A Socially Responsible Islamic Finance: Character and the Common Good (Palgrave Studies in Islamic Banking, Finance, and Economics)

This book explores how, through spirituality and the development of character, Islamic financial institutions and Muslim communities can integrate their businesses with contemporary social responsibility initiatives to produce positive social and environmental impact. From the looming environmental crisis to the divide between mainstream and extremist interpretations of Islam, the book addresses significant questions facing Muslim communities – and humanity – and demonstrates why Islam should sit ‘at the table’ with other faiths and ethical traditions discussing humanity’s great obstacles. Unlike existing literature, this work explores the intersections between classical Islamic ethics and spirituality, contemporary Islamic finance and economic markets, and select sustainability and impact initiatives (such as the Equator Principles and UN Principles of Responsible Investment) designed to make the worlds of business and finance responsible for the environments in which they operate and the communities that support them. Drawing on his years of experience in Islamic banking, Moghul addresses these applications in light of real-world practices and dilemmas, demonstrating how Islamic organizations and Muslim communities should embrace the broad range of stakeholders countenanced by the Shari’ah in conversations that affect them. By situating his exploration of Islamic finance in the light of the much larger critical issues of balance, justice, and moderation in Islamic praxis, Moghul creates an interdisciplinary book that will appeal to academics and researchers in economics, finance, business, government and policy, and law. Dedication 6 Acknowledgments 7 Contents 8 Introduction 9 Note 11 Chapter 1: Islamic Spirituality: An Impetus to Responsibility and Impact 12 The Shari’ah 13 The Spiritual Environment 15 Purpose 17 The Heart 17 A Cycle of Tazkiyyah 20 Sustenance and Work 27 Renunciation (Zuhd) 29 Excellence (Ihsan) 31 Renunciation and Excellence in Business 32 Analysis and Recommendations 34 Transforming Business Spiritually 34 The Purpose of Business 36 Notes 38 Chapter 2: Congruence and Convergence: Contemporary Islamic Finance and Social Responsibility 49 Introduction 49 Islamic Finance 50 Introducing Islamic Legal-Ethics 50 Legal Values 53 Some Principles of Commerce 54 Stakeholders 56 Who Are They? 57 What Are They Owed? 58 What Do They Want? 61 Sustainability and Islamic Ethics 63 Convergence 66 Bringing Responsibility to Islamic Finance 67 Providing Determinacy to Responsibility 72 The Irresponsibility of Debt 74 Analysis and Recommendations 76 Notes 79 Chapter 3: Sketching Consciousness: Natural and Built Environments 92 Islam and the Natural Environment 94 Spiritual Foundations 94 Islamic Environmental Law 97 Land Pollution 97 Water Pollution 98 Air Pollution 98 Resource Conservation 99 Minerals 99 Plants and Animals 100 Liability and Sanction 103 Coloring Finance Green 104 Contemporary Practice: Sukuk 105 Soft Law 107 Classifying Soft Laws 108 Sketching a Framework 112 Finding Congruence 115 Responsible Built Environments 115 Islam and Built Environments 117 Islamic Built Environment Law 119 Cities 122 Homes 124 The Shari’ah as Soft Law? 126 Natural Environment Standards 127 Built Environments Standards 128 Fatwa Criteria 130 One Report 132 Analysis and Recommendations 136 Notes 137 Chapter 4: Fatwas as Feedback Loops: Authenticity, Education, and Dialogue 164 Fatwas 165 Then and Now 165 Contemporary Islamic Finance Fatwas 172 The DJIMI Fatwa 175 Islamic Finance: Contemporary Practice as a System 178 Systems Thinking: A Brief Precis 178 Sukuk and the Critique of Authenticity 180 The Authenticity Loop 183 Consultation 187 Analysis and Recommendations 193 Evolving Fatwas 193 Consultative Fatwas 196 Mitigating Risk 200 Fatwas and Feedback Loops 202 Notes 204 Chapter 5: Designing Mindful Contracts 217 Vigilance 220 Transparency 222 Islamic Finance Contracts 226 Legal Overview 226 Descriptions and Prescriptions 230 Smoothing Returns 232 Tawarruq 233 Bifurcated Structure 234 Home Finance and Governing Law 236 Four Corners 239 Reintroducing Spirituality to Contract Governance 240 Gatherings 241 Mindful Contracts 242 Ownership 245 Designing Forbearance 247 Stakeholder Responsibilities 251 Improving Governance 252 Notes 253 Chapter 6: Structuring Philanthropic Partnerships, Mission Lock, and Impact Investments 266 Responsible Capital and Business 268 Mission Risk 268 Exiting Responsibly 271 Catalytic Capital 272 Measurement 273 Two Examples 273 A History of Giving 275 Institutionalizing Giving 277 Analysis and Recommendations 280 A Paradigm Shift 280 Lessons from an Ice Cream Maker 282 Beyond Islamic Finance 286 Notes 290 Chapter 7: Returning 302 Notes 303 Select Bibliography 304 Index 311 Front Matter....Pages i-xiii Islamic Spirituality: An Impetus to Responsibility and Impact....Pages 1-37 Congruence and Convergence: Contemporary Islamic Finance and Social Responsibility....Pages 39-81 Sketching Consciousness: Natural and Built Environments....Pages 83-154 Fatwas as Feedback Loops: Authenticity, Education, and Dialogue....Pages 155-207 Designing Mindful Contracts....Pages 209-257 Structuring Philanthropic Partnerships, Mission Lock, and Impact Investments....Pages 259-294 Returning....Pages 295-296 Back Matter....Pages 297-315