Abstract
The biggest financial crisis since 1929 is forcing the world to look for more sustainable financial models that would combine value-creation, stability and morality. Amid the chaos, two financial sectors are thriving: Ethical banking/Socially Responsible Investment (hereafter ‘SRI’) and Islamic Banking and Finance (hereafter ‘Islamic Banking’). The Islamic Banking sector is growing at about 10–15% per year. In contrast with conventional financial institutions the sector has been, so far, mostly insulated from the global financial turmoil. With approximately 1.5 billion Muslims worldwide, including numerous oil and gas producing nations, growth potential is tremendous.
Keywords
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
Plato, Laws, Book V; Aristotle, Politics, I, 10; Luke 6:35.
- 2.
- 3.
The subtilities involved in expanding upon different conceptions of interest (as a financial concept, i.e. a preditermined cash flow) and usury (as a despised or forbidden social practice of extracting money) according to different strands in religious and wordly ideologies, largely surpasses the scope of this contribution and even the book
- 4.
Reports of the sayings and activities of Muhammad and his companions.
- 5.
English translation from Haleem 2004. ‘It was He who created all that is on the earth for you, then turned to the sky and made the seven heavens; it is He who has knowledge of all things.’ [2:29] [Prophet], when your Lord told the angels, ‘I am putting a khalifa on earth,’ they said, ‘How can you put someone there who will cause damage and bloodshed, when we celebrate Your praise and proclaim Your Holiness?’ but He said,‘I know things you do not.’ [2:30]
The concept of Khalifa defines our position in the cosmos as ‘trustees’ of God. As trustees, we have the responsibility to safeguard nature and resources of the planet, and will be accountable for their abuse both in this world and the Hereafter. The Islamic principle of Akharah (‘the Hereafter’) is the concept that we are all accountable for our actions in the Hereafter where depending on our actions we shall be rewarded or punished. The central concept of Islam is Tawheed, it literally means ‘unity of God’ but also implies the unity and equality of all humanity in the eyes of God.
Islam also imposes on the Muslims the concept of Adl, or to do justice but in the most wide-ranging sense of the word. This means that to justice in every aspect of individual and social life is a primary obligation for all Muslims. Very close to the concept of Adl is Istislah, or public interest which a fundamental source of Islamic law. This Islamic principle makes it a responsibility of individuals, communities and the state to consider the common good and welfare of the society and the planet as a whole. Istislah is a far more extensive concept as compared to SRI. All these are fundamental Islamic Principles.
Let me refer to the following hadith:
-
The world is green and beautiful and God has appointed you his trustee over it. Clearly, this is undeniably a command to act in an ecological and environmentally-friendly manner.
-
God is gentle and loves gentleness in all things. This is in sharp contrast with the calls for blind violence advocated by some self-proclaimed clerics.
-
Pay the worker before his sweat dries. From this hadith, we can certainly deduce a recommendation for labour rights. Most unfortunately, this recommendation is often ignored; for instance, the appalling treatment of migrant workers in the UAE is well documented.
-
He is not a believer who eats his fill while his neighbour remains hungry by his side. A command to fight famine or malnutrition whether amongst Muslims or non-Muslims. More generally, a call to promote social justice.
-
Little but sufficient is better than the abundant and the alluring. This need for sustainability.
-
The special character of Islam is modesty. Clearly a recommendation against living materialistic lives.
-
References
Barkatulla, M. 2009. Ethical fusion. Islamic Banking and Finance 7: 23.
Bloomberg. 2009. Vatican Says Islamic Finance May Help Western Banks In Crisis. Bloomberg News Service 4th March 2009, http://www.bloomberg.com/apps/news?pid=20601092%26sid=aOsOLE8uiNOg%26refer%20=%20italy Accessed April 2010.
Brown, Gordon. 2006. UK’s Brown backs Islamic Finance. BBC News, 13th June 2006.http://news.bbc.co.uk/2/hi/business/5074068.stm Accessed April 2010.
Brugnoni, Alberto. 2009. Smoke signals. Islamic Banking and Finance 14: 22.
Buiter 2009. Maverecon: Willem Buiter. Islamic finance principles to restore policy effectiveness. Financial Times, 22 July 2009.
El-Gamal, Mahmoud. 2009. Crooks in the name of Islam. Available at http://elgamal.blogspot.com/search?q=snake+oil Accessed May 2010.
Eurosif. 2008. European SRI Study. Paris: Eurosif.
FAW 2008. Shariah Scholars in the GCC. 2008. A Network Analytic Perspective. Funds at work. Available at http://www.funds-at-work.com. Accessed May 2010.
FT 2008. Scholars and harmony in short supply. Financial Times, 19 June 2008.
Haleem, Muhammed A. S. A. 2004. The Qur’an: A New Translation. Oxford: Oxford University Press.
La Voix du Luxembourg. 2009 Une attirance réciproque. La Voix du Luxembourg, 6 May 2009.
Le Parisien. 2008. Les Banques Islamiques arrivent en France, Le Parisien, 27 November 2008.
Nienhaus, Volker. 2007. Governance of islamic banks. In Handbook of Islamic Banking, eds. M. Kabir Hassan, and Mervyn K. Lewis. Cheltenham: Edward Elgar Publishing. Available at http://www.google.com/books?hl=en%lr=%id=jvTtDzD5uFQC%oi=fnd%pg=PA128%dq=nienhaus+2007+%E2%80%98is+an+independent+body+of+specialized+jurists+in+fiqh+almua%E2%80%99malat+(Islamic+commercial+jurisprudence)%E2%80%99,%ots=72kNbiTZpy%sig=98bW6hRvPf7OwBgcB3d9MmCE0AM#v=onepage%q%f=false Accessed 25 May 2010.
Novethic. 2009. Finance Islamique et ISR. 2009. Convergence Possible. Novethic working paper. Available at http://ribh.files.wordpress.com/2009/06/novethic-finance-islamique-et-isr.pdf Accessed May 2010.
Oummatv. 2008. La finance islamique à la française: un moteur pour l’économie, une alternative éthique SECURE Finance. http://oummatv.tv/La-finance-islamique-un-moteur Accessed April 2010.
OWW. 2006. Islam and CSR: The compatibility between the tenets of Islam and the UN Global Compact, Research Report December 2006, OWW Consulting. Available at http://www.oww-consulting.com/downloads/research/islam-and-csr/download.html Accessed May 2010.
Reuters. 2008. Holy man joins jet set as Islamic finance booms. 5 February 2008. Available at http://www.reuters.com/article/IslamicBankingandFinance08/idUSL059423620080205 Accessed April 2010.
Stanley, Mark and Salmaan Jaffery. 2009. Can Islamic asset management aim a little higher? Achieving maturity and the impact of socially responsible investment. In Islamic Wealth Management: A Catalyst for Global Change and Innovation, London: Euromoney Books, ed. Jaffer, S., 247-260.
Sultan, S.A.M. 2007. Sharia’ah Audit for Islamic Financial Institutions - A Primer. Kuala Lumpur: CERT publications.
Synovitz, Ron. 2009. Islamic Banks Unhurt By Toxic Assets, But Could Suffer As Crisis Evolves, Radio Free Europe, 3 March 2009. Available at http://www.rferl.org/content/Islamic_Banks_Unhurt_By_Toxic_Assets_But_Could_Suffer_As_Crisis_Evolves/1503409.html Accessed May 2010
Tripp, Charles. 2010. Islam and the Moral Economy. Cambridge: Cambridge University Press.
Vogel, Frank E., and S.L. Hayes III. 1998. Islamic Law and Finance: Religion, Risk and Return. Boston, MA: Kluwer Law International.
Williams, Geoffrey and John Zinkin. 2010. Islam and CSR: A Study of the compatibility between the tenets of Islam and the UN Global Compact. Journal of Business Ethics 91(4): 519-533.
Zahari, Zaha Rina and Bala Shanmugam. 2009. Socially responsible investing. In Islamic Wealth Management: A Catalyst for Global Change and Innovation, ed. Sohail Jaffer. Euromoney Books, 234-246.
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2012 Springer Science+Business Media B.V.
About this chapter
Cite this chapter
Jaufeerally, R.Z. (2012). Islamic Banking and Responsible Investment: Is a Fusion Possible?. In: Vandekerckhove, W., Leys, J., Alm, K., Scholtens, B., Signori, S., Schäfer, H. (eds) Responsible Investment in Times of Turmoil. Issues in Business Ethics, vol 31. Springer, Dordrecht. https://doi.org/10.1007/978-90-481-9319-6_9
Download citation
DOI: https://doi.org/10.1007/978-90-481-9319-6_9
Publisher Name: Springer, Dordrecht
Print ISBN: 978-94-007-4070-9
Online ISBN: 978-90-481-9319-6
eBook Packages: Business and EconomicsEconomics and Finance (R0)