank does not become a "fundamentalist institution" solely due to adherence to Islamic financing principles; similarly: a hospital established by donors motivated by their faith does not automatically represent an extreme agenda; similarly: an NGO, school, trust, media outlet, etc do not necessarily constitute vehicles for militant politics merely due to the religiosity of their founders/managers. This represents confusion between religiosity and extremist politics; institutional affiliation vs intent to commit crimes.
Islamic banking is essentially a regulated financial model predicated upon prohibitions against riba; asset-based finance; Shariah compliance; shared risk; ethically screened investments; and mobilizing savings from individuals desiring faith-based financial services. Whether Bangladeshi Islamic banks have historically realised these objectives is another valid inquiry. To define Islamic banks as components of a "fundamentalist economy" merely due to their Islamic identity (or since some founders were affiliated with Islamic political movements) and absence of evidence demonstrating either illegal financing; support for violence; terrorist funding or criminally funded political activities provides very little by way of analytical rigor.
In reality, Islamic banking is a financially regulated industry requiring robust law-making; credible regulatory oversight; transparent ownership; prudent risk management practices; and competent Shariah governance practices.
The writer is Professor of Finance and Moffett Chair at the University of New Orleans and Member of the AAOIFI Ethics and Governance Board. mhassan@uno.edu
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