Page 13 - Valentino Cattelan - In the name of God: managing risk in Islamic finance

IANUS n. 26-2022 ISSN 1974-9805

3. Conceiving and managing risk in God’s creation: the logic of Islamic finance

As just remarked, in Islamic finance, according to the principle al-kharaj bi-l-
daman, risk management is conceptualized as a distribution of gains and liabilities
where the deserved profit (kharaj) follows the assumption of responsibility (daman)
in the light of man’s participation in the marketplace as an agent in the ‘real’/‘right’
(haqq) created by God.
Here, the ‘right’ (haqq) necessarily relates to something ‘real’ (haqq, again);
thus, any advantage or disadvantage cannot be separated from the actual
possession or ownership of an underlying asset. Coherently, in Islamic finance
risk management is shaped in the light of the primacy of the real economy, and
asset-backed transactions substitute the nominal exchanges of conventional
finance. In a nutshell, risk becomes in Islamic finance an asset-related ‘entity’,
and not a commercial ‘entity’ per se, to the extent to which ‘pure’ financial
products, such as derivatives, deemed lacking in any commercial value (since
nothing ‘real’ is actually traded) are rejected.
This alternative conceptualization of risk may find further explanation within
Islam’s atomistic conception of time, where God’s creativeness shapes any
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instant in the unity (tawhid) of the ‘real’/‘right’ (haqq as result of the only Truth,
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Haqq). At the micro level of human existence, this cosmology is mirrored by a
haqq that is not conceived anymore as the ‘right’ of a person in opposition to the
‘right’ of another person, but as a logical structure comprising both the ‘right’ and
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its corresponding ‘obligation’, which makes sense «only within the unity of the
two “elements” […] the huquq are not the “rights” and “obligations” that serve to
connect autonomous elements», but ‘sides’ of a justice existing through a
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balanced unity (tawhid), where economic resources are ‘shares’ of the unique
justice (‘adl) given by God (from which, possibly, the concept of ‘sustenance’,
ﻕﺯﺭ). Then, if time is composed of single instants created by God, each of them
must hold a balanced distribution of ‘rights’ (huquq), ruled by a transactional
equilibrium, which is guaranteed by quantitative balance (prohibition of riba) and
qualitative disclosure (gharar and maysir). Debt-structures and hazard-affected
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44 Thus, «atomism was not only most congenial to a vision of God acting instantaneously in the
world as the sole true cause, it also proved akin to Arabic grammar, which lacks genuine verbs for
“to be” and “to become”. Neither does Arabic employ the tenses of past, present, and future.
Instead, it uses verbal aspects of complete and incomplete, marking the degree to which an action
has been realized or is yet to be realized without distinguishing precisely between present and
future» (BÖWERING, The concept of time in Islam, cit., p. 60).
45 NETTON, Allah transcendent: studies in the structure and semiotics of Islamic philosophy, theology
and cosmology, cit.
46 KAMALI, Fundamental rights of the individual: an analysis of haqq (right) in Islamic law, in The
American Journal of Islamic Social Sciences, 10 (3), 1993, 340-366.
47 SMIRNOV, Understanding justice in an Islamic context: some points of contrast with Western theories,
cit., 345.
48 CATTELAN, From the concept of haqq to the prohibitions of riba, gharar and maysir in Islamic finance, cit.

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