Islamic finance can fund sustainable development

Axel Threlfall, Dr Adnan Chilwan, Prof Dr Mohamed Azmi bin Omar and Hassan Al Damluji at the event.
(Shihab)

Islamic finance may be the answer to plug funding gaps for sustainable development goals (SDGs), said industry experts during a plenary session on the first day of the Global Islamic Economy Summit 2016.

The session explored the role of wealthy Muslim governments, sovereign wealth funds and Islamic financial institutions in achieving SDGs within a realistic timeframe.

At a session titled ‘Is blended finance a solution to the funding requirements of sustainable development goals?’ keynote speaker and governor of the Central Bank of Kuwait, Dr Mohammed Yousef Al Hashel, said: “It is heartening to see the broad context of the conference, ranging from philanthropy to innovations to Islamic finance and halal industries. This reflects the true essence of an Islamic economic system. Constricting the Islamic economy to a few sectors defies its ubiquity.”

“Assets of the top 1,000 global banks alone are worth around $115 trillion, yet these banks are facing a serious squeeze on profit margins. Meanwhile, the Islamic finance industry, despite its impressive growth, collectively accounts for just $2 trillion,” Dr Al Hashel said.

“Looking at these figures, one might think that funding is not a constraint to achieve SDGs. However, the reality is quite different. By some estimates, around $3.5 trillion to $5 trillion is needed every year to make desirable progress on SDGs,” he added.

Investments in SDGs are not attractive to investors as they may not be profitable immediately and the countries that need them the most may be too poor to pay the market price, Dr Al Hashel said, adding that the very nature of Islamic economy may offer a solution to these challenges.

“The Islamic economy promotes the reallocation of profit for everyone’s benefit,” he stressed. “In Islamic finance, credit is channeled for productive consumption rather than speculation. The value-driven nature of the Islamic economy requires people to be considerate of others’ needs. This is the golden rule of a good society. The well-being of the society is above that of the individual. Moreover, the Holy Quran prohibits excess; this resonates with the current global emphasis on sustainability.”

“We need to progress from Shariah-compliant products to a Shariah-based system that doesn’t just mimic traditional banking, but rather innovates and creates new products and solutions,” Dr Al Hashel said.

The governor’s speech was followed by a panel discussion moderated by Axel Threlfall, editor-at-large at Thomson Reuters – UK, and including Dr Adnan Chilwan, CEO of Dubai Islamic Bank – UAE; Prof Dr Mohamed Azmi Bin Omar, secretary-general at the Islamic Research and Training Institute – Saudi Arabia; and Hassan Al Damluji, head of Middle East relations at the Bill and Melinda Gates Foundation – UK.– abdulbasit@khaleejtimes.com

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