Shariah-compliant Investing Masterclass
Check out the latest Asset TV session featuring our advisory board member and director, Omar Shaikh, joined by Sefian Kasem, HSBC Asset Management, and Umar Yaqoob, Aviva Business.
Together, they explore how Shariah-compliant pensions are reshaping retirement in the UK, bridging access gaps, boosting outcomes, and driving innovation through “do no harm” values, smart screening, and inclusive product design.
MIFC Partnership
MIFC Partnership
We are proud to announce an exciting new partnership with the Malaysia Islamic Finance Centre Leadership Council (MIFC) - an initiative of Malaysia’s financial market regulators and relevant government agencies dedicated to developing Malaysia’s Islamic finance market by engaging with industry and government.
Our Advisory Board Member, Omar Shaikh announced the partnership alongside MIFC chairman, Tan Sri Azman Mokhtar on 28 May 2024 in front of Prime Minister YAB Dato' Seri Anwar Bin Ibrahim at the Global Forum on Islamic Economics and Finance, organised by the Ministry of Finance Malaysia and Bank Negara Malaysia in collaboration with various stakeholders.
With the MIFC’s focus on propelling the next phase of growth and to solidify Malaysia's position as a leading international Islamic financial centre, the partnership will explore scope for collaboration around Islamic finance product innovation, the development of cross-border financial activities to support the Islamic Economy activities and capacity building and education.
During the Forum, the MIFC Leadership Council presented its visionary position paper, entitled "Establishing Islah through Islamic Finance," which provides strategic recommendations for policymakers and industry leaders to foster a more inclusive, sustainable, and humane financial system. The paper also outlines 10 key focus areas and 18 high-impact projects, such as elevating sustainability via a Biodiversity SRI Sukuk, unlocking equity risk capital, and strengthening philanthropic finance instruments like zakat and waqf. It calls for 10 transformative 'hijrah' shifts, underpinned by 7 guiding principles focused on inclusivity, sustainability, and ethical practices.
We look forward to working with MIFC to help align financial practices with Maqasid al-Shariah to promote societal welfare.
Islamic Finance, SDGs, and Consumer Attitudes: a Convergence of Ethical Banking
In an increasingly values-driven financial landscape, consumers demand more banking products that align with ethical and sustainable principles. Islamic finance, with its deep-rooted ethical foundations, is uniquely positioned to meet this demand. Insights from the UKIFC reports, Islamic Finance and the UN SDGs: Retail Banking Customer Perspectives and Attitudes of Banking Customers Towards the UN SDGs, along with Gatehouse Bank’s Islamic and Ethical Finance Consumer Report 2024, shed light on the potential of Islamic finance to address these growing expectations.
Growing Appetite for Ethical Finance
The Gatehouse Bank report highlights a rising interest in Islamic finance products, as Muslim consumers increasingly seek Shariah-compliant savings accounts, current accounts, and investment funds. The report reveals that 88% of Muslim consumers would consider shifting from conventional banking to Islamic if comparable services were available, demonstrating a strong preference for aligning financial decisions with their ethical and religious values. Additionally, non-Muslim consumers are also showing interest in ethical and green finance, with 16% expressing interest in green savings accounts.
This trend aligns with UKIFC findings, which highlight how Islamic finance principles naturally support many of the UN Sustainable Development Goals (SDGs). By prohibiting investments in harmful industries and prioritizing social justice, Islamic finance aligns with many SDGs such as responsible consumption, poverty reduction, and sustainable economic growth. Thus, it appeals to both Muslim and non-Muslim consumers who prioritize ethical and green finance products.
Values-Driven Investment
The most encouraging trend in these reports is the consumers willingness to pay a premium for products that reflect their values. The Gatehouse study indicates that 75% of Muslim consumers are willing to accept higher prices for Islamic finance products that adhere to their ethical standards. This sentiment also extends to green finance, with over half of Muslim consumers are willing to pay more for sustainable options and 22% of consumers not of the Muslim faith would switch to green finance if providers were trustworthy and transparent.
The UKIFC reports suggest that this willingness to invest in products aligned with personal values presents an excellent opportunity to advance the SDGs, particularly those related to poverty reduction (SDG 1) and reducing inequalities (SDG 10).
Education and Overcoming Barriers
Despite growing interest, a key challenge remains: a lack of understanding. The Gatehouse report notes that 24% of respondents are unsure about how Islamic finance works, with women in particular reporting lower familiarity with these products. Similarly, the UKIFC’s findings highlight the need for improved financial literacy and consumer education on the ethical principles of Islamic finance and its alignment with the SDGs.
This highlights the need for Islamic finance providers to undertake educational initiatives that clarify how Shariah-compliant products work and their alignment with global sustainability goals. Enhanced awareness and education can support both Muslim and non-Muslim consumers seeking transparent, ethical, and sustainable financial solutions.
Conclusion
As consumers becoming more attuned to ethical and sustainable finance, Islamic finance is well-positioned to play a pivotal role in this growing market. The UKIFC and Gatehouse reports indicate an increasing demand for financial products that align with ethical values, driven by younger generations and sustainability-conscious consumers. By leveraging principles of transparency, ethical investment, and social welfare, Islamic finance can contribute to a more sustainable and equitable financial system.
The challenge now lies in bridging the knowledge gap, dispelling misconceptions, and developing products that are not only ethically sound but also competitive and accessible to all consumers. As these reports collectively suggest, the future of finance is not solely about profit but also about purpose—and consumers are ready to lead the way.
"Progress and Perseverance: The Journey Towards Alternative Student Finance in the UK"
The current student finance system provides financial support to eligible students pursuing higher education in England. This support primarily covers tuition fees, maintenance loans for living expenses, and additional grants or loans for specific circumstances.
The system operates on the principle of income-contingent repayment, where students only start repaying their loans once they earn above a certain income threshold. Interest rates are applied based on the RPI inflation rate and how much a student repays will vary depending on the student’s income levels after studies. The repayment threshold for Plan 5 (the repayment loan issued to new students starting from August 2023) will be adjusted annually by inflation from April 2027. The current system however has caused financial exclusion for students (Muslims and others) who believe obtaining an interest-based loan for higher education is against their religious beliefs. The ban on (or aversion to) interest is a feature across Abrahamic faiths.
Additionally, individuals from low-income families, lower socio-economic neighbourhoods, or minority communities often face disproportionate challenges. These can include living in overcrowded conditions, experiencing various forms of deprivation, and encountering barriers to educational achievement. When access to higher education becomes more restricted, these groups tend to be the most severely impacted. For many in these situations, obtaining a degree that opens doors to quality employment opportunities can be a crucial stepping stone. It often serves as a powerful tool to break cycles of disadvantage within families and communities, potentially improving prospects for current and future generations. Although it may be argued that higher education is not the only path to success, vocational training, entrepreneurship, and other alternative routes can also play significant roles in improving socioeconomic outcomes. The key is ensuring equitable access to a range of opportunities that can lead to financial stability and improved quality of life. To ensure every British citizen has equal access to higher education, the journey to introduce Alternative Student Finance (ASF) began with the Prime Minister announcing this in 2013.
ASF is designed to provide a Sharia-compliant alternative to traditional interest-bearing student loans. It will be open to all eligible students regardless of faith. It is intended to cover tuition fees and living costs for eligible higher education courses, much like conventional student loans. Instead of charging interest, it uses a model based on the Islamic finance principle of Takaful or ‘mutual guarantee’. Students will receive payments to support their education whilst guaranteeing to repay amounts in the future once the graduate’s income reaches the relevant agreed upon threshold. This means ASF repayments will be based solely on what people earn, like the existing loan based system. The repayment amounts are calculated to ensure that students using ASF repay the same amount they would have under the existing loan based system.
The Islamic Finance Council UK (UKIFC) has been at the forefront of supporting the development of ASF in the United Kingdom. It was formally appointed in 2017 and has been assisting the Department for Education (DfE) since. This blog post outlines the key milestones in this journey, highlighting the progress made and the challenges faced in developing a Sharia-compliant student finance option.
Here’s a comprehensive look at the ASF milestones achieved on this journey.
The Early Stages (2010-2013)
In 2010, the need for an ASF system was identified, leading to initial discussions and proposals for changes in the existing student loan system. The following year Baroness Verma announced that the government was investigating the possibility of introducing an ASF, working with key organisations such as the Federation of Student Islamic Societies and the National Union of Students (NUS).
The Government’s higher education reforms introduced changes to interest rates on student loans and increased the tuition fee cap to £9000 per year, posing significant challenges for many in the Muslim community in 2012. This led to a coordinated campaign by Muslim organisations and the NUS to raise awareness of the negative impact of interest-bearing loans.
At the World Islamic Finance Forum in 2013, Prime Minister David Cameron MP promised to introduce a student finance system compatible with Islamic principles, ensuring that no Muslim student would be deterred from pursuing higher education due to financial constraints.
Consultation and Legislative Steps (2014-2017)
In April 2014, the government launched a ten-week consultation to gather opinions on a Sharia-compliant alternative finance product. Just under 20,000 formal responses and 68 comments were received. The overwhelming support led to the decision to adopt a mutuality based “Takaful” model for ASF. This would provide an alternative structure compatible with Islamic finance principles offering student finance on the same terms as existing student loans thereby ensuring complete parity for all students.
The publication of the Green Paper “Fulfilling Our Potential” in 2015 and the White Paper “Success as a Knowledge Economy” in 2016 provided further justification for the creation and adoption of an alternative student finance solution. The initial bill was accompanied by an Impact Assessment which highlighted the benefits of having an ASF.
As part of the legislative process, Lord Sharkey submitted an amendment that would hold the government to quarterly reports on ASF development. Lord Sharkey had noted, “…my amendment would require the Secretary of State to tell all relevant schools about the progress being made and to give an estimate of the likely date of availability.” He further stated “my amendment simply asks the Government to say when this conflict between faith and funding will be resolved. This was pressed to a vote but lost narrowly, by 227-225.
The Higher Education and Research Act gained royal assent, securing the powers to introduce ASF. The Act marked a significant legislative milestone. To enable the government to implement an extra student financing model called “alternative payments” that would not include interest, Sections 86 and 87 of the Higher Education and Research Act were passed in April 2017.
Development and Advocacy (2017-2022)
The DfE commissioned a study to support ASF development and appointed the UKIFC in October 2017 to help design an ASF model. The then Prime Minister, Theresa May MP, commissioned a review of post-18 education and funding in February 2018 (the Augar review). This wholistic review had a material impact on the timeline to introduce ASF.
In May 2019, DfE published an ASF research report highlighting positive perspectives on ASF from current and future students. In the same month, the findings of the Augar review were released which further highlighted reasons to have the ASF. There was a further debate on ASF in July 2019 at the House of Lords where the late Lord Sheikh who had also been the Co-Chair of the All-Party Parliamentary Group on Islamic Finance emphasised the need to fulfil the commitment made by David Cameron highlighting the considerable delay to date.
Following COVID-19, in 2021 the collaborative advocacy efforts from the Muslim community and NUS reignited due to the concerns and disappointment with the delays. The Muslim Census released the results of its online survey in October 2021 which revealed that over 12,000 students annually were negatively impacted by the lack of ASF. The Equal Access to University Education campaign was initiated by a coalition of Muslim charities and community organisations to advocate for ASF principally led by Asha Hassan and supported by Stephen Timms MP, Lord Sharkey, and others. They made a call to the then Prime Minister, Boris Johnson MP, to ensure ASF was rolled out by September 2022.
In February 2022, the government gave a conclusion to the Augar Review and confirmed that it will consider if and how ASF can be delivered as part of the Lifelong Loan Entitlement (LLE) which was a key recommendation of the Augar review. An opportunity in an accountability hearing in June 2022 of the universities minister led to a public commitment to introduce ASF alongside the LLE in the 2025/26 academic year pending consultation results.
Recent Developments (2023-2024)
The government published the outcome of the LLE consultation in March 2023 and confirmed that ASF will be delivered as soon as possible after the introduction of the LLE and emphasised its commitment to ensuring the availability of ASF, although it would not be delivered at the launch of the LLE in 2025/26 as previously hoped.
A government policy paper and blog post announced plans for ASF with UKIFC being contracted to provide advisory service. The Student Loans Company (SLC) began work on the ASF project pre-discovery with the UKIFC being appointed to support it in May 2023. This signalled the start of concrete development efforts towards operationalising ASF. Baroness Barran MBE [then Parliamentary Under Secretary of State, Department for Education] provided an update in September 2023 reflecting revived commitment from government, and highlighting that she was meeting on a quarterly basis with legislators, leaders of the Islamic community, the SLC and the UKIFC to discuss the government’s progress to provide ASF as soon as feasible. She provided another update in a letter to the House of Lords in December 2023.
The SLC discovery phase of the ASF project ended in March 2024, marking a crucial step towards the implementation of ASF.
Looking Ahead
The journey towards establishing ASF has been long and eventful, marked by significant milestones and persistent advocacy. Disappointingly, over a decade from the first announcement we are not there – yet! Introduction of ASF remains a significant step towards ensuring that higher education in the UK is inclusive and accessible to all, respecting the diverse beliefs and needs of its student population.
Key milestones including the legislative amendments and the completion of the SLC ASF discovery phase, are important milestones towards making this long-awaited finance option a reality. It is hoped that the new government will continue and successfully get ASF over the finishing line promptly.
ASF will not only benefit some Muslim students but also contribute to greater financial inclusion in higher education across England which in turn will help drive economic growth. It remains imperative for DfE and SLC to set a specific deadline to avoid leaving students in uncertainty. Additionally, Scotland and Wales should promptly develop plans for implementing ASF-equivalent options.
ASF TIMELINES
- 2010 – Changes in student loan system proposed.
- 2011 – Baroness Verma stated that the government was ‘ investigating the possibility of introducing an alternative finance system and were working with organisations such as the Federation of Student Islamic Societies and the National Union of Students https://www.theyworkforyou.com/lords/?id=2011-11-01a.1203.0 (Paragraph 5 ).
- September 2012 – The Government’s Higher Education reforms (introduced changes to interest rates on student loans and an increase in tuition fee cap to £9000 per year). Following the Brown Review posed problems for many in the Muslim community. This meant that the more affordable £3000 pa tuition fee cost was trebled with the addition of real interest. This was highlighted via a co-ordinated campaign by Muslim organisations and NUS to raise the profile of the harm interest-bearing loans could cause some students and their families.
- October 2013 – David Cameron MP promises (at the World Islamic Finance forum) to introduce a system of student finance compatible with the principles of Islamic Finance. He 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.’’
- April 2014 – Government launched a ten-week “Sharia-compliant Alternative Finance Product” consultation in April 2014. The goal of the consultation was to gather opinions on the acceptability of an alternative finance product based on the Takaful Model from students, Muslim communities, and the public. The consultation closed in June 2014. According to the Government, 19,886 formal responses and 68 comments (via a designated email address) were received. The responses were from individuals, academicians, charities, business representatives/trade unions, and business owners. Responses were made online through a survey monkey link.
- September 2014 – Government issued its response in September 2014 committing to introducing ASF due to overwhelming support in the consultation and concluded that a ‘Takaful’ system will be most suitable for ASF.
- November 2015 – Government published Green Paper (Fulfilling Our Potential).
- May 2016 – Government published White Paper (Success as a Knowledge Economy) which provided more justification for the creation and adoption of an alternate student financing solution.
- June 2016 – The initial bill was accompanied by an Impact Assessment which highlighted the benefits of having an ASF.
- March 2017 – As part of the legislative process, Lord Sharkey submitted an amendment that would require the government to make quarterly ASF progress reports. This was pressed to a vote but lost narrowly, by 227-225.
- April 2017 – Higher Education and Research Act gains royal assent (powers to introduce ASF were secured). In order to enable the government to implement an extra student financing model called “alternative payments” that would not include interest, Sections 86 and 87 of the Higher Education and Research Act were passed in 2017.
- August 2017 – The DfE commissioned a study to support the development of ASF.
- October 2017 – Specialist advisers, the UKIFC, were appointed in October 2017 to help DfE design an ASF model.
- February 2018 – Theresa May MP commissions a review of Post-18 Education and Funding.
- May 2019 – DfE publishes ASF research report (Current and future students’ perspectives) which sought to analyse the experiences of Muslims who took out student loans and those who did not, as well as those who did and did not enrol in higher education. The study discovered that several interviewees’ opinions on interest and personal money were significantly influenced by their religious beliefs. It also reported that ‘‘Individuals are overwhelmingly positive about the ASF model, feeling it is attractive to them, and will be attractive to their families, friends, and community and thus encourage more Muslim students to go university, particularly those who could be deterred by the need to use interest-bearing loans to finance their studies. They also feel ASF will be attractive to a wider audience, beyond the Muslim community’’. In the same month, the Independent panel report (Augar review) to the Review of Post-18 Education and Funding was released and it further highlighted reasons to have the ASF.
- July 2019 – There was a further debate at the House of Lords where late Lord Sheikh who had also been the Co-Chair of the All-Party Parliamentary Group on Islamic Finance emphasised the need to fulfil the commitment made by David Cameron.
- January 2021 – Government publishes an interim response to Augar review. ‘’The Government is committed to ensuring that all students with the potential to benefit from further and higher education are able to access it. The Government will provide a further update on the ASF product in due course.’’
- April 2021 – Through Parliament, Lord Sharkey attempted to set a six-month timeframe for ASF after the passing of the Act during the Financial Services Bill Report debate. It did not succeed.
- May 2021 – Equal Access to University Education Campaign held a campaign webinar, titled “Boris Johnson – Where are our Halal Student Loans?
- July 2021 – An adjournment debate led by Stephen Timms MP was held in the House of Commons with the universities minister highlighting the delay and sharing accounts of people who have been unable to attend the university due to the lack of ASF.
- October 2021 – Spending review took place alongside the Autumn Budget. The collaborative advocacy efforts from the Muslim community and NUS reignited due to the inexplicable delays. The Muslim Census released the results of its online survey in October 2021 which revealed that over 12,000 students annually were negatively impacted by the lack of alternative student financing (ASF). Equal Access to University Education Campaign was initiated by a coalition of Muslim charities and community organisations to advocate for ASF. They made a call to the subsisting Prime Minister Boris Johnson to ensure ASF was rolled out by September 2022.
- February 2022 – Government gives a conclusion to the Augar Review and confirms that it will consider if and how ASF can be delivered as part of the LLE.
- February 2022 – Government launches a consultation on the LLE.
- June 2022 – An opportunity in an accountability hearing in June 2022 of the universities minister led to the public commitment to introduce ASF in line with LLE in the academic year 2025/26 whilst they awaited the results of the consultation of the LLE. https://www.parliamentlive.tv/Event/Index/03f0d267-f992-4193-9d8f-746930d28032 10.28.37, 10.33.09
- March 2023 – Government published the outcome of the LLE consultation and confirms that ASF will be delivered as soon as possible after the introduction of the LLE and emphasised its commitment to ensure availability of the ASF, although it would not be delivered at the launch of the LLE in 2025/26 but noted that an update would be available in late 2023.
- May 2023 – DfE re-appoints UKIFC to provide advice on Islamic finance.
- July 2023 – Government published a policy paper and blog post announcing plans for ASF in England through an advisory engagement with UKIFC.
- August 2023 – SLC began work on the ASF project pre-discovery and kicked-off.
- September 2023 – Baroness Barran stated that she meets on a quarterly basis with legislators, leaders of the Islamic community, the Student Loans Company, and the UKIFC to talk about the measures the government is taking to provide alternative student financing as soon as feasible.
- December 2023 – Baroness Barran provided an update on Alternative Student Finance in a letter to the House of Lords.
- February 2024 – The British Board of Scholars and Imams (BBSI) issued BBSI Guidance on Student Finance: Between Prohibition and Lawfulness
- March/April 2024 – SLC discovery phase complete. ASF will need to follow the introduction of the LLE, as referenced in the letter from Baroness Barran to Peers in December 2023.
- *April 2024 – ASF remains aligned to Lifelong Learning Entitlement delivery timetable: ASF continues to be developed as part of the wider Lifelong Learning Entitlement (LLE) reform programme, with implementation dependent on the rollout of the LLE
- October 2024 – DfE appoints UKIFC to undertake the role as the Secretariat for the Islamic Finance Supervisory Board supporting governance and Sharia compliance oversight for ASF.
- November 2024 – Government updates ASF guidance and confirms revised LLE timeline (2026/27): The Department for Education updates ASF guidance, confirming the Lifelong Learning Entitlement will now be introduced in the 2026/27 academic year, with ASF delivery aligned to this timetable.
- December 2024 – House of Commons Library publishes updated ASF briefing: The House of Commons Library updates its briefing on ASF, confirming policy continuity and summarising progress on implementation planning and governance structures.
- June 2025 – Government publishes updated operational description of ASF: The Department for Education publishes updated guidance confirming ASF design features, including use of a Takaful model, equivalence with existing student finance, and delivery through Student Finance England.
- June 2025 – GOV.UK updates ASF guidance confirming independent Sharia governance structure: Government guidance confirms the establishment of an independent Islamic Finance Supervisory Board to provide Sharia certification oversight for ASF before launch.
- June 2025 – UKIFC website updated with information on the Islamic Finance Supervisory Board and UKIFC’s role as Secretariat to the Board supporting Sharia certification oversight for the Alternative Student Finance product.
- April 2026 – Department for Education launches early market engagement for an ASF Student Bank Account. The procurement seeks a banking partner to establish and manage a dedicated account structure to support the Alternative Student Finance model, ensuring funds are handled in a manner compliant with Islamic finance principles, including non-interest-bearing arrangements and FCA-regulated safeguards.
- July 2026 – ASF remains in development ahead of LLE implementation: ASF has not yet launched and remains dependent on the implementation of the Lifelong Learning Entitlement. Government confirms ASF will be introduced following LLE rollout in 2026/27.
* The below updates were made on 1 July 2026
Mid Year Update From UKIFC
As we arrive at the mid-point in the year we are sharing this update on our work to promote and enhance the global Islamic and ethical finance industries.
The Islamic Finance Council UK (UKIFC) has been at the forefront of pioneering initiatives, fostering collaborations, and influencing policy to create a more inclusive and sustainable financial ecosystem.
Our efforts span a diverse range of activities, including educational programs, thought leadership, and strategic partnerships, all aimed at integrating ethical principles into mainstream finance. Through our ongoing advocacy and capacity-building endeavours, we strive to bridge the gap between conventional and Islamic finance, ensuring that financial practices adhere to both ethical standards and faith-inspired principles. We are committed to driving innovation and best practices, thereby contributing to a resilient and responsible global financial system.
Islamic Sustainable Finance – Ecosystem Development
- We signed a Memorandum of Cooperation with MIFC on 28 May 2024 in Kuala Lumpur at the Global Forum on Islamic Economics and Finance, under the auspices of the Prime Minister of Malaysia to further the development of the global Islamic finance sector with a focus on sustainability (see picture above).
- Guidance on Green, Social, and Sustainability Sukuk: As Secretariat of the High-Level Working Group on Green Sukuk together with the London Stock Exchange Group, Islamic Development Bank and International Capital Market Association (ICMA), we successfully published guidance for issuers and market participants with practical information on how sukuk may be labelled as green, social or sustainability under the ICMA Green Bond Principles.
- Introduction of the Islamic Sustainable Investing Platform (ISIP): Following our COP28 announcement the ISIP was formally released in Dubai, Istanbul and Kuala Lumpur in May. The ISIP is a listing of independently assessed, validated, and showcased Islamic investment products that are directly aligned to sustainability goals.
UK Market Development
- Alternative Student Finance (ASF): We were commissioned by the UK Government’s Department for Education (DfE) to work together with the Student Loans Company (SLC) to support a discovery process to identify the implementation requirements for ASF. Progress has been made with DfE following positive engagement with Under Secretary of State at the Department for Education, Baroness Barran. The process to operationalise the requirements to successfully deliver ASF we estimate could easily take 18 to 24 months with the timeframe being directly impacted by the introduction of Lifelong Learning Entitlement (LLE) which introduces a major change to student loans in general.
- All-Party Parliamentary Group on Islamic and Ethical Finance Call for Evidence: As Secretariat we led a call for evidence looking at “Financial Inclusion of Muslims in the UK”. Thank you to all those who supported the call. The summary of responses which provides an insight into the challenges and barriers faced by Muslim communities in accessing financial services in the UK are available here. With the pending General Election all APPGs are currently dissolved. We look forward to the APPGIEF being reconstituted following the election results.
Thought Leadership
- Unlocking Islamic Finance for Climate Insight Series: This insights series was launched to unpack the role Islamic finance can play in financing the transition to net zero.
- Green and Sustainable Sukuk Update 2023: Together with the LSEG/Refinitiv team this report was launched highlighting the growth in the market of green and sustainable sukuk
- Post COP28 reflections: Our post COP28 reflections blog post published by FaithInvest highlights the immense opportunity for Islamic finance to support the transition towards a cleaner energy future and enable investment consistent with both climate goals and faith-based values.
Convening and Connecting
- Unlocking Islamic Sustainable Finance Round Table (London): Last month we held an exclusive round table that formed part of the London Climate Action Week programme. The event brought together industry experts to discuss the latest trends and opportunities in sustainable finance within the Islamic finance context.
- Unlocking Islamic Sustainable Finance Round Table (Dubai): In May we held an exclusive round table in Dubai (as pictured above), which brought key stakeholders together to discuss how we can build an enabling environment in the UAE for Islamic sustainable finance.
- Earlier this month we partnered with FaithInvest and over 300 faith leaders at the global Focolare Movement gathering in Rome. With Islamic finance being uniquely the only form of recognised globally regulated faith-based finance, participants were particularly keen to understand what lessons they could take to help align their faith values with their financial transactions.
- Unlocking Islamic Finance Summit at COP28: The UKIFC’s “Unlocking Islamic Finance at COP28”, which formed part of the Path to COP28 campaign (the first, and largest finance-focused campaign for the Dubai Climate Summit), was hosted in partnership with DIFC and was the main (and largest!) event focused on Islamic finance attracting over 200 leaders and practitioners.
- During May we spoke at a number of international events including the GFIEF Summit and World Bank roundtable in Kuala Lumpur, EYDK Summit in Istanbul, and the Focolare Summit in Rome.
Upcoming Events
- Durham Islamic Finance Summer School (DIFSS) 2024: 29 July – 2 August 2024: We are delighted to be joining this year’s DIFSS. Running since 2006, it has established itself as the leading training and leadership programme in Islamic finance. For a 15% discount register through the UKIFC by contacting oyin@ukifc.com
- Unlocking Islamic Sustainable Finance Global Summit: To be hosted in the UAE in Nov/Dec 2024. Please get in touch if you are interested in partnering with us for the event.
We are excited about the rest of the year and the impactful initiatives and events we have planned. Thank you for your continued support and engagement with the Islamic Finance Council UK. Together, we can drive positive change and promote a more sustainable and ethical financial future.
Shaping a Sustainable Future: UKIFC's Impactful Journey at COP28 and Beyond
The Islamic Finance Council UK (UKIFC) was a strategic partner for the Global Ethical Finance Initiative (GEFI)’s #PATHTOCOP28 Programme – the first and largest finance-focused campaign for COP28.
The programme had seven high–profile events which included the Evening Lectures 'Adam Smith & Ibn Khaldun at #PATHTOCOP28, the COP28 Climate Finance Summit: Financing Survival which Scotland’s First Minister – Humza Yousaf; Unlocking Islamic Finance at COP28, and the SDG Hive.
The Unlocking Islamic Finance Summit was the largest Islamic finance event at COP28. The event which had in attendance global experts and scholars in the industry, delved into discussions on Green and Sustainable Sukuk, transitioning from Halal to Tayyib by enhancing consideration of ESG factors, and the pivotal role of Shariah scholars in promoting sustainability.
The UKIFC has been at the forefront of advancing the intersection of Islamic finance and sustainable development over the years, we are therefore delighted to share some remarkable achievements and announcements that underscore our commitment to shaping a sustainable future through Islamic finance.
- PRE-COP28
Unlocking Islamic Finance Insight Series – LAUNCHED BEFORE COP
The UKIFC has released an Unlocking Islamic Finance Insight Series, a collection of blogs and articles that discuss key issues and opportunities in Islamic finance. This ongoing initiative aims to deepen understanding and awareness of Islamic finance through engaging discussions, webinars, and expert opinions. It includes articles about ESG Frameworks and the Imperative of Inclusivity, Challenges of Islamic Financial Institutions Engaging with Net Zero Frameworks and Other Initiatives, and Green Sukuk for Nature and Biodiversity Conservation: the Next Frontier.
Other Islamic Finance News
We are also happy with the launch of the annual report on the Islamic finance industry, titled “Navigating Uncertainty” by our partner London Stock Exchange Group (LSEG) and the Islamic Corporation for the Development of the Private Sector (ICD) during the 18th AAOIFI-IsDB Annual Islamic Banking and Finance Conference.
The Islamic Finance Development Report 2023 states that the assets of the global Islamic finance sector grew by 11% to US$4.5 trillion in 2022, with 72% of the industry's total assets coming from Islamic banking. It is anticipated that the industry will expand by US$6.7 trillion by 2027, having grown by 163% since 2012.
- BLUE ZONE ANNOUNCEMENT
ICMA, IsDB, and LSEG Partnership for Green Sukuk Guidelines – LAUNCHED IN BLUE ZONE
UKIFC welcomed the collaboration between the High-Level Working Group on Green Sukuk (HLWG) with ICMA through its partners IsDB, and LSEG to produce a Green Sukuk practitioners’ guide which will be in line with the Green Bond Principles. This collaboration aims to support the growth of the green sukuk market, mobilizing climate finance from global capital markets. The guide will enhance investor awareness of the sukuk asset class, furthering our collective efforts toward climate and sustainability goals. The UKIFC continues to support the work of the HLWG as its Secretariat.
- UNLOCKING ISLAMIC FINANCE SUMMIT
Launch of Global Islamic Finance and UN SDGs Taskforce Key Outputs Report – LAUNCHED AT SUMMIT
With the close of the Global Islamic Finance and UN SDGs Taskforce(Taskforce) we released its final report - Global Islamic Finance and UN SDGs Taskforce Key Outputs Report which delves into all the activities and achievements of the Taskforce. It also highlights the integral role Islamic finance plays in contributing to the United Nations Sustainable Development Goals, offering insights and recommendations for a positive global impact.
Through advocacy efforts at major global forums and the production of technical resources, the Taskforce successfully engaged with four working groups, focusing on Disclosures and Reporting, Education and Awareness, Pakistan, and the High-Level Working Group on Green Sukuk (HLWG).
The UKIFC looks forward to working with partners who are eager to take the recommendations from the report forward.
Green Sukuk Updated Report 2023 – LAUNCHED AT SUMMIT
The HLWG remains the only workstream that continues after the successful tenure of the Taskforce. Its commitment to sustainable finance is further emphasized in the Financing a Sustainable Future Green and Sustainability Sukuk Updated Report 2023. This report which is an update to the 2022 report provides a comprehensive analysis of the latest developments and trends in the green sukuk market, showcasing Islamic finance's pivotal role in driving environmentally conscious initiatives. The report shows global green and sustainability sukuk issuances exceeding $10 billion in the first three quarters of 2023 as the instrument gains momentum for financing environmental projects.
According to the report, global Green and Sustainability Sukuk issuance has surpassed $10 billion in the third quarter of 2023 compared to $9.4 billion in 2022. Indonesia, Malaysia, and Saudi Arabia also collectively contributed 77% of the total cumulative issuance by Q3 2023, underscoring the key role played by these nations in driving sustainability within the Islamic finance sector.
Tayyib Secretariat Launch – LAUNCHED AT SUMMIT
This global initiative, unveiled at GEFI's Unlocking Islamic Finance Summit in Dubai, developed following a year-long market assessment by UKIFC and GEFI. The Tayyib approach leverages the Shariah-compliant model of Islamic finance to cultivate an enhanced ESG and sustainability framework. Positioned as a potential best practice approach to responsible investing, the Tayyib Inspired Secretariat, a collaborative effort involving Malaysia, the UAE, and the UK, aims to develop Tayyib-inspired investment principles, foster market expansion, and contribute to the mainstream sustainable finance sector.
Co-managed by UKIFC and ISRA Consulting, with DIFC as the Host Financial Centre and PwC Dubai as the Technical Partner, the Tayyib Secretariat boasts an Advisory Panel representing Shariah scholars, multilateral bodies, and industry developmental stakeholders, along with an Industry Consultation Group to ensure comprehensive support and collaboration.
- UKIFC WIDER ENGAGEMENT AT COP28
Our Director and Advisory Board Member, Omar Shaikh attended three equally important events at COP28. He moderated the Fireside Chat titled “Leveraging Islamic Finance for Sustainability: MENA and ASEAN Perspectives” on 3rd December. The event was held at the Malaysia Pavilion. The theme for the Malaysia Pavilion for COP28 was “Going Beyond: Green Growth, Resilient Community, Liveable Planet”.
Experts on Islamic finance and sustainability gathered to discuss leveraging Islamic finance instruments to promote sustainability initiatives in the MENA and ASEAN regions, exploring the latest trends while considering the unique regulatory environments. Panelists addressed the current Islamic finance landscape and sustainability challenges, shared success stories demonstrating Islamic finance's pivotal sustainability role, and offered solutions to specific regulatory and practical obstacles.
On 4th December, he was a panelist at a UNHCR & Greenpeace Session on “Islamic Social Finance for Climate Action” held at the Faith Pavillon (Blue Zone). The discussion centred on how Islamic social finance might help address crises involving displacement, highlighting the innovative ways that the UNHCR has used zakat, sadaqah, and waqf as sustainable finance solutions.
At the Knowledge Hub on the 5th of December, he was one of the key stakeholders who attended the “Empowering society through financial resilience” event which was hosted by Abu Dhabi Islamic Bank (ADIB), in partnership with the London Stock Exchange Group (LSEG). The gathering brought together influential industry participants to explore market insights and trends with a particular emphasis on the role Islamic finance can play in advancing sustainable development goals (SDGs).
- CONCLUSION
UKIFC's recent achievements stand as a testament to the collective dedication and expertise of our community. The Unlocking Islamic Finance Summit emerged as a significant highlight of COP28, gathering global experts and scholars to explore themes like Green and Sustainable Sukuk, transitioning from Halal to Tayyib with enhanced consideration of ESG factors, and the crucial role of Shariah scholars in promoting sustainability.
The summit also witnessed the launch of the Global Islamic Finance and UN SDGs Taskforce Key Outputs Report and the Tayyib Secretariat, a transformative global initiative. With Islamic finance assets projected to grow 163% by 2027, the UKIFC remains committed to harnessing the industry's immense potential through strategic partnerships and initiatives promoting sustainable development.
Islamic Finance and UN SDGs: A Customer Perspective
Two key publications highlight the nexus between Islamic Finance and the UN Sustainable Development Goals (UN SDGs). In these papers, about 2000 respondents were surveyed from different Islamic financial institutions around the world, including those in Pakistan, Malaysia, the UK, Australia, and Nigeria.
These reports were among the outputs of the Global Islamic Finance and UN SDGs Taskforce, an innovative public-private partnership that examines the potential contribution of the Islamic finance sector to closing this funding gap as well as the potential business opportunities the SDGs offer the sector.
In this blog, we discuss the main highlights of the Islamic Finance and the UN SDGs Retail Banking Customer Perspectives Global Survey 2023 and the Attitudes of banking customers towards the UN SDGs Global Survey 2023.
The first report found the following:
- Ethical Commitment: 96% of respondents emphasized the importance of their financial products aligning with their personal values and ethics emphasizing that customers are committed to ethical banking.
- Demand for SDG Products: A significant 90% of respondents highlighted the importance of their banks offering products that aligned with the UN SDGs, indicating a demand for sustainable financial offerings.
- Poverty Alleviation: Social responsibility proved to be a high priority as 95% of respondents rated reducing poverty to be of high importance.
- Sustainability Encouragement: A notable 71% stated that the alignment of financial products with sustainability would motivate them to use their bank's products more actively, hinting at the potential of sustainable finance to engage customers.
- Premium for Alignment: An impressive 87% of respondents expressed their willingness to pay a premium for UN SDG-aligned products, demonstrating a strong commitment to values-driven banking.
The second survey categorized the 17 SDGs into four core areas: Reducing poverty and hunger, Injustice and equality, Environment and climate change, and Sustainable economic development. These categories were further divided into the Global North and Global South. Global South consisted of banks in Pakistan, Nigeria, and Malaysia while the institutions in Australia and UK made up the Global North.
The key findings include:
- Regional Disparities and Priorities: While the Global North exhibited a higher response rate, it was in the areas of "Injustice and equality" and "Environment and climate change" where significant differences emerged. This suggests that economic SDGs tend to hold greater importance in the Global South, whereas social and environmental issues are relatively more critical in the Global North concerning the SDGs as a whole.
- Alignment with Core SDG Areas: Survey participants overwhelmingly endorsed the alignment of Islamic finance with the four core SDG areas (reducing poverty and hunger, equality, environment, and economic development), with over 90% considering this alignment vital.
- Terminology and Awareness: There were disparities in terms of terminologies. For instance, "Net Zero" displayed significant awareness disparities between the Global North and Global South. “Impact investing" was more recognized in the Global South, while "ethical finance" garnered higher awareness in the Global North. This indicates that respondents in the Global North may possess a somewhat higher awareness of certain trends, especially those related to sustainability.
- Alignment with Core SDG Areas: Survey participants overwhelmingly endorsed the alignment of Islamic finance with the four core SDG areas (reducing poverty and hunger, equality, environment, and economic development), with over 90% considering this alignment vital.
- Seeking Information: Finally, the survey explored how respondents accessed information, with social media and website news emerging as the primary sources in both the Global North and Global South. Facebook was the preferred platform in the Global South, while LinkedIn took precedence in the Global North.
Overall, the surveys revealed respondents across regions showed keenness for aligning financial products with the SDGs once they understood the SDGs, moderate overall awareness of the SDGs, and a substantial willingness to pay for SDG-related financial products.
The SDGs represent an opportunity for Islamic finance institutions to drive sustainability and positive change. By utilising the SDGs in communications with customers about issues of social and responsibility, Islamic finance institutions have an opportunity to increase brand value and customer engagement.
By harnessing financial innovation to expand access to values-driven products, improve financial inclusion, support renewable energy investments, and finance projects alleviating poverty, Islamic banks and financial institutions can fulfill their purpose of bringing shared prosperity in an ethical manner.
Join us this Thursday for a lunchtime chat, 1:30 - 2 pm, where we explore these findings and learn more with Sultan Choudhury OBE.
Understanding Legal Maxims in Islamic Finance
The phrase ‘legal maxims’ often connotes a ‘well-established legal idea, proposal, or doctrine, generally expressed in Latin’. Legal maxims exist in Islamic law as well and are rooted in the principles of Shariah law. In the world of finance, legal principles and maxims serve as the cornerstone of stability, providing guidance and clarity in a complex and ever-evolving industry. In this blog post, we discuss some of the fundamental legal maxims that underpin Islamic finance.
Qawaid Fiqhiyyah/Islamic legal maxims have retained a distinctive place in jurisprudence for all time and will continue to do so. Legal maxims are typically accepted as the foundation for developing Shariah opinions by jurists from all schools. This is particularly true if these maxims are founded on the Holy Quran and the traditions of the Prophet SAW. These maxims provide an accessible summary of laws that are connected to one another and supported by the Qur'an and the Sunnah while some are direct citations from Hadiths of the Prophet PBUH. For instance, the maxim “There shall be no harm nor any reciprocation of harm.”
Some legal definitions offered for al Qawaid al-Fiqhiyyah include:
- Al-Suyti for instance defines Qawaid as “a general rule which applies to all its particulars.”
- Al-Burnu defined it “as a universal legal ruling or proposition from which are understood the particular legal rulings that are derived from it.”
- Sheikah Mustafa al-Zarqa defines Qawaid as “the root maxim of fiqh dedicated in its concise text with regulatory nature, containing general rules of Law on these issues which transpired under its theme”.
- Al Hamawi defined it as “the predominant ruling which is applied to the greater part of its particular”.
Islamic finance is governed by Shariah law, which consists of primary sources like the Quran and Sunnah as well as secondary sources like ijma (scholarly consensus), qiyas (analogical reasoning), and legal maxims. Legal maxims play an important role in interpreting and applying Shariah principles to contemporary financial practices. Here are some key legal maxims relevant in Islamic finance:
- Matters are determined according to intentions/ Al-'Aqd yata'amal bi 'Umum al-lafz wa khusus al-maqasid - In agreements, emphasis is placed on intent and significance rather than on language and form. The intended meaning should always take precedence over the literal phrase of an expression where there is a contradiction between them. This implies that we should prioritise a transaction's economic above its formal characteristics when assessing its legality.
- There shall be no initiation of harm, nor any reciprocation of harm/La zarar wa la dirar – All damaging and destructive acts must not only be avoided in all circumstances, but they must also be prevented. The implication is that in Islam there is an emphasis on ensuring good and avoiding harm. It proves that harm prevention, eradication, and minimization are the goals of the law.
- Custom is a basis for judgment/ Al-‘adah muḥakkamah – Customs are established practices of any community over a typically longer period of time. According to this maxim, the shariah acknowledges and respects the social customs of society in terms of their words and deeds in the absence of textual injunctions, provided they don’t violate the Quran or Sunnah or any shariah principle; the custom is applied consistently and is prevalent in the community; was applicable at the time the activity or transaction took place; and the contractual parties have not stipulated a condition that runs counter to custom at the time of the activity or transaction.
- The origin of all rules is permissibility/ Al'asl fi al'ashya' al'iibaha – Using this maxim as a general guideline, it can be said that Islamic financial practices are initially permitted unless there is proof that they contain aspects that are forbidden, in which case the original judgment is effectively changed. Also, tand wide room for innovations for different financial tools and instruments for financial transactions. These innovations must however not conflict with the Quran or Sunnah.
- Reward begets risk/ Al-Kharaj bi al-daman - According to this maxim, no one can expect to succeed in their endeavours without taking on some level of risk or loss.
- Ambiguity cannot coexist with certainty/ La yubaru ma'al-Gharar - According to this maxim, a contract or transaction that includes ambiguity or uncertainty cannot be deemed valid. It highlights the requirement for precision and clarity in contractual provisions in order to promote justice and prevent exploitation.
The legal maxims discussed are just a few that are applicable to Islamic finance, intended to situate the role and impact that they have on modern applications. These legal maxims are still actively guiding the practice and growth of Islamic finance.
The UKIFC will be introducing Project Tayyib at the largest Islamic and ethical finance event at COP28 – Unlocking Islamic Finance Summit.
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.
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).
