Achieving the Maqasid of Islamic Finance through Social Impact Bonds (SIB) and Sustainable and Responsible Investment (SRI) Sukuk

This article introduces the various types of sukuk that exist in the Malaysian secondary market. The Malaysian sukuk market was initially debt-based which attracted criticism from the Shariah scholars from the Gulf and Middle East. However, the Malaysian sukuk market made a turn towards equity and ijarah sukuk and ventured into “green sukuk” or socially responsible investment (SRI) sukuk. To facilitate the financing of sustainable and responsible investment initiatives, the Securities Commission of Malaysia (SC) has launched the Sustainable and Responsible Investment (SRI) sukuk Framework in 2014. The introduction of the SRI sukuk framework is seen to be in line with the rising trend of “green bonds” and “social impact bonds” that have been introduced globally to facilitate and promote sustainable and responsible investing. The writer has presented different examples from both regions to show that the gap has been bridged. However, despite this convergence the author recommends a revisit of the controversial debt-based instruments by Malaysian Shariah scholars.

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Sustainable Banking: New Forms of Investing under the Umbrella of the 2030 Agenda

Sustainability ◽

10.3390/su12052096 ◽

2020 ◽

Vol 12 (5) ◽

pp. 2096 ◽

Cited By ~ 4

Author(s):

Mariano Méndez-Suárez ◽

Abel Monfort ◽

Fernando Gallardo

Keyword(s):

Social Impact ◽

Positive Impact ◽

Socially Responsible ◽

Public And Private ◽

Responsible Investment ◽

Valuation Model ◽

2030 Agenda ◽

Socially Responsible Investments ◽

Social Impact Bonds ◽

Investment Portfolios

(1) Social Impact Bonds (SIBs) foster the relationships between public and private sectors while adding value to new forms of investment that are closely linked to Socially Responsible Investments (SRIs). In this context, Sustainable Developments Goals (SDGs) aim to strengthen global partnerships in order to achieve the 2030 Agenda. Sustainable banking should consider its role in both new responsible investment products and the 2030 Agenda. This study aims to: (i) estimate the ROI of SIBS, (ii) define a financial formulation and a measurement system, and (iii) explain the relationship between SIBs and SDGs. (2) This research analyzes SIBs from an SDG approach, and proposes a valuation model based on a financial options valuation methodology that clarifies the financial value of the world’s first SIB (Peterborough Prison, UK). (3) Findings suggest that investors expect to have a negative return of 16.48%, and that this expected loss may be compensated for by the short- and long-term positive impact of an intervention in society. (4) It is shown that SIBs provide an opportunity to reach SDG 17 and improve sustainable investment portfolios, while providing an opportunity to strengthen a company’s Corporate Social Responsibility policy and its corporate reputation.

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Exploring Potentials of Philanthropic Islamic Financial Instruments in Providing Healthcare Services for Underprivileged

TURKISH JOURNAL OF ISLAMIC ECONOMICS ◽

10.26414/a2377 ◽

2021 ◽

Vol 8 (Special Issue) ◽

pp. 239-260

Author(s):

Rusni Hassan ◽

Khairul Fikry Jamaludin ◽

Mohamad Benaicha

Keyword(s):

Social Services ◽

Social Impact ◽

Relevant Literature ◽

Healthcare Services ◽

Healthcare Sector ◽

Financial Instruments ◽

Socially Responsible ◽

Responsible Investment ◽

Ethical Finance ◽

Social Impact Bonds

Philanthropic financial instruments utilize donated funds or assets in order to deliver social services for society. NGOs may not be able to operate the social services efficiently in the absence of such funds. Lately, there are plenty of organizations that have taken initiatives to render social services for targeted populations in order to curb social problems such as poverty, hunger, crimes, etc., through the use of some forms of philanthropic instruments including Islamic social finance, ethical finance, and others. Today, however, philanthropic financial instruments such as socially responsible investment (SRI), social impact bonds (SIB), and even Waqf are issued by financial institutions rather than socially driven institutions. As such, they have been treated as commercial financial instruments rather than socially driven mechanisms. This paper aims to elucidate the potentials of selected modern financial philanthropic instruments that deal with the healthcare sector. The strengths and weaknesses of the selected instruments will be assessed to explore their potentials in serving the healthcare services sector particularly for the underprivileged. The healthcare sector is highlighted as the focus of this study due to its relevance to the present challenge of the Covid-19 pandemic. This is an exploratory study that adopts the qualitative method whereby a rigorous review of the relevant literature is conducted to examine the potential that philanthropic Islamic financial instruments can offer in providing healthcare services to the underprivileged. The findings elaborate on three important models of philanthropic instruments, namely social impact bonds (SIB), development impact bonds (DIB), and takaful-waqf models. It was also found that these philanthropic instruments have varied strengths and weaknesses that require rectification in the future.

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Impact investing will boost global Islamic finance

Emerald Expert Briefings ◽

10.1108/oxan-db207383 ◽

2015 ◽

Keyword(s):

Financial Markets ◽

Social Impact ◽

Islamic Finance ◽

Financial Assets ◽

Financial Return ◽

Impact Investing ◽

Content Type ◽

Thomson Reuters ◽

Social Impact Bonds ◽

Investment Choices

Subject Impact investing and Islamic finance. Significance The share of Islamic financial assets remains limited, currently accounting for just 1.27% of global financial assets, according to the latest Zawya Thomson Reuters report on the 'State of the Islamic Economy'. However, new opportunities are ahead. Impact investing, defined by its ambition of achieving the dual goals of measurable positive social and environmental impact, and financial return, is a rapidly growing segment of international financial markets. It offers unique opportunities for Islamic investors looking for investment choices that meet the goals of an Islamic value-based investment approach. Impacts Impact investing will create impetus for further product development in the Islamic finance sector. New deals are in the pipeline after record innovation in 2015 in social-impact bonds that are compliant with Islamic financial principles. They will increase the attractiveness of the Islamic finance sector to a whole range of investors.

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Does doing good pay off?

Islamic Economic Studies ◽

10.1108/ies-05-2019-0001 ◽

2019 ◽

Vol 27 (1) ◽

pp. 23-37

Author(s):

Syed Marwan ◽

Mohamed Aslam Haneef

Keyword(s):

Risk Sharing ◽

Social Impact ◽

Third Sector ◽

Theory And Practice ◽

Sustainable Growth ◽

Islamic Finance ◽

Content Type ◽

Responsible Investment ◽

Finance Industry ◽

Socially Motivated

Purpose The purpose of this paper is to examine the world’s first social impact bond (SIB) and the lessons that can be learned for the Islamic finance industry to fulfil its true objectives. Design/methodology/approach The Peterborough SIB was recently announced to be successful in achieving its targeted social and investment outcomes, reducing recidivism by 9 per cent and paying back investors a 3 per cent pa return. The paper compares Peterborough SIB with socially responsible investment (SRI) sukuk in terms of form and substance, and finds that there are various lessons from the Peterborough SIB that can be useful for future development of Islamic financial products. Findings Innovative social financial tools such as SIB exemplify the true spirit of risk sharing and social responsibility, which is arguably missing in current practices of the Islamic finance industry. With the growing interest towards SRI strategies and increase in socially motivated investors, such financial tools may not only help the sustainable growth of the Islamic finance industry, but also fill in the gap between its theory and practice. Practical implications As such, the paper also proposes a social impact sukuk model which integrates the key aspects learned from Peterborough SIB. This includes prioritising social impact, measurable success indicators, data and management systems, flexible contracts, third sector integration, risk sharing and fostering the culture of innovation. Originality/value The findings can offer some practical insights in dealing with the issue of Islamic finance practice being overly concerned with its formal adherence with Islamic legal rules whilst neglecting its true fundamental values.

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Complying with the requirements for issuance of SRI sukuk: the case of Khazanah’s Sukuk Ihsan

Journal of Islamic Accounting and Business Research ◽

10.1108/jiabr-02-2016-0024 ◽

2018 ◽

Vol 9 (3) ◽

pp. 415-433 ◽

Cited By ~ 3

Author(s):

Nazrul Hazizi Noordin ◽

Siti Nurah Haron ◽

Aznan Hasan ◽

Rusni Hassan

Keyword(s):

Capital Market ◽

Social Impact ◽

Critical Evaluation ◽

Content Type ◽

Responsible Investment ◽

Social Agenda ◽

Structural Applications ◽

The Us ◽

The One ◽

Sustainable And Responsible Investment

PurposeThe purpose of this study is to provide a critical review on how the Khazanah’s Sukuk Ihsan was structured in compliance with the requirements for issuance of Sustainable and Responsible Investment (SRI) sukuk set by the Securities Commission (SC) Malaysia. Design/methodology/approachTo explain the structures and features of the Sukuk Ihsan, this study extracted important information from the sukuk’s Principle Terms and Conditions and Information Memorandum and presented them in a simple and easy-to-understand way. Next, this study refers to Part D: Requirement for Issuance, Offering or Invitation to Subscribe or Purchase Sustainable and Responsible Investment Sukuk of the SC’s Guidelines on Sukuk (revised edition: 28 August 2014) to assess the compliance of the sukuk in terms of eligibility of SRI sukuk issuer and SRI projects, use of proceeds, reporting and disclosure and independent assessment on SRI programmes. In addition, this study then compares the requirements stated in the SC’s SRI Sukuk Framework with the International Capital Market Association’s Green Bond Principles (GBP) and the USA’s Social Impact Bond (SIB) Act 2014. FindingsThe present study finds that the definition of eligible SRI sukuk issuer in the Guidelines on Sukuk seems to be more stringent compared to the one provided in the GBP and the US’ SIB Act. Nevertheless, the SRI Sukuk Framework provides a more comprehensive yet precise list of eligible SRI projects, covering both environmental and social aspects, compared to the GBP (which only focuses on broad categories of environmental projects) and also the USA’s SIB Act (explicitly outlines 13 social projects which are aligned with the US Federal Government’s agenda in tackling social illnesses). Indeed, the main difference between the eligible SRI sukuk projects and its conventional counterparts lies in its compliance to Shariah principles. It is also observed that a significant emphasis has been given on SRI legislations in ensuring proper reporting and disclosure provided to the SRI sukuk stakeholders together with critical evaluation on the impacts of SRI programmes provided by an independent assessor. Practical implicationsThis paper contributes towards enriching the literature on the Islamic capital market, particularly on the integration between sukuk and social impacts investing. This paper was intended to highlight the important requirements in issuing SRI sukuk to various stakeholders of the Islamic capital market. Originality/valueThe authors hope to shed some lights on the unique features and structural applications of SRI sukuk and its importance in becoming an effective instrument to raise funds for social agenda of a country by providing a real and practical example.

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Is Islamic Banking and Finance Doing Enough? Shaping the Sustainable and Socially Responsible Investment Community

Asian Social Science ◽

10.5539/ass.v13n3p170 ◽

2017 ◽

Vol 13 (3) ◽

pp. 170

Author(s):

Amiruddin Ahamat

Keyword(s):

Social Impact ◽

Critical Role ◽

Triple Bottom Line ◽

Institutional Support ◽

Islamic Finance ◽

Islamic Banking ◽

Bottom Line ◽

Responsible Investment ◽

Banking And Finance ◽

Small Medium Enterprises

Islamic finance assets advanced at double-digit rates during the past decade, from about US$200 billion in 2003 to an estimated US$1.8 trillion at the end of 2013 (Ernst & Young 2014; IFSB 2014; Wyman 2009). Hence, despite this growth, Islamic finance and its related products are still focused in the Gulf Cooperation Council (GCC) countries, and Malaysia, and represent less than 1 percent of global financial assets. While, Islamic banking and finance sector, should responsive to small medium enterprises mitigating liability of smallness and newness. The factors mitigating the inherent liabilities associated with new entrepreneurial startups were found to be institutional support. Institutional support was also found to be an important factor of success for new startups. The primary focus of this study is to examine the critical role of Islamic Banking and Finance, expanding and facilitating entrepreneurial opportunities. This study draws on triple bottom line concept (people, planet and profit), by developing standards equivalent to triple bottom line reporting for Islamic banking and financial institutions, and disseminating independent and objective research to relevant stakeholders. This includes examining the potential positive or negative social impact of Islamic Banking and Finance on the financially sustainable and responsible community.

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