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 provides an introduction to the SDGs within the context of Islamic finance, emphasising the opportunity the SDGs present to the Islamic finance sector.
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.
The report shows that 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.
It also noted that 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.
It maintained that opportunity for Islamic finance to tap into emerging agnostic global liquidity pools seeking SDG-aligned products and increase tactical alignment with development bank funders.
It stated that alignment with the SDGs supports the tayyib (wholesome) 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.
The report added that 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.
Therefore, it also noted that with a deep rooted commitment to social benefit Islamic finance should be at the front and centre of this new, sustainable economic paradigm.
It revealed that 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.