Islamic finance now able to lead head on, according to Sultan Nazrin


KUALA LUMPUR (September 23): The Islamic finance industry’s response to the Covid-19 pandemic has shown it can lead head on, instead of just following consensus, Sultan of Perak Sultan Nazrin said Muizzuddin Shah.

The Sultan, who is also the royal patron of Malaysia’s Islamic Finance Initiative, said the great potential of Islamic finance to lead a fair global economic recovery is demonstrated by the actions of the Islamic Development Bank ( BID) during the pandemic.

“Of all the Multilateral Development Banks (MDBs), the IDB has perhaps had the greatest positive impact during the pandemic with a few of its initiatives. After the World Bank, the IDB holds the second largest subscribed capital of all MDBs with US $ 70 billion (US $ 1 = RM 4.19).

“What we must seriously consider [now] is how to instill Maqasid values ​​into the very architecture of operational Islamic financial services, ”he said in his special opening speech at the 12th SC-OCIS Virtual Roundtable today.

He believes that the Maqasid philosophy had not yet been fully embraced in all industry operations in order to bridge the age-old divide between “God and Mammon”.

“We now need to be even more proactive in developing a common set of social goals for the sector based not only on global best practices but also on Maqasid.

“This will allow us to produce the real social impact that we so badly need,” he said.

The Sultan said the urgency of the challenges facing humanity cannot be overstated as the Islamic system of economic and financial intermediation, based on the principles of Maqasid al-Shariah, becomes more relevant than ever.

“I sincerely hope that the industry will rise to this vital challenge and establish a strong and practical agenda for transformative change based on Maqasid,” he said.

Sultan Nazrin said that the current era is characterized by populist and increasingly polarized politics, growing inequalities, racial and gender-based discrimination and violence, and intergenerational tensions over climate change.

“There are many flashpoints of potential conflict, all of which have been exacerbated by the pandemic. What they reflect is an underlying fraying of existing social contracts, which may no longer be fit for purpose.

“There is a growing feeling that our systems are too heavily biased against the interests of the majority. Too many people feel like they are only scratching the harsh new climate, or worse, being left behind. The existing resentments and divisions are deepening, ”he said.

Fortunately, in the area of ​​Islamic finance, the Maqasid philosophy provides the ideal model for dealing with these troubling dynamics, said Sultan Nazrin.

“This gives us a basis to forge a transformative change agenda that aims to heal those divisions and bridge those divisions. It is now up to us to deliberate, consult and formalize this common agenda, ”he declared.

Sultan Nazrin said this program must combine the rule of law, shared values, risks and rewards, and equal opportunity in order to harness the resources and talents of each in the pursuit of the greater good. .

“This program should introduce ‘Maqasid social goals’ as the standard towards which all of our financial institutions should strive.

“These goals, developed in consultation with regulators and industry bodies, should be incorporated into the constitutions of all companies and institutions involved in the Islamic finance space,” he said.

According to Sultan Nazrin, social goals should include, inter alia, adopting an ‘impact investing’ approach by ensuring that all transactions and products contribute to the broader social agenda, and strengthening good governance and oversight mechanisms to minimize damaging corruption and cronyism. .

The goals should also aim to tackle inequalities by improving the access of minority groups and women to education, employment and services of all kinds, as well as ensuring decent wages and working conditions. .

It must also harness fintech and digitization, so that all operations are implemented as efficiently as possible, thereby maximizing positive social impact and promoting new connections between finance and philanthropy, for example, through public-private partnerships (PPP).

“P3s are a key area where financial and philanthropic goals can coincide for the greater good. They play a particular role in financing infrastructure investments.

“After being almost at a standstill during the pandemic, infrastructure development now has the potential to serve as an important driving force in post-pandemic economic recovery. One estimate places the current pipeline of global infrastructure projects at $ 12 trillion, with rail and renewables being the main sectors, ”he added.

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