The SDGs and Islamic finance: 5 publications to read

By Mohammad Hashimi

The sustainable development goals (SDGs) represent the global development agenda and need mobilization of capital from a variety of sources including Islamic finance. Here are five publications in on Islamic finance and SDG that those interested in the topic should read.

1. Innovation in Islamic Finance: Green Sukuk for SDGs

Innovation in Islamic Finance: Green Sukuk for SDGs, The Islamic Finance Council UK, 40 pages, 2021

The report, commissioned by UNDP Indonesia, explores the role of green sukuk in the context of climate change and the green economy. Indonesia has issued the world’s first sovereign green sukuk in 2018 and the world’s first retail green sukuk in 2019. The report highlights the opportunity for Islamic finance industry to play a major role in achieving the UN SDG. The report suggests green sukuk could bridge the gap of funding towards sustainability and provides several recommendations for the development of the green sukuk market.

It finds that “green sukuk are a relatively new development with limited issuances but have a clear alignment with the value system of Islamic law. As Islamic finance evolves, innovative products such as green sukuk represent the potential for a new class of products that consider more than legal permissibility, moving towards a positive impact in line with SDGs.”

2. How Islamic Finance Contributes to Achieving the Sustainable Development Goals

How Islamic Finance Contributes to Achieving the Sustainable Development Goals, OECD Development Co-operation Directorate, 44 pages, 2020

In this report, the authors argue that in Muslim-majority contexts, Islamic finance could be socially, culturally and ethically more acceptable than conventional finance and better suit development. The report discusses Islamic social finance instruments and opportunities that can be used for achieving UN SDGs.

The report “identifies the opportunities that Islamic finance presents for donors, as they look to deliver the Sustainable Development Goals (SDGs). To achieve the SDGs by 2030, Arab and OECD DAC donors need to mobilize innovative forms of financing and deliver the UN Secretary-General’s call to deepen the transformation of development finance systems.”

3. Reforming Islamic Finance for Achieving Sustainable Development Goals

Reforming Islamic Finance for Achieving Sustainable Development Goals, Tariqullah Khan, 19 pages, 2019

The author explains the possibilities of Islamic finance contributing towards SDGs in the light of objectives of Shariah. The paper examines that a change in the perspective current system will be helpful in achieving SDGs.

The paper suggests that Maqasid should be given more importance, and argues that “The paradigm of Islamic economics and finance is guided by the motivation of comprehensive human development (CHD) and its preservation as manifested in the objectives of Sharī?ah (maqā?id al-Sharī?ah)”

4. Role of Islamic Finance in Sustainable Development Goals

Role of Islamic Finance in Sustainable Development Goals, Abdul Ghafar Ismail, Salman Ahmed Shaikh, 16 pages, 2017

The paper explains the potential of achieving UN SDGs in light of the philosophical foundations of Islamic finance. The authors focus on environmental and climate changes caused by human beings. The paper suggests Islamic social finance instruments like zakat (obligatory alms) and waqf (charitable endowment) can contribute towards scaling up efforts in commercially non-viable but socially vital projects and programs.

They find that “there is much potential for Islamic finance to promote sustainable economic development through such approaches as widening access to finance, financing infrastructure projects, and expanding the reach of Takaful. Real sector based productive enterprise in Islamic finance has positive implications for the ecosystem.”

5. Sustainable Development Goals and Role of Islamic Finance

Sustainable Development Goals and Role of Islamic Finance, Habib Ahmed, Mahmoud Mohieldin, Jos Verbeek, Farida Aboulmagd, 47 page, 2015

According to the authors, basic principles of Islamic finance stabilize the economic system and give importance to social responsibility. The working paper explains how social financing tools like Zakath and Waqf help to achieve SDGs by enhancing stability and resilience to the financial sector, financial inclusion, reducing vulnerability of the poor, contributing to environmental and social issues, and infrastructure development.

They argue that “practical measures are required to enhance the contribution of the Islamic financial sector to achieve the SDGs. We have identified five tracks through which Islamic Finance could support efforts to achieve the SDGs: financial stability, financial inclusion, reducing vulnerability, social and environmental activities, and infrastructure finance.” 

Concluding thoughts

Together, these reports and papers display the harmony between Islamic economic thought, Islamic finance, and the SDGs. However, they also show that the majority of the work to practically utilize Islamic finance for achieving the SDGs remains to be done.