With COP 26 in Glasgow just six weeks away, we’re delighted to have launched the final report in our 4-part thought leadership series ‘Islamic Finance: Shariah and the SDGs’ written in partnership with Malaysia based International Shari’ah Research Academy for Islamic Finance (ISRA). This latest report is designed to assist and encourage active engagement in support of the UN Sustainable Development Goals (SDGs) by the global Islamic finance sector.
The report highlights the US$5-7 trillion annual funding gap to achieve the SDGs by 2030 which cannot all be obtained from government or donor agencies. With its underlying Shariah principles, Islamic finance is naturally aligned and well positioned to lead the private financial services sector’s efforts towards funding the SDGs.
By providing a detailed analysis the views of Shariah scholars on the alignment of Islamic finance and the SDGs the report explores the current awareness levels and captures views on SDG implementation.
The UKIFC and ISRA have published this report to encourage Islamic finance institutions (IFIs) to embrace the SDGs and demonstrate that consideration for people, planet and purpose can coexist with profit and underpin the next generation of Islamic financial products.The SDGs have a clear development agenda, relevant to the world of Islamic social finance (zakat, ṣadaqah, waqf, etc.), but this report presents a clear challenge to the private Islamic finance sector to build the achievement of the SDGs into their commitments to the fight against climate change.
REPORT FINDINGS :
- The alignment of the SDG agenda and Islamic finance presents a clear opportunity to attract capital from across the global financial system. SDGs provide an opportunity to Islamic Banks and Financial Institutions that should be adopted as part of their business strategies.
- The SDGs are aligned to Maqasid al-Shariah (the objectives of Shariah) with very minor differences in certain aspects of Shariah.
- In pursuing SDGs in socio-economic activities, philanthropic instruments such as waqf, zakat and ṣadaqah will rank supreme due to their potential in instilling cooperation, solidarity and alternative finance.
- The issuance of sustainable sukuk has been part of the Covid-19 response through an alignment with the underlying principles of Islamic finance.
- The emergence of fintech should trigger innovations among the Islamic finance industry players and promote creativity by providing new perspectives and practices in financial transactions.
- Shariah scholars should understand the technical aspects of sophisticated financial instruments and the implementation of fintech in Islamic finance to keep pace with the developments that are taking place in the market. In this regard, Shariah scholars and industry players must work together to produce innovative Shariah-compliant products that fulfil the needs of the society and help in realizing the objectives of SDGs.