‫التمويل االجتماعي اإلسالمي‪:‬‬

‫الواقع وآفاق املستقبل‬

‫‪Harmonization between the Goals‬‬

‫‪of Islamic Social Finance and‬‬
‫‪Sustainable Development Goals‬‬
‫)‪(SDG‬‬

‫‪Asst. Prof. Dr. Ziyaad Mahomed‬‬

‫الراعي الرسمي‬ ‫اجلهة املنظمة‬ ‫الشريك املصرفي الرسمي‬

‫الراعي الشريك‬ ‫الشريك اإلعالمي‬ ‫اجلهة الداعمة‬ ‫الشريك املعرفة‬

 Harmonization between the goals of Islamic social finance and Sustainable Development
Goals (SDG)

Islamic Social Finance

Overview

Islamic social finance (ISF) is aimed at solving the problems of those who are less or under-
privileged in the society by focusing on how the weak can be strengthened. The essence and core
principle of ISF is towards a more equitable socio-economic development. ISF’s is to ensure there
is a rapid reduction in poverty level of the population as the world grows bigger every
day. Similarly, ISF is there to promote inclusive growth and reduced inequality in society.

Being a branch of Islamic finance, which has its underpinning basis rooted in the Shari’ah, the
aims and objectives of ISF is not far from that of the Shari’ah. The Shari’ah, in summary,
emphasises everything that can develop human life and sustain their existence on earth. By
implication, ISF is aiming to achieve the objectives of Shari’ah (Maqasid).

Refraining from the riba is one of the concerns of Islamic finance, however, Islamic finance as a
whole is a system that aims to contribute positively to the fulfilment of the socio-economic
objectives of the society. In addition, Islamic finance guided by Maqasid Shariah; a system of
ethics and values covering all aspects of life like personal, social, economic and intellectual.

Means

Islamic Social Finance boasts of a various array of poverty alleviating and social development
instruments like Zakat, Waqf, Sadaqah, Qard Hassan, along with various modern forms of
Tabarru’aat (i.e. Islamic crowdfunding), and many others. These instruments, undoubtedly, have
not fully been maximized and harnessed to fulfil their potentials.

Shari’ah Basis

• (As-Sadaqat (here it means Zakat) are only for the Fuqara (poor), and Al-Masakin (the
poor) and those employed to collect (the fund), and for to attract the hearts of those who
have been inclined (towards Islam); and to free the captives; and for those in debt; and for
 Allah’s Cause (has been historically understood as funding the physical defense of
community), and for the wayfarer (a traveller who is cut off from everything), a duty
imposed by Allah. And Allah is All-Knower, All-wise) (Qur’an 9:60).
o In the above verse, Allah SWT has made it an obligation upon Muslims to make
charitable donations to the poor, thus eliminating the poverty.
• The example of those who spend their wealth in the way of Allah is like a seed (of grain)
which grows seven spikes; in each spike is a hundred grains. And Allah multiplies (His
reward) for whom He wills. And Allah is all-Encompassing and Knowing (Qur’an 2:261).
o This verse encourages us to donate for the sake of Akhirah.
• The Messenger of Allah said, “When a man dies, his deeds come to an end except for three
things: Sadaqah Jariyah (ceaseless charity); a knowledge which is beneficial, or a virtuous
descendant who prays for him (for the deceased).” (Muslim, Book 13, Hadith 8)
o The above hadith emphasises the everlasting impact of donations, in the life
hereafter.

SDG

Overview

The Sustainable Development Goals (SDG), as agreed globally, is a call to action by nations of
the world to put an end to poverty, to protect the planet (from climate change) and to ensure that
all people enjoy peace and prosperity. Further goals include tackling economic inequality,
achieving innovation, ensuring sustainable consumption, among other priorities.

In 2015 United Nations has launched Sustainable Development Goals (SDGs) which substitutes
the Millennium Development Goals (MDGs). It has 17 themes which are intended for the well-
being of human being. The goals of the SDGs, as highlighted by the United Nations (UN), are
adopted to ensure that the none and nothing is left behind. It is a holistic approach based on the
principle of “leaving no one behind”. The goals are as follow:

• GOAL 1: No Poverty
• GOAL 2: Zero Hunger
• GOAL 3: Good Health and Well-being
• GOAL 4: Quality Education
 • GOAL 5: Gender Equality
• GOAL 6: Clean Water and Sanitation
• GOAL 7: Affordable and Clean Energy
• GOAL 8: Decent Work and Economic Growth
• GOAL 9: Industry, Innovation and Infrastructure
• GOAL 10: Reduced Inequality
• GOAL 11: Sustainable Cities and Communities
• GOAL 12: Responsible Consumption and Production
• GOAL 13: Climate Action
• GOAL 14: Life Below Water
• GOAL 15: Life on Land
• GOAL 16: Peace and Justice Strong Institutions
• GOAL 17: Partnerships to achieve the Goal

As mentioned above, The United Nations (UN) SDGs are generally consistent with the objectives
of the Shari’ah (Maqasid al-Shari’ah). However, the means and their consequences need to be
considered that they do not violate Shari’ah objectives.

Means

CSR

Corporate Social Responsibility is a mean to achieve the SDG goals by the conventional financial
intermediaries. From the context of Islamic Finance, the CSR also in inline with the goals of
Islamic Social Finance. The below clause from AAOIFI Governance Standards explains that:

“For Islamic financial institutions (IFIs) CSR refers to all activities carried out by
an IFI to fulfil its religious, economic, legal, ethical and discretionary responsibilities as
financial intermediaries for individuals and institutions; Religious responsibility which
means the obligation of IFIs to obey the laws of Islam in all its operations and dealings.
Economic responsibility that means the obligation for Islamic Banks to be financially
viable, profitable and efficient. Legal responsibility refers to the obligation of IFIs to
respect and obey the laws and regulation of the country of operation. Ethical responsibility
which is the obligation of IFIs to respect the mass of societal, religious and customary
 norms which are not codified in law. Discretionary responsibility that refers to the
expectation from stakeholders that IFIs will perform a social role in implementing Islamic
ideals over and above the religious, economic legal and ethical responsibilities” (AAOIFI,
2017).

ESG

Environmental, social and governance (ESG) concern underlie the value proposition of the
Sustainable and Responsible Investment (SRI) industry. The SRI industry seeks to address global
challenges relating to the environment, society and corporate governance by explicitly integrating
ESG issues in the selections and management of investment portfolios. ESG is an approach to
achieve the SDG goals by UN.

Shari’ah Basis

There are numerous texts from both primary sources (Quran and Sunnah) that support the initiative
of the SDGs. Some are generic, and by inference are applicable to many of the goals while some
are specific and particular on some of the goals. The Quran, for example, praises those who feed
the poor and other alike. It is an act that raises someone to the level of righteousness.

(And they give food in spite of love for it to the needy, the orphan, and the captive”) (Quran
76:8).

Similarly, the Shari’ah frowns at distorting or destroying the system of nature as set by Allah, the
Almighty.

(…And do not desire corruption in the land. Indeed, God does not like corrupters.) (Qur’an
28:77)

(…And do not commit abuse on the earth, spreading corruption.) (Qur’an, 2:60)

Corruption on the land is not limited to committing vices, it also applies anything that can disrupt
the system of justice and goodness which the creation of heavens and the earth are based upon.

Furthermore, the Shari’ah enjoins people of like minds to cooperate on doing good and achieving
beneficial goals and not to cooperate on anything that causes evil.
Harmonization between the goals of Islamic social finance and Sustainable Development
Goals (SDG)

From above, it can be opined that the goals of both ISF and SDG are similar in their goals and
objectives. Both are aimed at helping the weak to become stronger in the society. In fact, many
researchers found that Islamic social finance has a big role in achieving the SDGs, it can be clearly
explained in the table below:

Islamic Social Potential of financing sustainable programs and investment SDG’s

Finance Addressed

Zakat - Consumptive program of zakat to provide basic 1, 2, 3, 4, 5, 6, 8,

needs (food, clothing, housing, education, healthcare, etc). 10, 12, 16, 17
- Productive program of zakat to provide Qardh
micro-financing to develop ME.
- Support social inclusion of the poor, empowering
women and promoting peaceful and inclusive society.

Infaq, • Support consumptive and productive program of 3, 4, 5, 6, 7, 8, 9,

Shadaqah, Zakat 10, 17
Hibah • Build resilient social infrastructure

Waqf – Social - Build resilient infrastructure, school, hospital, 3, 4, 5, 6, 7, 8, 9,

Islamic centre, city park, cemetery, etc. 10, 11, 17

Waqf- - Invest in business related to renewable energy, 3, 4, 5, 7, 8, 9, 12,

Productive sustainable fisheries, forestry, agriculture, health and 13, 14, 15, 16, 17
education, as well as invest in resilient infrastructure.
- Promote investment in climate change solutions.
Source: Ascarya, Promoting Islamic Microfinance for SDGs in Indonesia, The 1st ICIEBF,
Jakarta, Indonesia.

VBI

The VBI initiative in Malaysia is an approach to harmonise between the goals of ISF & SDG. The
initiative aims to bring value to the role of intermediation of Islamic Financial Institutions.

VBI aims to deliver the intended outcomes of Shariah through practices, conduct and offerings
that generate positive and sustainable impact to the economy, community and environment,
consistent with the shareholders’ sustainable returns and long-term interests.

VBI promotes a more holistic observation of Shariah, beyond Shariah compliance, i.e. ensuring
Islamic banking offerings and practices not only comply with Shariah requirements but also
achieve the intended outcomes of Shariah.

Initiatives by INCEIF

INCEIF, as an academic and research institution, has undertaken several initiatives to create better
harmonization between the goals of Islamic social finance and Sustainable Development Goals
(SDG). The institution has collaborated with RedCross to develop Islamic Social Finance
instruments. It has also contributed to Waqf roundtable arranged by the Central Bank of Malaysia.
INCEIF is also leading a project to develop Zakat Blockchain.