Islamic Finance and Social Sustainability: Parameters for Developing a Model for Social Impact Measurement

Abstract

To be true to the spirit of Islamic finance, embodied in the principles of maqasid al-shariah, developments in Islamic finance should contribute towards promoting social inclusion and reducing poverty. However, Islamic finance is criticised for the minimal social impact that it has created and its contribution towards promoting social sustainability. Thus, this paper aims to develop a comparative analysis of literature on the meaning, conceptualization and measurement models of social impact. Then, the paper uses maqasid al-shariah as a theoretical framework to conceptualise social impact and to propose a set of parameters that can be used to measure the social impact of IFIs.

Intention to Use Islamic Banking Products and Services: Evidence from Malaysia

“…According to the International Monetary Fund (IMF), the United Nations Development Program (UNDP), and the World Bank, Islamic finance relies on its principles and values that reflect equitable income and wealth, as well as a fair and just production cycle by eliminating riba (interest) and maintaining halal (permissible) (Mohamad & Borhan, 2017;Tijjani et al, 2021). Islamic finance avoids transactions that involve gharar (uncertainty), as well as immoral or unethical behavior like insider trading, market manipulation, short-selling, and trading in shares of unregistered companies (Khan et al, 2021;Tijjani et al, 2021).…”