Lessons learned from Islam could make global financing fairer and more accessible to all, says Islamic Relief in a publication released this week.

Islamic Relief has launched its latest publication, which calls for transformative changes to existing financial systems, and highlights the need to address inequality across the world.

financepaperjpegLessons from Islamic finance for socially, economically, and environmentally just outcomes in the Financing for Sustainable Development process also looks at the role Islamic finance could play in these changes.

Global financial systems need to be reformed, and Islamic Relief believes there is a lot that can be learned from Islamic finance. Islam, for example, insists on the need to redress injustice, such as the unequal distribution of wealth, oppression or unfair business transactions that contribute to inequality both within and between nations. We therefore call for a more ethical global system.

We believe that if the Sustainable Development Goals (SDGs) are to be effective, they must be inclusive of the needs of all. Islamic finance, for example, reflects Islamic prohibition of riba – the equivalent of interest. Not only did interest cause the international debt crisis of the 1970s, when developing nations borrowed heavily from Western economies but could not meet with the schedule of interest, but current financial mechanisms effectively deny a significant proportion of the world’s population access to formal financing.

The paper also highlights the responsibilities of Muslims, including zakat – a form of mandatory giving of wealth – and waqf – Islamic endowments – that constitute a significant resource that could be harnessed and used to end extreme poverty. Other tools of Islamic finance include takaful, a form of insurance that avoids interest and excessive risk, and sukuk, which are similar to traditional bonds but avoid interest by giving an investor a share of the asset rather than ownership of the debt owed. Both have positive implications for poverty relief. A socially responsible sukuk, for example, raised USD $500 million for children’s immunisation in countries including Indonesia and Afghanistan.

Islamic Relief recommends inclusive policy-making in the future, along with greater support for economic justice and renewed emphasis on the commitments already made globally. We call for financial reforms so the SDGs can be implemented justly.

Our work to harness the potential of Islamic finance to lift poor people out of poverty is already reflected in our microfinance initiative, which has had more than 50,000 clients since it was set up in 1994 and is currently run in 11 countries, including in Pakistan and Mali.