He raised the heaven and established the balance so that you would not transgress the balance.
- Qur'an 55:7
ISLAM AND FINANCE
With estimates of more than 1.5 billion followers, Islam is one of the three major Abrahamic religions. Muslims believe that Islam was revealed more than 1,400 years ago in Makkah, located in today's Saudi Arabia. They believe there is only one God, who they call by the Arabic name, Allah. Muslims believe that Allah sent several prophets to guide people, including Jesus (Isa), and that Muhammad was the final prophet.
CORE BELIEFS & PRACTICES
The Qur'an is the basis of Islam, supplemented by the Sunna and the Hadith. While the Qur'an is held by Muslims to be the literal word of God (Allah) and the ultimate foundation of all Islamic teachings, the Sunna is the Arabic term for the practical example of the Prophet Muhammad's way of life and sayings or rulings, which are recorded in the Hadith.
The Qur’an and the Hadith set the guidance for Muslim's relationship with their community and environment.
The five pillars of Islam are mandatory acts. These require:
Fasting (sawm) from dawn to dusk during the holy month of Ramadan;
Declaration of faith in one God, Allah and His prophet, Muhammad (shahada);
Prayer five times each day (salat);
Almsgiving (zakat – an annual religious tax of 2.5% of an individual’s wealth distributed to the poor);
And if possible, pilgrimage to Makkah at least once in a lifetime (hajj).
'The world is green and beautiful and Allah has appointed you His stewards over it'
WHAT DOES ISLAM SAY ABOUT WEALTH AND MONEY?
The tone of the Qur'an regarding wealth (Arabic: mal or rizq), gain (kasb) and expenditure (infaq) is supportive. Wealth is derived from God’s bounty (fadl, or ni'mah). It must be used with gratitude and its enjoyment must not encourage excess, lack of consideration for others, or hinder the common good and the fulfilment of the spiritual and ethical teachings of Islam.
According to the Qur'an, truly virtuous believers are those who, apart from being assiduous in worship, 'expend of that which We have bestowed upon them' (mimma razaqnahum yunfiqun) (2:3).
The Qur’an states: 'O you who believe, do not devour each other’s property by false means, unless it is trade conducted with your mutual consent.' (4: 29).
This means that participation can only occur in financial transactions that are fair and the only legitimate avenue for gaining wealth is trade based on mutual agreement and goodwill. To ensure the fulfilment of Islamic religious duty, there is an understanding that assets raised must be used (or invested) in a manner that is faith aligned.
WHAT IS ISLAMIC FINANCE?
Islamic finance is a form of financial activity that operates according to Islamic law (sharia). Islamic finance is based on several prohibitions.
Gaining from interest (riba) is regarded as unproductive, an excessive and exploitative pursuit of wealth and therefore should be strictly avoided.
Financial transactions should not cause harm and therefore, investment in activities related to alcohol, pork, tobacco and gambling are prohibited. These activities are considered haram or forbidden.
Islamic finance forbids transactions that rely on chance or speculation (maisir), rather than productive activity.
Also forbidden are transactions that involve significant risk and uncertainty (gharar). These transactions are regarded as dishonest and may cause injustice and inequality.
Finally, risks and loss/profits associated with the transaction should be shared equally.
Islamic finance has special types of financing arrangements.
Profit-and-loss sharing partnership (mudarabah) where one party provides capital and the other is responsible for management and investment of the capital. Sharing of the profit is determined by mutual agreement.
Profit-and-loss sharing joint venture (musharakah) are contracts where all parties contribute capital, are entitiedl to participate in the management of the capital and share the profit/loss in pre-determined ratios.
Then whoever has done an atom's weight of good, shall see it, and whoever has done an atom's weight of evil, shall see it.
– Qur'an 99:7-8
ISLAM AND OUR RELATIONSHIP WITH THE EARTH
Three central concepts guide the environmental ethics of Islam.
Care of the earth is a duty of trusteeship, or khalifah. We are Allah’s stewards on Earth and Allah has entrusted the Earth to us with its safe keeping.
Allah is unity (tawheed), and His unity is reflected in the unity of humanity and nature. We must therefore maintain the integrity and unity of the Earth, its flora and fauna, its wildlife and environment. Unity cannot be had by setting one need against another, and it is our responsibility is to keep balance and harmony in Allah’s creation.
Islam teaches that we will one day be judged by Allah for how we have discharged our responsibilities, and that we are accountable for our deeds and our omissions. The notion that describes the accountability of the khalifah is akrah.
These principles have been translated into practical directions for how to live, embodied in the Shariah, the laws of Islam. For more on Islam and the Environment, read the Muslim Declaration on Nature (Assisi, 1986).
KEY MOMENTS IN MUSLIM ACTION ON THE ENVIRONMENT
The Muslim World League was one of five representatives of religions invited by HRH Prince Philip – then International President of WWF International – to the landmark 1986 WWF meeting at Assisi, Italy, to discuss how major faiths could work with environmental groups to protect the planet.
Fatwa against the illegal wildlife trade, 2013
Muslims in Indonesia issued the first fatwa (religous edict) against the illegal wildlife trade in 2013 in response to the decline in endangered species and the biodiversity crisis. It was followed in 2016 by another fatwa against the deliberate burning of forest peatland.
The Islamic Declaration on Global Climate Change was adopted at the 2015 International Islamic Climate Change Symposium in Istanbul. It calls upon Islamic leaders to fulfil their social and ecological responsibilities, and to reject human greed for natural resources.
The Islamic Finance Council and the Church of Scotland launched the Edinburgh Finance Declaration as an interfaith framework on ethical finance based on shared values such as stewardship, love of one's neighbour, human flourishing, sustainability, justice & equity.
'There is no creature moving on the earth, nor a bird flying on its two wings, but they are all communities like you.'
– Qur'an 6:38
HOW WE WORK WITH MUSLIM GROUPS ON FAITH-CONSISTENT INVESTING
AN ISLAMIC INVESTING HUB?
FaithInvest is in early stage discussions with Muslim partners in Indonesia about the potential for setting up an Islamic Finance Hub to work with Muslim investors and entrepreneurs on aligning their financial activities with their values.
While Islam has clear and long established guidelines around Islamic finance, this would look at new ways to invest positively for people and planet. One idea which has gained popularity in recent years, for example, is that of a Green Wakf. FaithInvest Trustee Hayu Prabowo believes Green Wakfs could be a sustainable way to finance green or environmentally friendly projects.
To find out more about Green Wakfs, click below to be taken to the website for Ummah for Earth, an alliance that includes a number of our partners.
AL-MIZAN – THE BALANCE
FaithInvest is very much looking forward to the publication in coming months of Al-Mizan: A Covenant for the Earth. This global endeavour involves Islamic scholars and Muslim institutions across the world and will result in a landmark document on Islam and the environment.
Al-Mizan (which means 'the balance') will highlight key Islamic scripture, values and teachings to provide. a theological justification for action by Muslims to combat climate change and other threats to the planet. It is expected to inspire and galvanise the Muslim world in the way that Pope Francis's 2015 Laudato Si' encyclical letter did for the Catholic Church.
Find out more about Al-Mizan, including the core team, scholars, universities and institutions involved, by clicking below.
MEETING KEY FAITH PARTNERS IN ASIA
In October 2022, FaithInvest Founding President Martin Palmer, Director of Investment Solutions Mathew Jensen and FaithInvest Trustee Hayu Prabowo, chair of Environment & Natural Resources for the Islamic Scholars of Indonesia, delivered a three-hour lecture on faith-consistent investing and impact investing to the Islamic Banking School in Jakarta, Indonesia.
Afterwards, they joined the TBN Asia conference in Bali, where they presented on FCI.
Hayu Prabowo shared his vision of the potential transformative impact of Green Wakfs as an alternative instrument for financing green or environmentally friendly projects. A wakf is a form of charitable endowment under Islamic law, often involving land or property, for benevolent purposes that cannot be reclaimed. 'The great thing about it is it's permanent,' he says.
Read our full press release on our Asia trip.
ESG AND ISLAMIC INVESTING WITH SHARIAH SCREENING
In December 2021, FaithInvest held a webinar with Responsible Finance & Investment (RFI) Foundation, which acts as a catalyst linking responsible and Islamic finance, to discuss the relationship between ESG and Islamic investing through shariah screening.
FaithInvest's Mathew Jensen spoke to Blake Goud, CEO of RFI, and Dr Hurriyah El Islamy, an expert in Islamic Finance, a board member for RFI Foundation and a pleno member of the Indonesia National Shariah Council of MUI.
HOW CAN WE HELP YOU?
FaithInvest works with all major faith traditions to promote faith-consistent investing and grow the FCI Movement. We also offer a range of services including supporting faith groups to develop investment policies and guidelines aligned to their faith values; governance and communication; training on faith-consistent investing; and FCI scoring and benchmarking.
To find out how we can help your faith-based organisation to develop or refine faith-consistent investing principles and practices, click below.