Mainstream Islamic finance is no longer an infant discipline. Overall, the global Islamic financial services industry now has total assets of around $2 trillion with nearly 80%, entrusted either to Islamic banks or to the Islamic units of conventional banks. The rest takes the form of sukuk (15%); Islamic investment funds (4%) and takaful (1%).[1] Together, these sectors have been growing at an annual rate of over 15%. Analysts expect this growth to continue well into the future. Such frenetic pace of the industry has also resulted in Islamic finance maturing as a discipline, which naturally attracts a growing number of students and researchers. There is a steady growth in number of teaching and research programs across the globe in the fields of Islamic commercial banking, Islamic funds, sukuk & Islamic capital markets and takaful. However, Islamic finance is not all about making and taking profits, as it is often made out to be. As we wrote in the opening pages of Islamic Social Finance Report (ISFR) 2014:

While philanthropy-based and not-for-profit modes attracted the attention of early researchers of Islamic economics and finance, they apparently failed to catch the fancy of the professionals and practitioners. As a result, after growing at a frenetic pace for over four decades, mainstream Islamic finance is now understood to comprise banking, insurance and financial market participation. These are for-profit segments of the Islamic economy. The impressive growth has also been matched by a large-scale increase in research and documentation pertaining to these segments. At the same time there appears to be a gross imbalance in resources committed to research and documentation of the Islamic social, philanthropy-based and not-for-profit sector.

The Jeddah-based Islamic Research and Training Institute of the Islamic Development Bank Group was among the first to note this imbalance with concern and rightly identified ISFR 2014 as its flagship multi-year project. As the project leader of ISFR 2014, we had to often strive to define this “new animal”. Why should we call this Islamic social finance? Should we not include “for-profit” microfinance in the scope of its definition? Why should we not address the sectors individually as zakat, awqaf and what-have-you. However, the initial resistance gave in, once the ISFR 2014 was launched by IRTI in association with Thomson Reuters in February 2014. Soon our concern reverberated in other forums, seminars and conferences.

Launch of ISFR 2014 at International Conference on Awqaf held at Bangalore, India

Download the Islamic Social Finance Report 2014 here.

In a meeting of the Governors of Central Banks and Monetary Authorities of the OIC Member States, in Surabaya, Indonesia on 6 November 2014, H.E. Mr. Iyad Ameen Madani, the OIC Secretary General called for the rejuvenation of Islamic social finance (i.e. Zakat and Waqf) for the purpose of mobilizing adequate resources to address the problems of financial exclusion, poverty and unemployment among the vulnerable groups of population in OIC Member States. Based on the deliberations, the Meeting adopted its Final Communique containing a set of recommendations to further increase intra-OIC cooperation in this domain. Organized by the Bank of Indonesia and the OIC, the Meeting was attended by Governors and Deputy Governors from more than 30 OIC Member States, representatives of the Islamic Development Bank Group and regional and international financial institutions, such as Asian Development Bank, World Bank and International Monetary Fund.[2]

The second issue of ISFR released in March 2015 contributed further to bridging the information gap relating to the sector. It focused on zakat, awqaf and not-for-profit microfinance sectors in selected countries in Sub-Saharan countries, such as, Sudan, Nigeria, Kenya, Tanzania, Uganda, Mauritius, South Africa and a few other countries.

Launch of ISFR 2015 at International Conference on Awqaf held at Cape Town, South Africa

Download the Islamic Social Finance Report 2015 here.

In May 2016, a special session at the first ever World Humanitarian Summit organised by the UN at the beautiful city of Istanbul was dedicated to the theme, “Islamic Social Finance as a New Alternative for Humanitarian Financing.” The speakers at this session – the Sultan of Perak, the Secretary General of OIC, the President of IDB, experts from the World Bank, the UNDP, the WFP and other international bodies -acknowledged the significant of this sector. They called for serious efforts to strengthen the sector to significantly enhance its contribution to humanitarian financing.

And in October 2017, the third issue of ISFR has been released.  This issue of the report analyses the Islamic social finance sector in the Russian Federation, Kazakhstan, Kyrgyzstan, Tajikistan, Bosnia and Herzegovina, and Macedonia.

Download the third issue of Islamic Social Finance Report 2017 here.

These are exciting times indeed for all those associated with the Islamic social finance. Is Islamic social finance now firmly etched as the new paradigm that reflects the objective and spirit of Islam far better than the profit-seeking financial institutions and markets?

 

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[1] Economist, Sept 13, 2014

[2] OIC Secretary General Calls for Revitalizing Islamic Social Finance, accessed from http://alummahworld.com/article/146/oicidb on January 16, 2015

Note: ISFR 2014 was the first ever publication to use the term “Islamic Social Finance” to denote zakat, awqaf and not-for-profit Islamic finance

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