UKIFC

The Islamic Finance Council UK (UKIFC), in partnership with Malaysia based International Shari’ah Research Academy for Islamic Finance (ISRA), has launched the first report in a thought leadership series that aims to assist and encourage active engagement in support of the UN Sustainable Development Goals (SDGs) by the global Islamic finance sector.

The report, Islamic Finance and the SDGs: Framing the Opportunity, provides an introduction to the SDGs within the context of Islamic finance, emphasising the opportunity the SDGs present to the Islamic finance sector.

The SDGs seek to address global economic, social, governance and environmental challenges by 2030 and have been adopted by 193 countries. They recognise that ending poverty and other deprivations complement strategies that improve health and education, reduce inequality, and spur economic growth – all while tackling climate change and working to preserve our natural environment.

With a $2.5 trillion per year financing gap the UKIFC has committed to a 24 month action oriented programme of activities to address barriers blocking Islamic Financial Institutions from embracing the SDGs. The report follows the launch of a global Islamic Finance and SDG Taskforce that is supported by the UK Government and involves senior level participants from across the globe.

With Covid-19 exposing the fragility of people and the planet the SDGs is a recognised global framework upon which we can, collectively, build our social, environmental and economic resilience. With its underlying Shari’ah principles, Islamic finance is naturally aligned to, not only support but, lead the financial services sector’s efforts towards achieving the Global Goals.

TAKEAWAYS FROM THE REPORT INCLUDE:

• There has been limited participation from Islamic finance sector in leading UN initiatives (such as Principles for Responsible Investment, Principles for Responsible Banking and Principles for Sustainable Insurance) that support financial institutions to align with the SDGs.
• To achieve SDG targets, Islamic Development Bank Member Countries need annual funding of between US$700 billion and US$1 trillion which represents around 40% of the total global SDG financing gap.
• Opportunity for Islamic finance to tap into emerging global liquidity pools seeking SDG-aligned products.
• Alignment with the SDGs supports the tayyib (pure, good) concept which contends that the focus of Islamic finance products and services should be on the evaluation of wider societal impact rather than an overly legalistic analysis of Shari’ah compliance.
• With assets expected to reach US $3.8 trillion in 2022, through its adeptness at innovative financial structuring, Islamic finance is well placed to create instruments that drive capital towards the SDGs.

With a deep rooted commitment to social benefit Islamic finance should be at the front and centre of this new, sustainable economic paradigm. With the SDGs emerging as the shared blueprint for peace and prosperity for people and the planet, now and into the future, it is time for the global Islamic finance sector to step up and demonstrate its credentials for driving finance for positive change.

Executive Director of ISRA, Dr Akram Laldin, said:

“Islamic finance has a lot in common with impact investment and can play a major role in addressing the problems faced by society. It also has the potential to bring added value to the efforts to mobilize resources for the sake of realizing the SDGs.”

Richard de Belder, Advisory Board Member of the Islamic Finance Council UK, said:

“The UKIFC firmly believes that the Shari’ah principles which underpin Islamic finance make the sector well positioned to lead in promoting the SDGs to achieve global economic and social justice combined with sustainability and to drive home the point that we are all vice regents with temporary custody of the world’s finite resources and so need to act in a way that recognises this.”

Charles Haresnape, CEO, Gatehouse Bank, said:

“The environmental and social challenges facing the world impact everyone and equally we must all play our part in affecting change for the better. Islamic Finance institutions already champion fairness and ethics through Shariah principles and by working to align our business activities with the UN’s SDGs we can further solidify that commitment. As the first UK Shariah-compliant bank to become a signatory to the principles we have seen first-hand how oversight from the UN encourages us to scrutinise the impact of our activities and importantly, assess where we can improve.  This is an important global scheme that we would encourage other Islamic finance providers to be part of to drive positive change.”

Stella Cox, CEO, DDCap Group, said:

“The 17 SDGs are an incredibly important resource as they provide a roadmap to address some of the world’s most pressing matters, from battling climate change to reducing social inequality and raising global living standards. Every institution, regardless of size, can and should seek to align its work with the objectives of the 17 goals.  Furthermore, there is a natural alignment between the SDGs and the core values in our industry. UKIFC’s Islamic Finance and SDGs Thought Leadership Series provides us with the opportunity to call to action and inspire greater engagement of the global Islamic banking and wider financial industry in delivering against the targets set within the SDGs. We are proud to support the UKIFC’s valuable work during the publication of this important series of reports.”

A new international taskforce is to be created with the support of the UK Government to engage the Islamic finance industry with the UN’s Sustainable Development Goals. The high-level Islamic Finance and Sustainable Development Goals (SGDs) taskforce will be anchored in London and run by the Glasgow-based Islamic Finance Council UK (UKIFC). Economic Secretary to the Treasury John Glen said the new initiative will ‘drive forward innovation around the world’. The UK Government will be the founding country partner when it begins in 2020, with an aim to promote understanding and encourage adoption of the UN SDGs amongst Islamic financial institutions. Gatehouse Bank has confirmed participation and interest has already been expressed from Malaysia and Dubai, as well as other UK organisations.

The UN’s SDGs are the blueprint to achieve a better and more sustainable future for all, addressing issues such as climate change, education and equality. But a recent analysis from UKIFC and Malaysia-based ISRA found a considerable lack of knowledge, misunderstandings and minimal engagement by Islamic financial institutions with the SDGs. Islamic finance is one of the fastest growing sectors in the global financial industry, with assets expected to reach US $3.8 trillion in 2022. Innovative financial structuring in the sector can help create instruments that drive capital towards the SDGs. The UK – and London in particular – has already become a centre for Islamic finance, helping finance developments such as The Shard and the Olympic Village. In 2014, the UK Government cemented the UK’s position as a hub for Islamic finance by becoming the first western country to issue sovereign Sukuk – Islamic bonds. With the City’s strength in conventional financial services, the strong legal framework and progressive outlook it continues to intellectually innovative and assist developments in the global Islamic finance arena.

The UKIFC was established in 2005 as a specialist advisory and developmental body focused on promoting and enhancing the global Islamic and ethical finance industry. It was the first global specialist Islamic finance body to sign up to the UN Principles of Responsible Banking (PRB). With Gatehouse Bank the only fully Shariah-compliant signatory, the UK is leading the way in relation to the Islamic finance sector’s engagement with the global framework that aligns with the SDGs. In 2016, the Church of Scotland and the UKIFC signed a partnership agreement to co-develop an ethical finance solution open to all society, regardless of race, religion or ethnic background and based on the shared values between the faith traditions. The UKIFC supported this month’s Ethical Finance 2019 global summit in Edinburgh, which brought together over 400 senior representatives from more than 200 companies and organisation.

The Economic Secretary to the Treasury, John Glen MP, said:

“The UK is a world leader in Islamic Finance, so I am pleased we’re now a founding country partner and observer member of the new Islamic Finance SDG Taskforce. “This Taskforce will bring together the global Islamic finance community so it can help us meet our international, environmental and sustainability objectives – using UK expertise in sustainable finance to drive forward innovation around the world.”

Richard de Belder, Advisory Board Member of the Islamic Finance Council UK, said:

“Delivering the UN’s Sustainable Development Goals will require private sector involvement. “But business-as-usual in the global financial arena will not deliver the 2030 goals. “A step-change in private investment in SDGs is required, and Islamic finance, as one of the fastest growing sectors in the global financial industry, provides a unique opportunity for innovative solutions. “We need a fairer system of financial management that delivers more than just profit and the inherent principles within Islamic finance are naturally aligned to the sustainability agenda. “This new taskforce will explore ways to bring people and institutions together to help achieve the UN SDGs.”

Charles Haresnape, CEO, Gatehouse Bank, said:

“We welcome the opportunity to support and participate in the Islamic Finance and Sustainable Development Goals Taskforce. “Our Shariah-compliant finance principles mean that our products and services are ethical by design and as a founding signatory of the UN’s Principles for Responsible Banking, Gatehouse Bank has committed to strategically aligning its business with the UN’s Sustainable Development Goals. “We are confident that the taskforce will play a significant role in identifying innovative solutions for sustainable finance in the future.”

ENDS 

NOTES TO EDITORS

The Islamic Finance Council UK (UKIFC) is a specialist, not-for-profit, advisory and developmental body focused on promoting and enhancing the global Islamic and ethical finance industry. It has helped six countries develop enabling regulatory frameworks for Islamic finance, enhancing financial inclusion to over 15 million people, established the award-winning Ethical Finance Round Table series running since 2010, launched the world’s first joint venture between Islamic finance and the Church of Scotland, and delivered development sessions to over 500 Islamic scholars across the globe.

The framework of an Islamic financial system is based on elements of Sharia (the law of Islam) which governs Islamic societies. The fundamental concept of Islamic finance is that money has no intrinsic value and should only be used as a measure of worth.