Preface to an introduction

Jan Bergstra
(Utrecht Netherlands 2011)

I have decided to start a blog in order to have a fast way to make my work on the theoretical foundations of ethical finance known to those who share my interetsts in that fascinating topic.

Needless to say Islamic finance is today's paramount example of an approach to ethical finance. RSPF stands for Reduced Product Set Finance (for an extensive rationale of this notion see http://arxiv.org/abs/1012.4291). The Twitter hashtag for RPSF is #rpsfi.

I assume that systems of ethical finance are all subsystems of a large and evolving superstystem called Rational Finance. The adjective rational reflects the absence of explicit underlying ethical principles rather than the presence of any compelling design logic.

For theoretical and conceptual work it is important to think in terms hypothetical systems specified in abstract ways. An abstract (and for that reason stylized and simplified) description of a system of finance will be called an abstract finance framework (AFF). Many different abstract finance frameworks can be imagined.

Existing systems for finance, often denoted as mainstream, conventional, western or common, can in principle be analysed as a parallel and interacting combination of instantiations of different AFF's. Similary Islamic finance is a container concept which may refer to a variety instantiations of different AFF's.

I write from an external position, that is from outside Islam, and if the work reported in this blog may become classified as work on Islamic finance, it would preferably be classified under the heading of secular Islamic finance.

Secular Islamic Finance is an approach for investigating AFF's which incorporates essential tenets taken from known approaches to Islamic finance, not so much because of their origin in classical tradition and writings but because of their conceptual value for the design of alternative financial systems. Thus, at least in principle, an AFF based on an approach to secular Islamic finance might be the system of choice for a Christian community, simply because they applaude the portfolio of design decisions which it comprises.

Thus some systems of RPSF are AFF's which, when instantiated would be valid as a system for Islamic finance, and at the same time is meaningful for other potential users. An AFF for secular Islamic finance, preferably specified as an RPSF embedded in some larger system of rational finance can serve as a platform for conceptual and theoretical research. Its instantiations need not comply with all requirements of Islamic finance but perhaps only with some of these requirements. The kernel "Islamic finance" is carried along in this terminology because the product set restrictions imposed will by and large be inspired by the theory and practice of Islamic finance.

The advantage of this way of working, seen from the perspective of rational finance is that design restrictions can be imposed in a modular fashion.

In this blog I will try to set out viewpoints that arise from my own research, including joint work with colleagues, but I will also try to comment on existing work as well as work in progress by other authors and groups in order to combat an isolation which makes these efforts less attractive for prospective blog visitors.