Empowering Education: The Case for Shariah-Compliant Alternative Student Finance

Access to education is a fundamental right that should be available to all individuals, regardless of their financial circumstances or religious beliefs. Financial solutions must consider different cultural and ethical factors in a varied nation like the UK.

A student loan is one area where this is especially
pertinent as it is designed by the government to widen access to higher education David Cameron as
Prime Minister in 2013 at the World Islamic Economic Forum in London stated “Never again should a
Muslim in Britain feel unable to go to university because they cannot get a Student Loan—simply
because of their religion.” The Department for Education recently announced its collaboration with
Islamic Finance Council UK (UKIFC) to develop a Shariah-compliant Alternative Student Finance
(ASF). In this blog post, we delve into the reasons why a Shariah-compliant option is essential for
fostering education and economic growth.

Central to this is the fact that Islam prohibits charging or paying interest (Riba). The fact that some of the companies that offer loans often invest in pornography, gambling, or alcoholic beverage industries also makes them prohibited under Shariah law. By offering a Shariah-compliant Alternative Student Finance (ASF), the government can ensure that all students, regardless of their religious beliefs, have access to an inclusive financial system that respects their values.

Islamic finance is built on principles of ethical behaviour and social responsibility. It emphasizes fair and just economic transactions that benefit society as a whole. By providing a Shariah-compliant ASF, the government would support students in pursuing education without compromising their faith. This initiative not only encourages responsible financial practices but also contributes to a more ethical and equitable financial ecosystem.

Access to education should not be hindered by financial barriers. According to an online survey by the Muslim Census in which nearly 40,000 Muslims in the UK responded, every year, 12,000 students are forced to pay for their own education or forgo it completely due to a lack of funding and ASF. ASF provided by the government would bridge this gap, ensuring that individuals from all walks of life have the opportunity to pursue their educational aspirations and contribute to society’s progress.

Education is not only a catalyst for economic growth, but the pursuit of higher education has also become increasingly important for career prospects and personal growth. The Muslim Census survey revealed that more than 1 in 10 qualified Muslim students do not attend university at all as a direct result of the absence of any financing options other than student loans. By investing in the education of its citizens, a government invests in the future prosperity of the nation. Shariah-compliant ASF supports this growth by enabling a diverse range of students to access quality education, thereby equipping them with the skills and knowledge needed to contribute effectively to the workforce and the economy. 

A government’s commitment to diversity and inclusion is reflected in its policies and initiatives. Providing a Shariah-compliant ASF option demonstrates a proactive effort to accommodate the needs of diverse communities within the country. This, in turn, enhances social cohesion by fostering a sense of belonging and respect among various religious and cultural groups.

Although it may be argued that other alternatives to funding education exist like getting scholarships or grants, opting for work-study programmes, crowdfunding, and employer sponsorship. A response to this is that most of these options are not readily available to all. Also, some may be tied to certain conditions which may be difficult to fulfil. 

Having a Shariah-compliant ASF would close a gap for Muslim students who have been at a disadvantage. The UKIFC is proud to be a partner of the Department for Education in creating a Shariah-compliant ASF.

Be a part of creating change and allowing Muslims in the UK to have access to financial products in line with their values by responding to the Call for Evidence by the All-Party Parliamentary Group on Islamic and Ethical Finance (APPGIEF) before the 18th of September, 2023.

APPGIEF Call for Evidence

Unveiling the ESG Controversy: How Islamic Finance Offers a New Perspective

A few weeks ago, headlines lit up with confusion and consternation as Philip Morris International (PMI), a cigarette producer, was awarded higher Environment Social and Governance (ESG) scores than electric car manufacturer Tesla. ESG was even termed the ‘devil’ by Elon Musk.

The criticism is premised on the fact that Tesla, which produces electric cars thus promoting a cleaner environment because it aims to reduce carbon emissions, got an ESG score of 37 on a 100-point scale. This is in comparison to PMI, the maker of Marlboro cigarettes which according to a WHO report causes the death of over 8 million people annually, was given a high score of 84!

This controversy in ESG underscores one of the primary differences between the conventional finance approach and the Islamic finance approach to potentially controversial industries. In a previous blog, we discussed the Islamic Finance stance on divestment versus engagement, which leans more heavily on negative screening than conventional finance. It, therefore, screens out any industries considered haram, meaning that it is forbidden to invest in alcohol, tobacco, or pork products. In doing so, Shari’ah-compliant investment funds are designed with a degree of controversy protection by excluding certain high-risk industries. In the case of PMI, tobacco is excluded from Islamic funds because it is an intoxicant and causes harm to its consumers. By removing these products from the pool of potential investments, it is easier to avoid conflict like that between Tesla and Philip Morris International. 

Tesla did score a 60 on the E which stands for ‘environment’ but scored 20 in social compared to PMI’s 84. It scored 34 in ‘governance’ against PMI’s 83. In ESG, the ‘S’ focus tends to be on employees within the company and external stakeholders from an environmental standpoint, meaning that a company will be positively viewed from a social standpoint for investing in community initiatives like education or development; however, this excludes a focus on the impact of the product itself on the community. For PMI, reinvestment in their environmental impact and pro-social policies pushed their ESG scores significantly higher than expected, with no consideration given to the fact that tobacco products kill over 8 million people a year. Tesla’s primary negative points were the mineral-heavy nature of electric vehicle manufacturing, plus poor social performance as controversy broke out regarding the negative treatment of employees. 

The ‘S’ focus from the Islamic finance standpoint has other elements. The conventional interpretation in the context of ESG is often restricted to workforce and diversity, safety management, customer management, and communities. Islamic finance has other social instruments such Zakat, Qard Hassan, and Waqf. Zakat is one of the five pillars of the Islamic faith, and it is comparable to a tax on assets that are worth more than a specific amount. It is utilized for social welfare without any reimbursement. It is a goodwill-based loan that is mostly given for welfare purposes. The borrower is simply required to repay the principal amount borrowed, not interest. Waqf or endowment, is a particular form of philanthropic deed that lasts forever. It entails giving away a fixed asset with the potential to generate income or offer benefits. 

In summary, the current ESG scoring can produce counterintuitive results by not considering product impact. Islamic finance on the other hand applies additional social screening to avoid investing in industries like tobacco that cause harm thereby focusing on the impact a product would have. Perhaps it would be a good time for an Islamic finance focused ESG scoring to be initiated which would close gaps on issues like this.


Navigating Islamic Finance: Embracing Divestment or Engagement for Ethical Investments

Prophet Muhammad (pbuh) said:

The world is sweet and green and verily Allah (SWT) has made you stewards in it.
– Sahih Muslim

The notion of convergence of Islamic Finance and ESG continues to be a point of interest particularly for those interested in investing. The question of whether to divest or engage is a continuous debate that is driven by a growing understanding of the significance of ethical investing and gathering momentum in the financial sector, however, with the prohibitions that exist in Islamic Finance which are based on Shariah. The question of whether to divest or engage is clear when it comes to Shariah compliance. This article focuses on divestment or engagement on ESG principles that are in tangent with Shariah principles. 

Islamic finance refers to financial practices that adhere to Shariah, the ethical principles of Islamic law.  As a result, Shariah compliance is a prerequisite for the completion of economic and financial transactions. The Shariah prohibits interest/riba, excessive uncertainty/gharar, games of chances and gambling/maysir and qimar. It also prohibits investments in industries such as alcohol, pornography, and production of ammunition.

Whether an investor decides to divest or engage, the primary motivation remains the reduction of harm.  This is based on Islamic legal maxim – there is to be no harm and no reciprocating harm, “Harm shall neither be inflicted nor reciprocated” (Sunan Ibn Majah, 2340). Everybody has an obligation, based on their capacity, to prevent harm based on the verse of the Quran (Qur’an 2:286) ‘Allah does not burden any soul more than it can bear’. 

Also, the concept of stewardship of the earth and its resources is emphasised in Islam. The responsibility of humans is to do good and refrain from doing bad as a vicegerent of Allah. The verse below underlines that since humans have been placed in charge of managing the earth, they have a duty to do so.

The Quran states that: 

“It is He who has made you successors on the earth and raised some of you in ranks above others, that He may try you in what He has given you. Indeed, your Lord is swift in penalty; but indeed, He is Forgiving and Merciful.” Qur’an 6:165

Divestment versus Engagement

Divestment, also known as disinvestment, involves selling or giving up one’s shares to a company. This is often the result of objecting to a company’s practices or policies.  It involves investors taking out their shares from portfolio businesses that don’t fulfil ESG standards. 

Allah (swt) says in the Quran:

“Corruption has appeared on land and sea by what people’s own hands have wrought; that He may let them taste the consequences of their deeds so that they may turn back” – Qur’an 30:41

In 2019, three Islamic faith-based organizations – the Bahu Trust, Islamic Foundation for Environmental & Ecological Sciences (IFEES), and the Mosques & Imams National Advisory Board (MINAB)  issued a unified demand for the divestment from fossil fuels and reinvestment in cleaner renewable energy as the sole means of ensuring a sustainable future for the current and future generations. This resulted in the first divestment commitment by a Fiqh Council – the Islamic Society of North America on fossil fuels in 2016.

There are arguments for and against divestment. The positives include raising awareness regarding certain issues and impacting consequences on companies that fail to meet certain ethical standards. In industries that rely heavily on investors, this is a more significant threat. However, the negative side of divestment is the loss of maintained influence, as the moment an asset manager sells their shares in a company, they can no longer be a positive influence on said company or pressure its board to implement more pro-social or pro-environmental policies. 

Engagement involves investors working with portfolio firms or issuers to help them manage or disclose ESG performance or concerns more effectively. It can take many different forms, including proxy voting, shareholder activism, and open communication with the company’s management. It is often encouraged before divestment occurs because it motivates investors to improve portfolio firms’ performance in order to achieve ESG goals. For instance, Engine No.1’s engagement effort with ExxonMobil led to it adopting more renewable energy and sustainable value creation by convincing big investors to vote for three new board members with backgrounds in clean energy.

There are verses in the Quran that encourage ‘enjoining good’ which can be used to argue for engagement in Islamic Finance. Investors can lean in to engage with companies that are falling short of their ESG obligations. 

Divestment and Engagement in Islamic finance are effective ways to advance ethical investing while upholding the fundamentals of Islamic finance. Investors can help to create a more sustainable and socially just financial system by divesting from unethical sectors and engaging with companies to promote ethical behaviour. Through these actions, Islamic finance can play a significant role in creating a more ethical and sustainable future for the global financial landscape. The maxim ‘severe harm is removed by lesser harm’ allows an investor to opt for the lesser of two harms. Ultimately, the decision lies with the investor in how much they are willing to engage with a company.

There’s still time to register for the Ethical Finance Global 2023 event by our partner GEFI.

Register today

An Ethical Convergence: Islamic Finance and ESG Principles

By Oyin BamgboseJuly 11, 20230 Comments

HOME / NEWS / FAITH IN FINANCE: COLLABORATING FAITHS FOR ECONOMIC INTEGRITY


In recent years, Environmental, Social, and Governance (ESG) considerations have become increasingly important in the financial industry. The term was first used by the UN Global Compact in 2005. ESG despite having financial relevance, originally was not a part of financial analysis.

The term “ESG” refers to a firm’s overall impact on the environment, society, and the strength and openness of its corporate governance, including matters such as executive compensation, company leadership, audits, internal controls, and shareholder rights. The environmental considerations center on how the company lessens its environmental impact, for instance, resource depletion, greenhouse gas emission, and deforestation. The social component is concerned with the way a company affects both workplace culture and the larger society, for instance, working conditions, including child labour and slavery; and health and safety. The term “governance” describes the procedures for making decisions, reporting, and managing the day-to-day operations of an organisation including issues on donations and political lobbying, corruption, and bribery.

Similarly, Islamic finance, which is guided by the principles of Islamic law (Shariah), continues to grow rapidly. Islamic finance refers to financial services – such as banking or investment – where money is raised and used in line with Shari’ah. It prohibits interests (riba), engagement with gambling (maysir), uncertainty (gharar), and prohibited industries like alcohol and pornography. It offers perspectives that aligns closely with ESG objectives. This blog post explores the reasons why Islamic finance is inherently compatible with ESG principles and how Islamic banks are taking steps to align with ESG principles. One area of convergence between ESG and Islamic Finance is that both encourage economic expansion and financial stability, as well as the protection of the environment and the eradication of poverty. For instance, countries like Saudi Arabia and Malaysia have begun to issue green and sustainable sukuk. These investments in environmental assets and renewable energy are compliant with Shari’ah.

Just like ESG, Islamic Finance requires screening out certain industries, the beneficiaries’/clients’ values must be reflected in the portfolios, together with the objective of creating a just and sustainable society and avoiding environmental or human harm. The screenings could be absolute, for instance, it could prohibit weapons, pornography, and cluster ammunition. Where the screening is relative, the rules can entail for instance barring businesses whose tobacco sales account for at least 10% of their total revenue. Companies or issuers that perform poorly in terms of ESG factors or that transgress international soft laws like the UN Guiding Principles on Business and Human Rights may also be excluded. Investments in conventional financial services, cigarettes, alcohol, pork, pornography, guns, gambling, human smuggling, and other goods and activities that are regarded as illegal are prohibited under Islamic finance, which is based on Shari’ah regulations.

Islamic finance places emphasis on investments in real assets and tangible projects that have a positive impact on society. This emphasis is consistent with the ESG philosophy of investing in businesses and initiatives that meet social needs, produce sustainable value, and improve the general well-being of communities.

Although similarities exist between ESG and Islamic Finance, there are areas of divergence. Islamic Finance prohibits security lending and shorting. ESG does not prohibit it but some investors running ESG investing strategies also will not partake in security lending and shorting, while others will apply rules that allow them to vote on shareholder resolutions.

Islamic banks are taking steps like their conventional counterparts to align with ESG. Some of them are signatories to the Principles on Responsible Banking like Al Baraka Banking Group (Bahrain), Gatehouse Bank (UK) and Jaiz Bank (Nigeria) which are fully Shari’ah compliant. A new three-year ESG strategy to incorporate ESG risk concerns within the banking framework was recently highlighted in the Abu Dhabi Islamic Bank’s second annual ESG report.

Overall, there is a chance to increase the influence of ethical and responsible investing due to the convergence of Islamic finance and ESG. It enables Islamic financial institutions and investors to include ESG factors and support sustainable development while upholding their core values and tenets. This convergence encourages the development of ethical finance, broadens the use of sustainable investment strategies, and helps create a more equitable and sustainable international financial system.


Register here to participate in the conversation on ESG at the Ethical Finance Global 2023 summit organised by our partner GEFI.




Faith In Finance: Collaborating Faiths for Economic Integrity

By Oyin BamgboseJune 16, 20230 Comments

HOME / NEWS / FAITH IN FINANCE: COLLABORATING FAITHS FOR ECONOMIC INTEGRITY


Faith groups have a long history of incorporating values into financial decision-making. For thousands of years, the world’s major faiths have included instructions on how to carry out business in an ethical manner, and the modern ethical finance movement has its roots in religious investment funds seeking to exclude weapons manufacturers from their portfolios in the 1970s. The Pax World Fund, launched in 1971 by Methodists in reaction to the Vietnam War, is still active today and known as Impax Funds.

In 2018, the Edinburgh Finance Declaration was launched by UKIFC in collaboration with GEFI and the Church of Scotland after a three-year dialogue. The Edinburgh Finance Declaration is a ray of hope in a world where economic systems frequently put financial gain ahead of morality. By working together, these institutions strive to promote financial integrity, responsible investment, and economic justice.

In this article, we look at the six shared values in operation in both Islam and Christianity which the Declaration identifies as providing an ethical framework. They are – StewardshipLove of the NeighbourHuman FlourishingSustainability & PurposefulnessJustice & Equity and the Common Good.

Stewardship

Both religions place an emphasis on stewardship which implies that the money we possess ultimately belongs to God and is to be spent in accordance with righteous moral standards, with investments made with the welfare of humanity in mind. In the Holy Quran (Q2:30), human beings have been appointed as vicegerents on earth and Genesis 1.26- 27 has a similar provision.

Love of the Neighbour

It suggests a sense of social duty and a dedication to advancing others’ well-being, rather than just expressing love or other forms of connection. It was reported by a companion of Prophet Muhammad (p.b.u.h) Abu Hurayrah that the Prophet (p.b.u.h) said: “Jibra’il kept enjoining good treatment of neighbours until I thought he would make neighbours heirs.” Loving one’s neighbour is also mentioned in Matthew 22:34-40. This concept helps to develop empathy, kindness, and care for other people.

Human Flourishing

It refers to a person’s condition of maximum well-being and development, during which time they are experiencing personal growth, fulfilment, and potential realisation not just for themselves but for the overall good. Additionally, it entails the capacity to completely embody the virtues of charity, compassion, and justice within a society through not only the advancement of commerce but also one that is mindful of the needs of all.

Sustainability and Purposefulness

The idea of stewardship means that human beings must take responsibility to manage the available resources and use them efficiently. Sustainability and environmental stewardship are frequently values that cross religious boundaries. By working together, religious groups can influence the financial sector to support initiatives that put focus on renewable energy, environmental protection, and ethical business practices.

Justice and Equity

Justice, equality, and compassion are values that are emphasized in both religious traditions. There can be cooperation in the financial sector to combat systematic injustices, poverty, and marginalisation. As a result of his concern for the extreme poverty of his parishioners, Rev. Henry Duncan founded the first savings bank – Ruthwell Parish Savings Bank in 1810 with the intention of promoting saving among the working class and protecting them from the degrading effects of poor relief. Interestingly, Mit Ghamr established the first Islamic bank on his model. Although both banks were short-lived, they were foundations for the recent banking models.

Common Good

This shapes how followers interact with and give back to their communities and the larger world, guiding their personal behaviour and informing both religions’ ethical teachings. This underscores the requirement to pay zakat. It is the third pillar of Islam which mandates that Muslims donate 2.5 per cent of their qualified wealth each year to support Muslims who are in need. Although voluntary, the idea of paying tithes in Christianity can be linked to this.

In conclusion, by working together, these institutions strive to promote financial integrity, responsible investment, and economic justice. The partnership between UK Islamic Finance Council (UKIFC) and the Church of Scotland serves as a model for interfaith cooperation and demonstrates the potential for transformative change within the community.





Investing in SDG-Aligned Products

In our recently published report, Attitudes of banking customers towards the UN SDGs, an impressive 87% of respondents stated that they would be willing to pay extra for SDG-aligned products. For a product to be SDG aligned, it must be connected to one or more of the existing 169 targets under the 17 SDGs. What exactly does that mean?

An SDG-aligned banking product is similar to a sustainability or green product. It can be a loan, bond, sukuk, or any other sort of financial product. The difference from a traditional product is that these specialty products are designed with a specific goal in mind, usually an environmental or social goal that can be measured. For instance, a green loan that is tied to a particular project may have different repayment amounts for different levels of success, such as cutting emissions from a particular business by 20% or 50%. In this case, the borrower would repay less if they achieved more of an emissions cut.

The findings from Attitudes of Banking Customers Towards the UN SDGs, recently released by GEFI and the UKIFC, found that 80% of Global North respondents and 89% of Global South respondents were willing to pay more for an SDG-aligned financial product. On average, the respondents were willing to pay a premium of up to 4.4%. That’s a significant amount, a clear demonstration that this is becoming more and more important to financial product clients all over the world.

There were variations in feedback that were most evident in age, with the lowest (18-24 year olds) and highest (65+) being willing to pay the lowest premium (3.8% and 2.1%, respectively). This is likely due to differences in awareness. Younger respondents are in the process of learning about financial products and exploring what works best for them, while older respondents may have concerns that impact-oriented investing may not be as effective as traditional investing. In both cases, clear educational tools and resources would be beneficial. Luckily, more and more research is finding that investing from a sustainability-backed approach does well to mitigate risk, tends to be less volatile, and is economically profitable.

When developing these financial products, financial institutions have an opportunity to impact genuine positive change. The OECD’s Framework for SDG Aligned Finance presented this beautifully with two primary objectives:

  1. Equality: resources should be mobilised to leave no one behind and fill the SDG financing gaps, and
  2. Sustainability: resources should accelerate progress across the SDGs.

This is pivotal as it emphasizes the need to make socially conscious decisions while addressing the SDGs, to ensure that investments in one area are not detrimental to another. For instance, suddenly shutting down all mining operations may be better for the environment, but it could leave the local population struggling if there is no other industry around. SDG financial products must be carefully designed to maximize positive benefit while mitigating the negative.

With a strong interest in SDG-aligned financial products from consumers and research supporting the economic benefits of such an investment, it is no wonder that impact investing has grown 63% from 2019 to 2021, surpassing $1.2 trillion according to the Global Impact Investing Network (GIIN). Demand is rising for positive investments that are good for people and good for the planet.

The findings from Attitudes of banking customers towards the UN SDGsa joint effort by GEFI and UKIFC, found consistently strong support for financial products that are SDG aligned. These products give banking clients the opportunity to directly support causes they feel strongly about, to invest in their communities, and to see positive returns for socially and environmentally aligned investments. It is empowering for clients, creates opportunities for financial institutions to invest in risk-mitigated, strategic, long-term projects, and fosters a sense of inclusion.


To support this important work, GEFI has designed the SDG Product Platform. Financial products are carefully assessed to ensure that they meet the goals they set for themselves, and GEFI works closely with the asset manager to maintain SDG alignment and economic benefit. Learn more about GEFI’s SDG Product Platform here:

SDG FINANCIAL PRODUCTS PLATFORM

Banking Customer Focus on UN SDGs

In the recently released joint report by the UKIFC and GEFI, banking customers discussed their perceptions regarding the UN and UN SDGs, and revealed where their values lie.

The report, Attitudes of banking customers towards the UN SDGs, took a particularly interesting approach as so often the focus is on how the UN SDGs can be integrated into a financial portfolio. Research is often framed from the perspective of the asset manager, government, or special interest nonprofit. Speaking directly to banking customers in different countries reveals the concerns of everyday people, not just industry experts.

Of the top UN SDGs that banking customers focused on, both the Global North and Global South prioritized Quality Education (Goal 4) (30% and 29%, respectively). There is an awareness of how vital it is, not only for children but for adults, to continue learning and growing as the challenges we face as a planet evolve. This goal spans generations and genders, as it highlights the importance of lifelong and gender-inclusive learning.

The top priorities for both Global North and Global South were focused around social equity and quality of life. Quality Education sets the foundation for the other goals of Zero Hunger (Goal 2), Gender Equality (Goal 5), Clean Water & Sanitation (Goal 6), and Affordable & Clean Energy (Goal 7).

Interestingly, the UN SDGs with the least amount of awareness for both the Global North and Global South are Life Below Water (Goal 14) and Life on Land (Goal 15), likely because they are broad, far-reaching goals. Both of these goals significantly impact those living in vulnerable areas such as islands or in areas sensitive to climate shifts, but they can come across as abstract concepts for people who don’t experience direct impacts of climate change in their daily lives.

The other SDGs that received the lowest engagement are Responsible Consumption & Production (Goal 12) and Partnerships for the Goals (Goal 17). Given that this survey targeted banking customers, it is likely that those particular goals seem best addressed at an institutional level. In support of this, it is worth noting that survey participants were strongly in favour of their banking institutions offering sustainability products.

The Global North and Global South agreed that Reducing Poverty and Hunger was the most important UN SDG to consumers. Of the global population, 8.9% are undernourished and roughly 8% are living in extreme poverty, meaning that these issues impact over 650 million people. With increasing environmental risks from climate change, these percentages are likely to increase as a direct result of droughts, shifting weather patterns, and planetary stress.

Recent publications from ESG Today to Reuters have stressed the importance of ‘zooming out’ to see the bigger picture beyond environmental metrics. It is important to remember that while we focus on particular issues, all of the UN SDGs are connected in one way or another. In cleaning up the oceans (Goal 6), we can create quality employment (Goals 7, 8, and 9), healthier communities (Goals 3, 11, and 12), and encourage global collaborations to unite and strengthen our sense of global community (Goals 16 and 17).


SHARE YOUR VIEWS | Islamic Finance and Sustainable Banking: Global Retail Survey

We want to hear your views on sustainability in the Islamic banking industry! Our Islamic Finance and Sustainable Banking: Global Retail Survey is a landmark study that aims to understand the views of customers of Islamic banks on environmental sustainability and the UN Sustainable Development Goals.

The survey takes 4 minutes to complete, and will help inform the direction of the Islamic banking sector going forward. Please click here to share your valuable feedback.


The SDGs and Islamic finance: 5 publications to read

By Mohammad Hashimi

The sustainable development goals (SDGs) represent the global development agenda and need mobilization of capital from a variety of sources including Islamic finance. Here are five publications in on Islamic finance and SDG that those interested in the topic should read.

1. Innovation in Islamic Finance: Green Sukuk for SDGs

Innovation in Islamic Finance: Green Sukuk for SDGs, The Islamic Finance Council UK, 40 pages, 2021

The report, commissioned by UNDP Indonesia, explores the role of green sukuk in the context of climate change and the green economy. Indonesia has issued the world's first sovereign green sukuk in 2018 and the world’s first retail green sukuk in 2019. The report highlights the opportunity for Islamic finance industry to play a major role in achieving the UN SDG. The report suggests green sukuk could bridge the gap of funding towards sustainability and provides several recommendations for the development of the green sukuk market.

It finds that “green sukuk are a relatively new development with limited issuances but have a clear alignment with the value system of Islamic law. As Islamic finance evolves, innovative products such as green sukuk represent the potential for a new class of products that consider more than legal permissibility, moving towards a positive impact in line with SDGs.”

2. How Islamic Finance Contributes to Achieving the Sustainable Development Goals

How Islamic Finance Contributes to Achieving the Sustainable Development Goals, OECD Development Co-operation Directorate, 44 pages, 2020

In this report, the authors argue that in Muslim-majority contexts, Islamic finance could be socially, culturally and ethically more acceptable than conventional finance and better suit development. The report discusses Islamic social finance instruments and opportunities that can be used for achieving UN SDGs.

The report “identifies the opportunities that Islamic finance presents for donors, as they look to deliver the Sustainable Development Goals (SDGs). To achieve the SDGs by 2030, Arab and OECD DAC donors need to mobilize innovative forms of financing and deliver the UN Secretary-General’s call to deepen the transformation of development finance systems.”

3. Reforming Islamic Finance for Achieving Sustainable Development Goals

Reforming Islamic Finance for Achieving Sustainable Development Goals, Tariqullah Khan, 19 pages, 2019

The author explains the possibilities of Islamic finance contributing towards SDGs in the light of objectives of Shariah. The paper examines that a change in the perspective current system will be helpful in achieving SDGs.

The paper suggests that Maqasid should be given more importance, and argues that “The paradigm of Islamic economics and finance is guided by the motivation of comprehensive human development (CHD) and its preservation as manifested in the objectives of Sharīʿah (maqāṣid al-Sharīʿah)”

4. Role of Islamic Finance in Sustainable Development Goals

Role of Islamic Finance in Sustainable Development Goals, Abdul Ghafar Ismail, Salman Ahmed Shaikh, 16 pages, 2017

The paper explains the potential of achieving UN SDGs in light of the philosophical foundations of Islamic finance. The authors focus on environmental and climate changes caused by human beings. The paper suggests Islamic social finance instruments like zakat (obligatory alms) and waqf (charitable endowment) can contribute towards scaling up efforts in commercially non-viable but socially vital projects and programs.

They find that “there is much potential for Islamic finance to promote sustainable economic development through such approaches as widening access to finance, financing infrastructure projects, and expanding the reach of Takaful. Real sector based productive enterprise in Islamic finance has positive implications for the ecosystem.”

5. Sustainable Development Goals and Role of Islamic Finance

Sustainable Development Goals and Role of Islamic Finance, Habib Ahmed, Mahmoud Mohieldin, Jos Verbeek, Farida Aboulmagd, 47 page, 2015

According to the authors, basic principles of Islamic finance stabilize the economic system and give importance to social responsibility. The working paper explains how social financing tools like Zakath and Waqf help to achieve SDGs by enhancing stability and resilience to the financial sector, financial inclusion, reducing vulnerability of the poor, contributing to environmental and social issues, and infrastructure development.

They argue that “practical measures are required to enhance the contribution of the Islamic financial sector to achieve the SDGs. We have identified five tracks through which Islamic Finance could support efforts to achieve the SDGs: financial stability, financial inclusion, reducing vulnerability, social and environmental activities, and infrastructure finance.” 

Concluding thoughts

Together, these reports and papers display the harmony between Islamic economic thought, Islamic finance, and the SDGs. However, they also show that the majority of the work to practically utilize Islamic finance for achieving the SDGs remains to be done. 


'The Future of Green and Sustainable Finance'- UKIFC at Dubai Expo 2020

The UKIFC are thrilled to be delivering a Global Leaders event in partnership with the Global Ethical Finance Initiative, as part of the Scottish Government’s Expo 2020 Dubai Race to Net Zero Day. Taking place in Dubai International Financial Centre, the event will look at future of green and sustainable finance with a particular focus on financing the UN Sustainable Development Goals (SDGs).

Speakers include:

  • HE Dr Reza Baqir, Governor, State Bank of Pakistan
  • Christian Gueckel, Chief Risk Officer, Head of Research, Sedco Capital
  • Ivan McKee, Minister for Business, Trade, Tourism and Enterprise, Scottish Government
  • Mustafa Adil, Head of Islamic Finance, Data & Analytics, London Stock Exchange Group
  • Graham Burnside, Senior Advisor, GEFI & Chair, UKIFC
  • Syed Samar Hasnain, Executive Director, State Bank of Pakistan
  • Omar Shaikh, Managing Director, GEFI

Scotland has a unique and strong heritage in ethical finance through the world’s first mutual savings scheme, the world’s first savings bank and indeed the father of modern economics Adam Smith. Smith’s reconciliation between self-interest and innate goodness through his enquiries into moral philosophy and the causes of the wealth of nations created the chassis by which modern markets and economies functions.

With the meteoric rise of ethical/sustainable finance (over $80trn signed up to PRI) once again modern markets face the challenge of reconciling profit and purpose. This event will unpack and explore key thematic in the financial markets in addressing this global trend which aligns with Expo 2020 Dubai’s focus on sustainability and the UN SDGs.

We will also be officially launching our latest report with State Bank of Pakistan (SBP on implementing the SDGs into national economic framework.

There is still time to register to join us here.