Reforming Islamic Finance for Achieving Sustainable Development Goals

19 Pages Posted: 9 Oct 2019

Date Written: 2019

Abstract

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 (Maqasid) of Sharia. However, the real world free-market economies are driven by the linear economy paradigm under the influence of Hotelling’s 1931 famous work concerning the economics of exploiting natural resources, in which, the ecological environment is not recognized as a resource. The global financial architecture is designed to protect and preserve the linear economic paradigm. In practice, Islamic finance has also remained a halal sub-set of this system. The resultant social, environmental and governance imbalances have recently led to the initiatives sponsored by the UN including sustainable development goals (SDGs). Like the Maqasid, the SDGs also aim at achieving and preserving human development. In practice, for the first time, a real paradigm shift from the linear to the ecological/circular economy is noticeably taking place, also inducing the transformation of the financial architecture. In this paper, in a broader perspective, we use the CHD and SDGs interchangeably, and discuss a number of paradigmatic and regulatory reforms that will be required to enhance the actual effectiveness of Islamic finance in achieving the ideals of CHD, and the SDGs at large. The paper in fact outlines a wider scope of the potential reform initiatives.

Keywords: Maqasid Al Sharia, SDGs and Islamic Finance, SDGs and Design of Financial Contracts, Reforming Islamic Finance, Regulating Islamic Finance, Circular Economy and Islamic Finance, Reforming Sharia Governance, Reporting SDGs, ESGs and Islamic Finance

Suggested Citation

Khan, Tariqullah, Reforming Islamic Finance for Achieving Sustainable Development Goals (2019). Journal of King Abdulaziz University: Islamic Economics, Vol. 32, No. 1, 2019, Available at SSRN: https://ssrn.com/abstract=3465564

Tariqullah Khan (Contact Author)

Hamad Bin Khalifa University ( email )

P.O. Box: 5825
Education City
Doha
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