One of the unique features of IF is the close interaction between social and business matters
By DAUD VICARY ABDULLAH
For those of you who know me well, you already understand that I am always “the glass is half full” kind of person. I always have a sense of optimism about most things, hence my title for this brief piece. I believe that Islamic finance (IF) has some fantastic opportunities ahead, just so long as we remain bold, stay focused and collaborate effectively.
More that 15 years ago, I was asked a question by the media as to what IF is? I responded with “IF is about the effective and efficient mobilisation of capital for the benefit of the real economy”. I still believe that such an answer holds true today. Although I do believe that the definition of the real economy may have changed a little along the way. Let me try to explain.
For me, IF has always been about shared values and social impact. Alignment with, first, the Millennium Development Goals, and now, the 17 Sustainable Development Goals (SDGs) from the United Nations, has always been there and is something that we, as an industry, can clearly demonstrate.
The path of the Maqasid is about our role, as Muslims, as stewards of the planet. I do feel, however, that we have not made enough yet of our clear alignment with these values and demonstrating that they are shared with all humanity.
More awareness must be created and concrete examples of the “Demonstration Effect” must be used. We are starting to see a great deal of effective work taking place in a couple of areas though. Firstly, financial technology (fintech) and secondly, Islamic social finance.
The focus of performance metrics is starting to change significantly. It is no longer about the financials and the amount of money you make. It is becoming much more about how effectively the financials are used to create sustainable impact. The millennial generation and those who follow in Generation X, Y and Z are far more concerned about impact and sustainability than making profits.
Fintech is providing big data and AI (artificial intelligence) which are enabling real time, online tracking of performance of thousands of companies, not just in terms of profitability, but in terms of social impact and alignment with the SDGs.
The Big Four professional services firms are already gearing up for sustainability audits. The public at large are starting
to look for the transparent publication of performance data, from all aspects of the SDGs, for companies that they want to invest in. IF, because of its clear alignment with the objectives of the SDGs, is in a prime position to take advantage of this situation and to demonstrate true leadership.
Where Social, Business Matters Meet
Let me turn now to Islamic social finance. One of the unique features of IF is the close interaction between social and business matters. The giving of zakat and sadaqah and the establishment of awqaf are features of our industry that provide clear opportunity to perform good, but also to do it in an effective and efficient way on a global basis. There are many examples of how this is being done. Some of them include the effective mobilisation of fin- tech and big data analysis on climate change and crop sustainability.
One such example is how zakat contributions from a Malaysian state have been effectively used to provide drought and famine relief in Kenya. The project actually turned a profit as the cash value of the crop grown far exceeded the value of the seeds bought. This has meant that subsistence farmers have some amount of disposable income, which they are using for food, healthcare and education.
In addition, this predominantly non-Muslim area of Kenya has also decided to pay back the zakat amount so that it may be mobilised in a neighbouring Muslim majority county to assist with drought and famine relief. Also, 1.2 million people have been impacted positively in the first county. A further one million are being impacted as a result of the zakat being paid forward in the neighbouring county.
Most of the effective initiatives that I am witnessing are starting at ground level and are from the ground up. These are not top-down approaches. They are about individuals and small groups and teams taking up the challenge despite the bureaucracy that very often surrounds them, in many cases, from the top down. I have a strong feeling that this kind of approach is starting to grab the attention and will inevitably lead to top-down change to reflect and support such initiatives that are already creating an impact.
As ever, there is much to do and not a moment to lose. Just “boldly go” and make a real difference.
Daud Vicary Abdullah, the MD of DVA Consulting Sdn Bhd, is a former Islamic banker and immediate president/CEO of Malaysian-based International Centre for Education in Islamic Finance.