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Why did Islamic finance become durably institutionalized between the 1970s and early 2000s in the Arab Gulf states, where no mass movement demanded it, but not in Pakistan, where activists had demanded it for decades? I argue that institutionalization required a stable coalition among religious authorities, market actors and the state that shared understandings of religio-economic virtue. Those understandings also had to be compatible with the neoliberal financial order. In the Gulf, an elite social movement presented usury as an individual sin and agreed on the roles of religious authorities and the state in Islamic finance. Their vision was compatible with the social order of national and international credit markets. In Pakistan, a stable coalition and shared understandings were absent. A popular Islamist movement, presenting the defeat of usury as a large-scale political–economic transformation, pursued a revolutionary overhaul of the economy that threatened domestic and international financial interests.
Ryan Calder (Tue,) studied this question.