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Lessons from Islamic finance for socially, economically, and environmentally just outcomes in the Financing for Sustainable Development Process

You who believe, uphold justice and bear witness to God, even if it is against yourselves, your parents, or your close relatives. Whether the person is rich or poor, God can best take care of both. Refrain from following your own desire, so that you can act justly– if you distort or neglect justice, God is fully aware of what you do.” (Qur’an 4:135) 

Country: International
Category: Influencing the UN Development Goals, Human Development & Poverty, Faith Perspectives

This paper examines the link between Islamic finance and global policy discussions on financing for sustainable development.

Islamic finance includes a series of instruments that were originally derived from Islamic theological texts and designed to govern the role, distribution, and use of wealth in society as a means of ensuring the overall well-being of communities. While much of the ethics of this system has been lost in contemporary incarnations of Islamic financial mechanisms, academics and policy makers as well as community workers and civil society working in Muslim communities have laid the ground work to revive the ethical system at the core of Islamic teachings on economics – an ‘Islamic moral economy.’[1] This framework prominently emphasises the mutually reinforcing rights and responsibilities of individual community members, suggesting an ethical imperative to ensure a minimum standard of societal well-being and social justice. Notably, zakat, a form of mandatory financial giving incumbent on all Muslims of sufficient means, institutionalises the rights of the poor over the wealthy through compulsory wealth redistribution.

In order to thrive, the tools of the ‘Islamic moral economy’ – including zakat, waqf (Islamic endowments), and Islamically compliant lending – require an enabling policy environment at all levels, including within the national policy-making spaces of Muslim majority countries where the values and tools underlying Islamic finance have not always been fully explored as pathways to poverty eradication.

[1] Asutay, 2012. “Conceptualising and Locating the Social Failure of Islamic Finance: Aspirations of Islamic Moral Economy vs the Realities of Islamic Finance,” Asian and African Area Studies, 11 (2): 93-113, 2012.

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