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).
The best Islamic Finance Qualifications in 2022
Islamic finance has been hailed as a means to catalyze economic growth in the UK in 2022. For those of just starting out in the field- or looking to solidify our practice within it- now might be the perfect time to gain a qualification.
Islamic Finance Qualifications are a great way to integrate a Shariah and faith-based perspective to your pre-exisiting financial knowledge. Gaining an Islamic Finance Qualification represents a fantastic opportunity to learn how to implement Shariah principles in a business and insurance capacity, and to increase your subject-awareness more broadly.
Knowing what qualification to take can be a challenge, whatever stage of your career you’re currently at. To help you take your next step on your Islamic Finance journey, we have put together a directory of UK-based and remote qualifications to suit your learning needs.
UK-Based:
- Islamic Finance Msc, University of Birmingham:
Islamic Finance – MSc – 2022/23 Entry | Birmingham City University (bcu.ac.uk) - Islamic Finance Msc, University of Dundee
Islamic Finance MSc | University of Dundee - Durham: Durham Centre for Islamic Economics and Finance – Durham University
- The Islamic Foundation, Markfield Institute
- Islamic Finance & Banking Islamic Banking and Finance | Bangor University
- The Islamic Foundation, Markfield Institute
Remote Learning / Outside of the UK:
- CISI: Islamic Finance Qualification (cisi.org)
- ACCA: The Islamic Finance Qualification (IFQ) | ACCA Global
- The Global University of Islamic Finance: INCEIF | » Professional Certificate in Islamic Finance
- The Accounting and Auditing Organization for Islamic Financial Institutions: AAOIFI
- Ethica Institute: Ethica Institute of Islamic Finance
The UKIFC has specialist capability in advising government agencies, regulatory bodies and financial institutions on creating enabling frameworks for Islamic finance, as well as empowering Shariah scholars and finance professionals. To find out how we can help you or your organisation, contact info@ukifc.com
REPORT ANNOUNCEMENT: Innovation in Islamic Finance: Green Sukuk for SDGs
New report estimates an additional US$30-50bn can be raised by 2025 through green and sustainability sukuk to deliver the United Nation’s Sustainable Development Goals.
Indonesia – 28th September 2021, United Nations Development Programme (UNDP), in partnership with the Islamic Finance Council UK (UKIFC), has today launched a pioneering report setting out the important role Islamic finance can play in delivering the finance needed across the world’s most vulnerable regions.
The UN Climate Summit (COP26) in Scotland, in less than six weeks’ time, brings together world leaders to hammer out a deal to reduce greenhouse gases and adapt to the impacts of climate change. The report shows how green sukuk bonds can provide a major part of the US$100bn in climate finance needed for developing countries.
UKIFC Managing Director Omar Shaikh presented the report’s findings to over 500 senior finance leaders at the first Islamic Finance and the Sustainable Development Goals Virtual Global Summit that took place today.
Sales of new Green sukuk bonds have grown from US$500m in 2017 to US$3.5bn in 2019. The Republic of Indonesia (ROI), in partnership with the UNDP, issued the world’s first Government green sukuk in March 2018 (raising US$1.25bn) and the world’s first retail green sukuk in November 2019 (raising IDR1.4trn or USD$104.4m).
The report takes a detailed look at the best practice approach to green sukuk taken in ROI and other Islamic finance regions.
REPORT FINDINGS:
- Upfront investment is needed to develop a green framework and independent certification to assure investors that green sukuk bonds are not greenwashing.
- Demand from western global investors for Environmental, Social, and Corporate Governance (ESG) investments gives green sukuk bonds the opportunity to attract major new investors who otherwise would not have considered sukuk bonds for their portfolios.
- Green or sustainability sukuk bonds might lower the cost of raising vital climate finance. Malaysia has seen the largest volume of sukuk issuances supported and facilitated by a number of Government initiatives.
- Indonesia has a very limited corporate sukuk market and has not seen any corporate green sukuk issuances. There is a need to ensure sukuk have a level playing field with no additional burdens in comparison to conventional bonds; in addition, tax incentives could encourage corporate sukuk issuances.
- The opportunity is there for Shariah scholars to positively influence ESG aspects as part of their Shariah review of sukuk issuances.
- A challenge within the Islamic finance industry is the general lack of experience and depth of knowledge in relation to ESG matters. It is recommended organisations such as the Accounting and Auditing Organization for Islamic Financial Institutions take a lead and develop guidance for Shariah scholars.
The principles of Islamic finance are underpinned by the objectives of Islamic law and match many of the aims and objectives of the agenda for sustainable development goals adopted by all United Nations Member States in 2015 to provide a shared blueprint for an urgent call for action by all countries to end poverty, improve health and education, reduce inequality, and spur economic growth – all while tackling climate change and working to preserve our oceans and forests.
The report demonstrates how this unique alignment of the SDGs and Islamic finance provides a clear opportunity for green sukuk bonds to bridge the gap in private sector finance needed to meet countries’ climate targets and accelerate achieving their wider Sustainable Development Goals.
You can access the report in full here.
See also:
https://ukifc.com/sdg/
https://ifikr.isra.my/library/SR/1
UKIFC experts quoted in Chartered Banker Magazine article 'Progressive Pakistan'
The Islamic Republic of Pakistan is by most standards a young country – its founding in 1947 was not without both complication and conflict, and historical political divisions have frequently laid obstacles in its mission to forge a path as an influential and modern Islamic republic. Today, however, the impact of decades of globalisation – along with economic growth across South Asia – puts the country in a strong position, most significantly demonstrated by its increasingly dynamic banking and finance sector.
This article originally featured in the Spring 2021 edition of the Chartered Banker Magazine - click here to download
As the world’s fifth most populous state, Pakistan is nothing if not a significant player in the South Asia region. Its current economic indicators do, however, tell a story of a country that up to now has been relatively slow to develop in its infrastructure, health and education, and business environment.
The hesitant pace of growth and development can be viewed through the lens of a challenging domestic political scene that saw the country struggle until recently to establish a more stable democracy. However, Pakistan has benefited from structural reforms in recent years that have injected new impetus into its continuing transformation as a modernising republic.
A $6.3bn cash facility from the International Monetary Fund (IMF) in 2013, for one, was designed to help Pakistan stabilise its public finances and address energy supply shortages, and measures to attract much-needed foreign investment brought inflows of $3.1bn in 2019-20 – of which the financial sector was the second-highest beneficiary.
Despite some bumps in the road, the positive consequences for banking and financial services in the country are now being felt across the board in Pakistan. The country’s central bank, State Bank of Pakistan (SBP), notes the progress made in financial inclusion across such a vast population, saying: “In June 2018, we had 64 million unique accounts in operation, which reflects a penetration of more than 50% of Pakistan’s adult population. As of June 2020, we now have 73 million unique accounts, of which 61% are active.”
These accounts are a mix of traditional branch accounts and digital/mobile platforms – the very territory that is ripe for further expansion. And, given that the Pakistan Telecommunication Authority (PTA) reports some 93 million citizens as having broadband access, the potential for further penetration looks promising.
It could be cited that there are three ways in which the country’s financial sector has managed to blossom under such a transformative environment for banking worldwide. A key piece in the jigsaw is the autonomy that SBP now enjoys in making vital monetary policy decisions. The reforms go back to 1994, with further powers being subsequently granted in 1997.
“The changes in the State Bank Act gave full and exclusive authority to the State Bank to regulate the banking sector, to conduct an independent monetary policy, and to set limits on government borrowing from SBP”, which had been enacted in the SBP Act 1956. “SBP formulates and monitors monetary and credit policy, and in determining the expansion of liquidity, it takes into account the Federal Governmentʼs targets for growth and inflation that the Bank [operates] in a manner consistent with these targets.”
Secondly, the momentum for digitisation in Pakistan means increasing the share of online banking, whether that includes retail point-of-sale payments or opening and using e-wallets issued by FinTechs. SBP has capitalised on the digital shift by collaborating with the Pakistani government to allow its citizens living abroad easy access to retail investment opportunities back home by launching the Roshan Digital Account (RDA).
“During the past four quarters, the number of registered mobile phone banking users increased by three million to reach8.9 million.”
Institute of Bankers Pakistan
But perhaps a most prominent characteristic of the financial sector here is the growth and development of a highly developed alternate – or Islamic – banking system.
The Islamic banking impact
As an Islamic republic, Pakistan is strategically and culturally well placed to develop Islamic finance products. It is one of the very few jurisdictions to enjoy explicit constitutional support for it, and this in turn has increased incentive and backing for its development from the state.
According to SBP, the government has used a number of legal and regulatory initiatives to help nurture Islamic banking. As part of the National Financial Inclusion Strategy, it is determined to increase the share of Islamic banking to 25% of the banking industry, and its branch network to 30% by 2023. SBP has enjoyed a pivotal role in promotion and development of the Islamic banking industry and, as a result, is recognised today as a stable and resilient segment of the overall sector.
Although often seen as niche banking instruments, Pakistan has been cannily nurturing a sub-sector of Sharia-compliant* products and services since the early 1980s, with the result that it has grown substantially in both appeal and reach.
SBP reports 22 Islamic banking institutions operating in the country, including “five fully fledged Islamic banks, one specialised bank and 16 conventional banks with Islamic banking branches”. In the financial year ending 2020, a further 361 branches were added to a network already spanning 3,274 branches in 122 districts. Lower-income citizens are also are part of the commitment to growth, with banks such as NRSP and MCB-Islamic offering a range of Islamic microfinance solutions.
S. Fahim Ahmad, a Karachi-based Senior Adviser to the UK Islamic Finance Council (UKIFC), has more interest than most in the positive impact of Islamic finance. A former senior banker with Citibank and passionate supporter of sustainable charities, he was asked to set up Pakistan’s representation to the Global Islamic Finance UN SDGs Taskforce, which aims to ensure that it can actively engage with the 17 UN Sustainable Development Goals (SDGs) and make Islamic finance part of this global initiative.
“The team at State Bank of Pakistan were easily convinced of the benefits of such a cause,” he explains. “They had never done this before, as their role is more that of a regulator. But they are ina position to manage the banks much better than I could.”
In November 2020, the Pakistan chapterof the Taskforce was launched, enrolling the support and participation of seven Islamic and conventional banks which it was felt could best drive forward the mission. Its four key objectives include enhancing engagement with the UN SDGs – but also to promote Principles of Responsible Banking (PRB); facilitate alignment tools that deliver on additional areas such as green financing and the Global Ethical Finance Initiative (GEFI); and share international experiences.
“This collaboration between SBP and UKIFC is a novel concept,” continues Ahmad. “The idea is to replicate this in other markets. We have had to catch up in many respects with developed Islamic finance markets, and this is a good chance to make up for that.”This level of engagement is a far cry from the early days when legal issues tended to slow the growth of Islamic banking in Pakistan.
Finally, after 2000, the founding of the country’s largest Islamic bank, Meezan, was made possible when the SBP agreed to scope out proper guidelines and a regulatory framework. Today, Islamic banks in Pakistan are so successful, they have a surplus of liquidity, which inevitably needs to find a home in investment instruments that are considered halal (permissible or lawful).
“There’s no doubt in my mind that there’s a huge demand for Islamic finance products,” adds Ahmad. “The impact of wider regional change in 1979-1980 had fundamentally changed the relationship we have since had with Islam, and the younger generation is, by extension, now more into Islamic banking.
”However, there is still no global uniformity among Sharia scholars about the acceptability of different products – and there is extensive room for growth yet. What will make Islamic banking take off in Pakistan? Ahmad argues that this will happen if the government uses it on a large scale, for example through sovereign or corporate bonds in sovereign sukuk.
“Social good is a key part of Islamic finance,” he adds. “Islamic banks hold a lot of liquidity as we know, and if they can deploy that into productive, socially impactful use, the whole economy will benefit.”
Pakistan banks on faith
A recent joint survey held by SBP and the UK Department for International Development identified an “overwhelming demand” for Islamic banking, regardless of whether or not the respondents were urban or rural. A huge majority (94.51%) came out in favour of the prohibition on interest, with 88.4% regarding contemporary bank interest as a similarly prohibited practice.Even non-banked respondents echoed the sentiment, at 98% and 93% respectively, and 62% of those who are banked would willingly pay more for Islamic banking products due to religious preferences.
As with other jurisdictions worldwide, however, the shift towards contactless and e-wallet transactions is strengthening the hand of the non-bank sector too. This has not been lost on SBP which, in 2019, responded by enabling “electronic money institutions” access to Pakistan’s payments ecosystem. It is only a matter of time before the pace of innovation injected into the sector will transform people’s payment habits across the country.
Facing the future with confidence
As the world starts to deal with the economic fallout from the coronavirus pandemic – which, in many countries, is still in full flow – Pakistan’s financial sector seems to have shown a healthy degree of resilience in the face of the shock of 2020. SBP puts this down to capital buffers put in place over the long term to strengthen the banks’ position. The higher capital adequacy ratio (CAR) of 19.5% at the end of September 2020 put Pakistan beyond the minimum local and global requirements for its banking system. Liquidity has also been uninterrupted following state interventions to support key parts of the economy during this period.
From this position of strength, therefore, Pakistan is able to focus on at least three priorities among many that will shape its financial sector into a growing force for the economy: continued digital transformation, affordable lending instruments for housing, and programmes to reduce the gender gap in access to finance.
On the digital front, the Digital Pakistan Policy and the National Financial Inclusion Strategy are two initiatives that hold promise in the battle to reduce the informal economy and make FinTechs a productive addition to the domestic market. In particular, the launch of Raast, an instant digital payment system, will be an innovative step forward in reducing citizens’ reliance on cash while making transactions cheaper.
This collaboration between State Bank of Pakistan and the UK Islamic Finance Councilis a novel concept... We have had to catch up in many respects with developed Islamic Finance markets, and this isa good chance to makeup for that.
Islamic Finance Council, UK
Long-term property lending policies – where SBP has given mandatory lending targets to banks on their housing portfolios and developers are being offered incentives – should help boost a sector badly in need of modernisation to benefit future homeowners.Third is the launch of SBP’s Banking on Equality Strategy, where a “gender lens” will be applied to the industry to ensure increased financial access for women based on a set of approved measures.
When viewed in the context of an often-turbulent history, there’s little doubting the progress made to date in Pakistan’s journey of banking and finance. The policies, commitment, and liquidity – three factors crucial to any developing economy – should herald a more prosperous and dynamic economy well into this century.
No one left behind
According to State Bank of Pakistan (SBP), women are disproportionately underserved by the country’s financial system. With only around 25% of bank accounts held in the name of women (even fewer are actually active), it has been widely accepted by government that economic development cannot be achieved without a healthier approach to reducing the gender gap. The bank has therefore created a policy entitled Banking on Equality: Reducing the Gender Gap in Financial Inclusion to ensurea manageable but proactive shift towards women-friendly business practices. The draft policy was presented in December 2020 for consultation.
UKIFC is proud to support the Path to COP26 campaign
UKIFC is proud to be a signatory of the Path to COP26 campaign from the Global Ethical Finance Initiative. We are supporting the Faith in the SDGs stream of the campaign, which seeks to bring together, diverse global faith groups to drive change in finance through ethical leadership and stewardship of their endowments, bringing faith to finance, and finance to faith at the crucial Glasgow summit in 2021
Alongside UKIFC, signatories include major financial institutions such as NatWest Group, Baillie Gifford and Aberdeen Standard Investments, professional bodies such as Chartered Banker and CISI, and campaign groups and NGOs including Make My Money Matter and NatureScot.
UKIFC experts explain why UK and UAE fintechs could be taking on the world together - Arabian Business
This article originally appeared at https://www.arabianbusiness.com/banking-finance/457790-why-uk-uae-fintechs-could-be-taking-on-the-world-together.
The UK and the UAE fintech markets will see major regional cross-collaboration in the coming years, according to experts.
Fintech – including Islamic fintech - is a growing industry globally. Britain is now home to 27 Islamic fintechs, followed by Malaysia with 19, the UAE with 15, Indonesia with 13, and Saudi Arabia and the US with nine, according to IFN FinTech.
Global investments in Islamic economy-relevant companies totalled $11.8 billion in 2019/20, according to the State of Islamic Economy 2019/2020 report by Dinar Standard.
Islamic fintech attracted 41.8 percent of the investments. This figure reflects corporate-led mergers and acquisitions, venture capital investments in tech start-ups, and private equity investments, the report said.
British fintech boom
The UK’s fintech start-up scene has seen an injection of Islamic-focused firms in recent months, which abide by interest-free Sharia laws and avoid ‘unethical’ investments, such as alcohol and gambling.
My Ahmed, a sharia-compliant e-money platform, was accepted into the Financial Conduct Authority’s regulatory sandbox in July. In the same month, Islamic peer-to-peer lending platform Qardus launched UK services, along with trading platform Minted and sharia-compliant ethical banking alternative, Kestrl.
This year, Islamic banking app Niyah and sharia-complaint digital bank Rizq also launched in the UK.
My Ahmed is a sharia-compliant e-money platform
The UK’s large Muslim population has played a major role in helping to establish London as the focal point of Islamic financial services in the west. About 4.5 percent of the British population is Muslim, according to the 2011 census. More than a million of the UK’s 2.8 million Muslims live in London.
What’s more, Britain’s Muslim population is growing - and getting wealthier. The average monthly income of those born locally, with at least one parent born in Britain, is £1,219, compared with £815 for those who arrived aged six or older, according to the Economist Intelligence Unit.
UK-UAE crossover
Former Lord Mayor Peter Estlin, the global ambassador for the UK’s financial and professional services industry, visited the Gulf in January 2020 to help strengthen fintech trade and investment ties.
Discussing emerging opportunities for collaboration between the region and the UK, he said: “British business and innovation across financial and professional services has much to offer partners in the region, whether it be in currency trading and asset management, or growing areas like fintech and green finance."
Former Lord Mayor Peter Estlin, the global ambassador for the UK’s financial and professional services industry
According to Umer Suleman, board member, UK Islamic Finance Council (IFC), the UK finance market is mature with a strong regulatory landscape and a legacy of innovation. These British strengths offer partnership benefits for the UAE, Suleman said.
“The UK has launched many products and we know how to utilise financial technology,” the UK IFC board member told Arabian Business. “We know finance can go wrong - however, we’ve seen the resolution and evolution of products and services over time.”
“The Gulf has a great appetite for new innovative ideas. UK experts can offer their experience in terms of implementation and help build the region’s products and ecosystems,” said Suleman, adding that the Middle East’s high mobile phone penetration, legacy-free systems and flowing capital are boons for fintech growth.
“The Middle East is very open to using Islamic fintech but the [domestic] innovation isn’t fully there yet as it takes a while for research facilities to grow,” he added.
Gaurav Dhar, a global fintech investor and founder of Dubai-based digital payments firm Marshal, said London has a “huge history” of creating financial products and exporting them globally.
“This experience has flowed through into the digital age,” Dhar told Arabian Business.
Stella Cox CBE, Islamic finance government lobbyist and managing director at financial market intermediary DDCAP Group
Strong fintech dialogue
The Marshal founder said that a strong fintech dialogue has already begun between the UK and Gulf governments.
“It’s important that this conversation continues. There is a lot of opportunity for the exchange of technology, ideas and learning.
"While the UK has more to offer at this stage in terms of technology, the cross-regional fintech relationship is still in the early stages and will continue to grow organically.”
Stella Cox CBE, Islamic finance government lobbyist and managing director at financial market intermediary DDCAP Group, said there is major scope for cross-collaboration in the fintech space as the Gulf states continue to develop their cryptocurrency and digital payments ecosystems.
“The UK Islamic fintech community are creating its own ecosystem at the moment which is quite exciting. There is a lot of opportunities to share intellectual capital [between the UK and the Gulf] and I’m sure we’re eagerly looking at each other’s regulatory sandboxes at the moment,” she told Arabian Business earlier this month.
The potential for crossover and authorisation in one market attracts the attention of other proximate markets, Cox added.
“I see this dynamic extending beyond the Middle East into South East Asia as the Islamic fintechs create their own dynamic.
Muslim students still waiting for government funding plan - BBC News
UKIFC co-founder Omar Shaikh appeared on a BBC News video explaining some of the challenges that Muslim students are facing in accessing Shariah-compliant student finance - watch now.
The application of Maqaasid As-Shariah in achieving the UN SDGs
In simplistic terms, Maqaasid As-Sharia is defined as the “Goals of Shariah”. These encompass the 5 necessities of human existence. The preservation of: faith, life, intellect, lineage and wealth. These objectives have a great resemblance to the UN SDGs (United Nations Sustainable Development Goals). The SDGs are defined as “the world we want. They apply to all nations and mean, quite simply, to ensure that no one is left behind.”
Maqaasid As-Shariah involves realising the human well-being by enhancing welfare or benefit (maslaha) of the people on one hand, and preventing harm (mafsadah) on the other. The satisfaction of these needs is a basic human right and has been addressed under the generic term “Maqaasid As-Shariah”.
Although the SDGs have not been developed on a religious basis, most goals are nonetheless aligned with the spirit of Islamic law! Muslims are duty-bound by their religion to ensure the sustenance of the 5 necessities of Maqaasid As-Shariah. This means that the Islamic development is endogenously sustainable since preservation of life is an explicit objective of the Islamic law.
The dimensions of SDGs (the 5Ps) can also be found in Maqaasid As-Sharia as follows: People (Intellect), Planet (lineage), Prosperity (wealth), Partnership (faith) and Peace (life). When we talk about Maqaasid As-Shariah we are really talking about a guiding framework, a value system, the objectives of which are explained from the holy Qur’an. Some of these are referenced below:
- No Poverty, Zero Hunger, Decent work and economic growth (SDG1, 2 & 8)
[Chapter 16 v 97: “Whoever works righteousness, whether male or female, while he (or she) is a true believer verily, to him We will give a good life (in this world with respect, contentment and lawful provision)…”]
- Good health and well-being (SDG 3), Quality Education (SDG 4), Clean water and Sanitation (SDG 6)
[Chapter 7 V 160: “…Eat of the good things with which we have provided you…”]
- Gender equality (SDG 5)
[Chapter 49 v 13: “We have created you from a male and a female….Verily the most honourable of you with Allah is that (believer) who has at taqwa (piety)…”]
- Affordable & Clean Energy (SDG 7), Climate Action (SDG 13)
[Chapter 7; V85: ““…and do not mischief the earth after it has been set in order…”]
- Industry, Innovation & Infrastructure (SDG 9)
[Chapter 13 v 11: “…Verily, Allah will not change the good condition of a people as long as they do not change their state of goodness themselves …”]
- Reducing inequality & Peace, Justice & Strong Institutions (SDG 10, 16)
[Chapter 4 v 135: “Stand out firmly for justice…”]
- Responsible consumption & Production (SDG 12)
[Chapter 7 v 31: “…eat and drink but waste not in extravagance…”]
[Prophetic advice: “The food of one person is sufficient for two, the food of two people suffices for four people and the food of four people suffices for eight”]
- Sustainable cities & Communities (SDG 11)
[Chapter 8 v 46: “…do not dispute (with one another)…”]
- Life below Water (SDG 14), Life on Land (SDG 15)
[Chapter 30 v 41: “…Evil has appeared on land and sea because of what the hands of men have earned (by oppression and evil deeds)…”]
- Partnerships for the goals (SDG 17)
[Chapter 5 v2: “…help you one another in virtue, righteousness and piety (common good) but do not help one another in sin and transgression…”]
The UN SDGs are primarily intended for the well-being of human beings. As sustainable development strives for a balanced economy, society and environment, Islam too drives a balance between the 3 to maintain efficient and effective resource usage. If spirituality becomes a way of life upholding timeless moral, ethical and human values, sustainability is certainly assured and Maqaasid As-Shariah to serve as governance framework, guidelines and values.
The adaptability of Islamic Finance (IF) post Covid-19 - AAOIFI
During the recent AAOIFI webinar that took place on the 14th December 2020, much of the discussion was around the adaptability of Islamic Finance (IF) post Covid-19. The COVID-19 pandemic is an event which has provoked unprecedented reflections and shifts within the sector.
Many countries fell into economic depression despite government and central bank support, with supply chains, currencies and SMEs all affected. However, the pandemic also accelerated the set-up of the digitalisation trend - from the creation of blockchain technology platforms where users could mobilise funds in a transparent manner, to online banking, online schools, virtual meetings and more.
A study conducted by some of the participating banks in Turkey revealed that the pandemic presented some strengths where clients were giving priority to Murabaha debt to continue financing their business operations and there were no dealings in any derivatives instruments. It was also an opportunity for widening the distribution channels and increasing the number of customers. On the more challenging side, the contraction in economic activities caused a cash shortage in companies and where participating banks were not able to lend a helping hand. Participating banks had limited number of instruments for consumer credits.
In an Islamic Economic system, the gap between the real and financial sectors is non-existent. While the financial sector can move independently from the real sector (which is what happened during the financial meltdown of 2008, when profits were being made while the real economy shrank). It is evident that reform in IF is needed, and there is a huge opportunity for the industry to re-inject returns into the real economy towards the creation of employment and promoting real businesses. On the other hand, financial innovation relating to the environment such as green financing and sustainable financing is encouraged by the Maqasid Al-Shariah.
In this current climate the role of regulators is more imminent than ever in providing guidance & the necessary educational tools to Islamic Banks (IB) and the industry, especially where many Central Banks have failed to abide by Standards that are pillars to the economy. IFSB for example are working in line with Regulators in an attempt to bring together uniformity and good guidelines in the IB sector. The pandemic is placing enormous strains on corporate cash flows as business operations have temporarily ceased.
Banerjee et al (2020) estimate that 50% of firms in 26 advanced countries do not have enough cash to cover total debt servicing costs over the coming years. Some guidance for governance during the pandemic included:
- Board & executive directors are recommended to implement crisis management plans. Such crisis management plans should cover reporting practices and governance issues.
- Boards are recommended to emphasise stakeholders’ needs and ensure transparent reporting of transactions arising due to the pandemic (moratorium payments).
- Boards are recommended to emphasise ethical considerations while developing strategies to handle the pandemic.
- Sharia boards are advised to develop pro-active measures to ensure sharia compliance.
Some opportunities for IFIs included:
- Social safety net – IFIs need to develop fiscal plans for a sustainable future.
- Islamic Social Finance tools – e.g. Qard Hassan, Sukuk, Waqf, Zakaat are available for IFIs
- Fintech (Mobile banking, Sharia compliant crowdfunding, Islamic micro finance & smart contracts).