A Socially Responsible Islamic Finance pdf

A SOCIALLY RESPONSIBLE ISLAMIC FINANCE – Sample Book

Congruence and Convergence: Contemporary Islamic Finance and Social Responsibility

Introduction

Across the world, there is widespread belief that businesses, organizations, and individuals must conduct themselves responsibly and sustainably. This belief has fueled growth in Islamic finance and socially responsible business markets, making them the two most rapidly growing areas of finance over the last two decades, expanding at rates far exceeding that of financial markets as a whole.1 Insurmountable differences between Islamic finance and contemporary responsibility efforts, a term we use broadly,2 might seem to begin with the religious basis of the former.

But some, in fact, place the origins of the latter in religion, noting, however, their gradual separation.3 In limiting profit motives, their notions of what is ethical and how to implement values do differ in some ways but share much. Although they should be engaged with one another, active overlap has begun only very recently.

This chapter identifies points of divergence as well as convergence among Islamic spiritual and ethical precepts, con-temporary Islamic economic markets, and contemporary initiatives linking business with sustainability, responsibility, and impact. Later chapters expand upon this, detailing how classical Islamic spiritual and ethical-legal thought foreshadows certain aspects of contemporary socially responsible business and, in numerous respects, calls for it outright.

Islam, as a matter of its ethics and laws (fiqh) as derived from the Shari’ah, teaches its adherents to act upon matters of environmental and social responsibility, often in detail, and to engender well-being broadly.

Accordingly, Islamic finance was envisioned “to be civilizationally oriented and concerned with social justice and human well-being, where critical subjects such as poverty, underdevelopment, illiteracy, inequali-ties, and the level of health and education of the newly independent Muslim world were prominently addressed.”4

Based on the core values it shares with others—such as individual responsibility, commitment to social welfare, care for the environment, and concern for economic and social justice—“Islamic finance has been promoted as a socially respon-sible paradigm rooted on religious tenets.”5 Issues such as moral excel-lence, the fulfillment of basic needs, equitable distribution of wealth and opportunity, sustainability and stability, and social cohesion are objectives, and should be consequences, of Islamic economics.6 Echoing this, a majority of today’s Islamic investors consider such responsibilities “to be equally or more important than the economic dimension.”7

Responsible business initiatives may learn from the approach taken by Muslim jurists to stakeholder rights, sustainability and intergenerational ethics, and risk sharing and debt. Responsible markets offer, in turn, methods and frameworks “towards incorporating broader principles of Islamic ethics in the investment process.”8 This is important for Islamic finance not merely to win over customers, but to seize upon the oppor-tunity it holds to demonstrate the continued relevance of its underlying principles, particularly, and of Islam, generally.

IslamIc Finance Introducing Islamic Legal-Ethics

Islamic commercial principles are derived from the Shari’ah, the same source from which theological beliefs are derived. Islamic jurisprudence and law are divided into those matters relating to (1) the worship of God

(ʿibadāt); and (2) interactions between and among humans, and the balance of creation (muʿamalāt).9 This categorization mirrors the dual nature of humans mentioned previously. The former, worship, is an inte-gral part of the law, serving as a foundational support for the latter. In other words, spirituality and worship prepare and cause willing obedience to the latter realm of ethics and law which governs property and business. Generally, different rules govern the derivation and application of law in the spiritual and the material.10 Rules of the former cannot be rationalized

in the same manner as can those of the latter. In contrast to the spiritual, rules governing the material are mutable and dynamic to reflect the “existential and material realities” as they impact realization of the Lawgiver’s wisdoms and objectives.11

Theories of Islamic jurisprudence and law are not monolithic; interpretations of the Shari’ah vary.12 Sunni Muslim jurists eventually organized into four schools of jurisprudence (madhhab), known commonly after their eponyms as the Hanafi, Maliki, Shafi’i, and Hanbali schools.13 Recognizing the probabilistic nature of their interpretations and their fallibility, jurists contend with, and respect, competing opinions.14

One would be remiss if in attempting to understand Islamic law one applied “conceptual categories, distinctions, and binarisms that originated in modern Europe”15 for the “very term law is ideologically charged with Foucauldian notions of surveillance, inconspicuous punishment, hegemony and subordination of the docile subject, all of which mechanisms of control (at the very least) make our modern notion of law, and therefore of morality, quite different from any earlier legal system.”16

The Shari’ah is designed to secure benefit and prevent harm in this world and in the hereafter. “‘Benefit’ and ‘harm’, as defined in the context of objectives of Islamic law, have their own distinguishing features. “The essence of benefit, then, is pleasure and enjoyment, be it physical, emotional, mental or spiritual, while the essence of harm is pain or suffering, be it physical, emotional, mental or spiritual.”17

But the benefit spoken of here is not, for example, “simply the gratification of impelling desires or short-lived caprices.”18 If an act has more beneficial than harmful effects, then for the sake of attaining such benefit, Islamic law deems the action praiseworthy.

“[C]onversely, an action which has more harmful effects than beneficial ones, it is this harm which is taken into consideration by the Law, and it is for the sake of its elimination that the Law prohibits the action concerned.”19 In order for any rule of Islamic law to be valid and applicable, it must not violate the intent and purpose of the Shari’ah,20 known as maqasid al-Shariah and sometimes referred to as “public inter-ests” or “common good” (maslahah).

Such objectives, according to Ibn Ashur (d. 1973 CE/1393 AH), may be understood as “the deeper mean-ings and inner aspects of wisdom considered by the Lawgiver in all or most of the areas and the circumstances of legislation.”21

To understand Islamic law, one must appreciate its “moral message and structure.”22 The legal is a derivative of the moral, “the latter being the archetype.”23 Classical Muslim jurists, such as al-Shāṭibı̄ (d. 1388 CE/790 AH), set forth the Divine objectives in three tiers.24 First, the essentials