DISCOVER NEW PERSPECTIVES

Maqasid al-Shari'ah and SDGs

In essence, Maqasid al-Shari'ah and the sustainable development goals (SDGs) initiated by the United Nations have the same goal: to achieve the perfection of a sustainable human life.

Our Common Future

As Islamic finance continues to develop throughout the world it has shown great potential to support the implementation of the sustainable development goals (SDGs) initiated by the United Nations (UN) to maintain human and environmental welfare.

Many countries with sizable Muslim populations have high poverty rates and low scores in terms of achievement of the SDGs, which indicate that these countries require large investments in their infrastructure sector. Several studies have also suggested that Islamic finance can contribute to and support the implementation of the SDGs.

It is often argued that the SDGs can be seen as mirror images of the Maqasid al Shari’ah (Objectives of the Shari’ah) and as such should form the very heart of the operations of the Islamic financial institutions. It may require The challenges in actually mapping the SDGs to Maqasid al Shari’ah will require accepting changes needed in the structure of the Islamic Financial Institutions to achieve this mapping. Without this the claim of Islamic Finance to offer an alternative paradigm which is socially and environmentally responsible will continue to ring hollow.

The alignment of Islamic finance with ethical principles and the pursuit of the Maqasid al Shari’ah (objectives of Islamic law) is crucial for it to effectively champion the UN Sustainable Development Goals (SDGs). Here is how Islamic financial institutions can give increasing attention to the ethical content of their operations:

Alignment with Maqasid Al Shari’ah: Islamic financial institutions should prioritise the realisation of the Maqasid Al Shari’ah, which include the preservation of faith, life, lineage, intellect, and property. By adhering to these objectives, institutions can ensure their operations are inherently ethical and contribute positively to society.

Responsible Finance Principles: Islamic financial institutions should integrate responsible finance principles into their operations, including transparency, fairness, and accountability. This involves ensuring that financial products and services comply with Islamic principles and contribute to the well-being of individuals and communities.
 
Socially Responsible Investment (SRI): Islamic financial institutions can promote SRI principles by investing in projects and businesses that have positive social and environmental impacts. This may include financing projects related to clean energy, healthcare, education, and poverty alleviation, which are aligned with the SDGs.
 
Ethical Screening: Islamic financial institutions can implement ethical screening criteria to ensure that investments and financing activities comply with Islamic principles and ethical standards. This may involve avoiding investments in industries such as gambling, alcohol and tobacco.
 
Stakeholder Engagement: Engaging with stakeholders, including customers, investors, regulators, and community members, can help Islamic financial institutions better understand their needs and preferences regarding ethical and responsible finance. This can inform decision-making processes and lead to the development of products and services that align with ethical principles and the SDGs.
 
Education and Awareness: Islamic financial institutions should prioritise education and awareness initiatives to promote understanding of Islamic finance principles and their alignment with ethical and responsible finance. This can include providing training programs, workshops, and educational materials for employees, customers, and the wider community.
 
Partnerships and Collaboration: Collaborating with other financial institutions, NGOs, government agencies, and international organisations can amplify the impact of Islamic finance in promoting ethical and responsible finance practices and achieving the SDGs. By working together, institutions can share best practices, resources, and expertise to address common challenges and opportunities.

By prioritising the realisation of the Maqasid al Shari’ah and aligning their operations with ethical and responsible finance principles, Islamic financial institutions can effectively champion the UN Sustainable Development Goals and contribute to the well-being of individuals, communities, and the planet.

Alignment between SDGs and Islamic Finance

An industry report highlights four core areas of alignment between SDGs and Islamic Finance. These are: – Reducing poverty and hunger. – Injustice and equality. – Environment and climate change. – Sustainable and economic development. Substantial financing is required to respond to today’s sustainable development challenges of poverty, social inequality, and environmental degradation, which exceed the capacities of governments to solve.

Blending Islamic Finance and Impact Investing for the Sustainable Development Goals

Fatima Cinar, Islamic Finance Portfolio Lead, Istanbul International Center for Private Sector in Development (IICPSD), United Nations Development Programme, wrote in an article on “Blending Islamic Finance and Impact Investing for the Sustainable Development Goals”, originally published in IFN Volume 19 Issue 20 in May 2022, “Islamic finance can be an important non-traditional source of financing for the SDGs. Given its widening geographic reach in Asia and the Middle East, and high growth potential in South America and Europe, Islamic finance is a promising but untapped source of financing for the SDGs”.

Impact investing was another valuable source of funding for the SDGs. Impact investing is an investment strategy that seeks to generate financial returns while also creating a positive social or environmental impact. Investors who follow impact investing consider a company’s commitment to corporate social responsibility or the duty to positively serve society as a whole.

Convergence of Islamic Finance and Impact Investing

On “The Convergence of Islamic Finance and Impact Investing”, Fatima Cinar, wrote “Islamic finance adheres to high ethical standards, as set forth in Islamic law (otherwise known as Maqasid al-Shari’ah), and considers the well-being of all stakeholders, broader society, and the environment when making financial decisions. It supports overall public interests through the minimisation of harm – a key guiding principle for Islamic finance transactions”.

“According to Shari’ah, unethical assets used to finance businesses in certain areas or industries are prohibited since they harm the well-being of individuals or the well-being of other living creatures. As the purposes of Shari’ah include preservation of the environment, destruction or harm to the environment is not permitted. Therefore, impact investing, sustainability, socially responsible investing, and green investment fall within the mandate of Shari’ah-complaint investment. Islamic finance has always supported purposeful investments, but now the ethical aspects of social impact are becoming more commonplace”.

“Islamic finance and impact investing adhere to similar principles. Both promote value-based investments with a broad understanding of society-business relationships, which contribute to the development of an inclusive financial system. Islamic financial institutions are increasingly supporting socially responsible investments and ethical financing. Green Sukuk is a particularly suitable and impactful Islamic capital market instrument, reducing carbon footprints, preserving the environment while contributing to the supply of renewable and green energy. Given their complementary nature, bringing Islamic finance and impact investing together can create a promising avenue for financing sustainable development, fostering inclusive economic growth”.

Islamic Finance as a catalyst for financing the Sustainable Development Goals (SDGs)

In a publication of Deloitte Touche, November 2023, on “Islamic Finance as a catalyst for financing the Sustainable Development Goals (SDGs)”, Dr Hatim El-Tahir, FCISI, Director, Consulting, Financial Services Industry Leader, DTM Islamic Finance Knowledge Center (IFKC), wrote about the sustainable financing agenda,  “The sustainability agenda, as articulated by the 17 United Nations (UN) Sustainable Development Goals (SDGs), recognises that businesses are an essential partner for addressing the SDGs, from contributing finances to providing products and services that address sustainability. In line with this, global financial institutions led several business initiatives to support and align what has become a blueprint strategy for sustainable finance i.e., incorporating and achieving the SDGs.

“The SDGs business strategy and Islamic finance business principles (jurisprudence) are interconnected through their shared values and business objectives of addressing social impact, ethical investing, responsible and sustainable financing, and climate change, advocating sound sustainable development in our societies and economies. The primary objective of Islamic law – which drives the business and jurisprudence principles of Islamic finance – is the realisation of its benefit to mankind by preserving and protecting five fundamental objectives i.e. the Maqasid Al Shari’ah or Shari’ah objectives. These are: 

  • Religion (Deen), 
  • Life (Nafs), 
  • Lineage (Nasl), 
  • Intellect (Aql) and 
  • Property/wealth (Mal). 

“However, it is suggested that achieving these ‘Maqasid Al Shari’ah’ begins with mapping the widely accepted concept of global development framework designed by the UN’s SDGs with product development in Islamic finance to ensure that product innovation is aligned to the global financing and investment practices. Moreover, achieving both the SDGs and the ‘five pillars’ of Maqasid Al Shari’ah can be better addressed and aligned if Islamic financial institutions take a lead and adopt the approach of developing products and services that address the local economy’s needs; more precisely, develop its Islamic green financing solutions for sectors that will make social impact and social returns rather than the quick return commercial and trade financing sectors. For example, developing products and services to the pressing and priority sectors such as the housing, education, health-care and other social infrastructure institutions”.

17 Goals of the UN’s Sustainability Development 
United Nations Department of Economic and Social Affairs

Sustainable Development

The 2030 Agenda for Sustainable Development, adopted by all United Nations Member States in 2015, provides a shared blueprint for peace and prosperity for people and the planet, now and into the future. At its heart are the proposed 17 Sustainable Development Goals (SDGs), which are an urgent call for action by all countries – developed and developing – in a global partnership. They recognise that ending poverty and other deprivations must go hand-in-hand with strategies that improve health and education, reduce inequality, and spur economic growth – all while tackling climate change and working to preserve our oceans and forests.

Goal 1  NO POVERTY
End poverty in all its form everywhere.

Goal 2  ZERO HUNGER
End hunger, achieve food security and improve nutrition and promote sustainable agriculture.

Goal 3  GOOD HEALTH AND WELL-BEING
Ensure healthy lives and promote well-being for all at all ages.

Goal 4  QUALITY EDUCATION
Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all.

Goal 5  GENDER EQUALITY
Achieve gender equality and empower all women and girls.

Goal 6  CLEAN WATER AND SANITATION
Ensure availability and sustainable management of water and sanitation for all.

Goal 7  AFFORDABLE AND CLEAN ENERGY
Ensure accessible, affordable, reliable, sustainable and modern energy for all.

Goal 8  DECENT WORK AND ECONOMIC GROWTH
Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all.

Goal 9  INDUSTRY, INNOVATION AND INFRASTUCTURE
Build resilient infrastructure, promote inclusive and sustainable industrialisation and foster innovation.

Goal 10  REDUCED INEQUALITIES
Reduce inequality within and among countries.

Goal 11  SUSTAINABLE CITIES AND COMMUNITIES
Make cities and human settlements inclusive, safe, resilient and sustainable.

Goal 12  RESPONSIBLE CONSUMPTION AND PRODUCTION
Ensure sustainable consumption and production patterns.

Goal 13  CLIMATE ACTION
Take urgent action to combat climate change and its impact.

Goal 14  LIFE BELOW WATER
Conserve and sustainably use oceans, seas and marine resources for sustainable development.

Goal 15  LIFE ON LAND
Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification and halt and reverse land degradation and halt biodiversity loss.

Goal 16  PEACE, JUSTICE AND STRONG INSTITUTIONS
Promote peaceful and inclusive societies for sustainable development, promote access to justice for all and build effective, accountable and inclusive institutions at all levels.

Goal 17  PARTNERSHIP FOR THE GOALS
Strengthen the means of implementation and revitalize the Global Partnership for Sustainable Development.