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Insights into Business in Islamic World
Topics: Research-Research and DevelopmentEconomics-Developing Countries and EconomiesGlobalization-Cross-Cultural and Cross-Border IssuesBridging differences in political and economic systems has always been one of the challenges of international business. Where religious beliefs influence those systems heavily, as is increasingly the case in Islamic countries, the sensitivities can be even greater. While appreciating the distinctiveness of Islam is important, Americans can still find points of connection in such settings, HBS professor emeritus Samuel Hayes told an HBS audience. "Islam is a different culture, but the Western influence is very strong because the current generation of decision-makers has largely been educated in Western colleges and universities."
Hayes's comments, together with those of Harvard
Law School adjunct professor Frank Vogel, were delivered as part
of the School's "Rising to the Challenge" program,
which addresses topics of particular relevance to business leaders
in the post-September 11 global context. Hayes and Vogel,
coauthors of the 1998 book Islamic Law and Finance: Religion,
Risk, and Return, explored issues of doing business in Islamic
countries at a presentation in late January.
Hayes noted that despite a common faith, styles of
practice among Muslim individuals or nations may be quite diverse.
Saudi Arabia and Pakistan, for example, are countries noted for
application of Islamic law beyond religious and family life to
civic, financial, and commercial affairs, he said. Since the 1970s,
other nations such as Jordan, Iran, and Egypt have also moved
in this direction. Vogel, who directs the Law School's Islamic
Studies Program, explained that such legal systems do not rely
on precedents or written codes and have an inherent dependence
on religious beliefs. "This law is seen as deriving from
direct, divine commands from Islamic scriptures," said Vogel.
Aspects affecting business practices include prohibitions
on paying or collecting interest, avoidance of any business dealings
considered speculative, ensuring that contracts are fair to all
parties, and treating distressed businesses with compassion. Hayes
noted, however, that it is often possible to work around differing
financial norms. "If you understand the religious principles
underlying these restrictions, you can sometimes create contracts
or other arrangements that accommodate them," he said, citing
leases as one example of a familiar financial tool deemed fully
compatible with Islam.
- Laura Singleton (MBA '88)
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