Role of Islamic Finance in Achieving SDG and Future Sustainability

Transcription

1 Role of Islamic Finance in Achieving SDG and Future Sustainability Dr. Hamim Syahrum Ahmad Mokhtar Deputy Director, Islamic Banking & Takaful Department Bank Negara Malaysia 1

2 17 Sustainable Development Goals (SDG) SDG theme: Leaving No One Behind The United Nations (UN) initiated agenda on Transforming our World: the 2030 Agenda for Sustainable Development 2

3 Value-based Intermediation (VBI) as the next growth driver of Islamic finance in generating positive and sustainable impact What is VBI? - an intermediation function that aims to deliver the intended outcomes of Shariah - through practices, conduct and offerings that generate positive and sustainable impact to the economy, community and environment, - without compromising shareholders long-term interests & - focus on quality growth How do value-based practices look like? Impact-based Assessment Impact-based assessment provides equal attention to application s potential impact to the society, environment & economy Performance Measurement Comprehensive performance measurement (both financial & non-financial aspects) Impact-Focused Disclosure Impact-focused disclosure covers details of clients that they finance to & invest in (e.g. purpose, location & impact) Inclusive Governance Active engagement & constructive collaboration with multi-stakeholders in decision making process 3

4 Thank You 4

5

6 ! "#$ ""% %$

7

8 &%$#'%"#$ ("%($$$ ()($)(

9 % #$%!"!"" #$# $ % %%&'(())('*+',-(./&'% 2/3#)34$( )('*+(5($,67()/ 2/8,'#/+3$3+#3!% #)3).#)* ( )*+,, ( )*-.+/0 )*+./. $,( /, %%7#$ :,'1 -/ "1 2 +/ 3 & / 7 8 9/ & '5&'6 91

10 ; 91 7! :2 *23 2'/2'#)*6,/()/#3$()/'(6'()(2'% 3)<$37=,4#$(3)<#)*% 3 4 4; <%! # 9- '.= >, 0. >=!. *? "3 8 3,)5()#().( '% - ; ;33'#/# 83>#-38# % *'38$(,.#(/+%? %%7#$$#,) -,% B23$#/+>2.3/#,) 2/#$#3/#,) -,77('.#3$$+#34$( (1 3)<$37B %

11 B *$%!"# $%&'# %+ *() ##,-$'./$"0$#*+,- %'*+ &%.&/0#%.#%& *$%1!).&1(%. % )) "+ *$%12%. %2)3&'+ * $1454 ##,1'+

12 ('/#:#.3/#,)',*'377( 3 )#5('#/# 3#) $373$3+#3 4;@6C3'>,4#$#/+.8(7(% * %& 0D3'/#.#63)/ % 2..(#,)$3))#)* 3)<$37 (3>('8#6',*'377(% (3>('8#6,2)>3/#,)<#$$ % ),2(('/#:#.3/#,)',*'377( )/(')3$'3#)('% 3 $37#.#)3).(B23$#:#.3/#,)% 3 )#5('#/# 3$3+3 ('/#:#(>',:(#,)3$ '3#)('3.#$#/3/,'%

13 +6 * ",)$($)")2 $ $"(/ $789#:+ *(%)$./.% %1'$"(/34))("8 #&9&9#3'$)#$"$%.%+

14 *#%;#%9&'%--&'$"./'&+ * $&*'%.#86' <%=#" )&%#8%9+ * ",$($)'83)2 $ $"./'$%& 8+ *%5$#6$($)'$" '(/'$$"$&+

15 +#*#%= %#'/ % ""#' 7$$' 4''$3 "#$ '%$8 *%&&9.% %"%-'-%& '# &0'"9&/ %"%-%"9' &/%#$ ' ")$" *%/ 9"& *%/ 9"&>%9& '%- &&%&%#'/ &/%#$ ' ")$" &%# &%'% #'' "&0'' 78'&'/: 9"#% &%# &%'% #6&8 '&%' 9"# %'#"# %#'/8 & &'.# '%(./'0$ 5./6#''#&0'' (?12)& %0&'&=%&883)$#$( ))'"4/)) "#$$4)). %)& 9.&0%&/%9'#7:8) $$($)#" $')))"$#$%'%(%$$$3 $$"#4)))##$8) $$%##(9 )) "#%$:&'""0%&/3& 8 3& 0=& 9"8

16 1

17 1

18 " A A A A A *@ 27&2 1 " 2 "1@ ; (6,)#4$(,.#(/+,).#,2 3 )#/(>3/#,) $,43$,763./'#).#6$(:,'(6,)#4$( )5(/7()/..,2)/#)*3)> 2>#/#)*'*3)#E3/#,):,'$37#.#)3).#3$ )/#/2/#,) ),! &71 5C -6!''7*/

19 1 B /'3)63'()/@'2$(43(>@#)5(/7()/6',.(

20 1 ; " 5;"6 ; " 5;"6?&3

21 B -/ DE-, +/ 2) 3! DE-,, )1 B B / 3)<$37+(/ /,3>,6/ " 366$+#)* )5#',)7()/3$,.#3$,5(')3).(

22 :#)3).#3$ #).$2#,)3)>83'(> 6',6('#/ #):'3/'2./2'( >(5($,67()/ & ; -/ 5&2-6 +/ " 55&2+6./ 7 5&2.6 9/ " F 7 5&296 0/ "1 5&206 C/ B ; ; 5&2C6 5&2>6 5&2=6 5&2--6 >/ 5&G-C6

23

24 The Role of Islamic Finance in Achieving SDG and future Sustainability!"#$%&'"%&(#)*(*'&*+"*(&,*,'-. / &' &-:"*!"#$%&'()

25 -;478<32458; * The Sustainable Development Goals, the global development agenda for 2015 through 2030, set the stage for global support of ambitious development goals behind which the world must rally. * For developing countries, the required investment for the Sustainable Development Goals (SDGs) would be approximately US$4.5 trillion per year, with an additional requirement of US$3.1 trillion (UNDP, 2016). * The potential for Islamic finance to play a role in supporting the Sustainable Development Goals should be explored. *!"#$%&'()&*$*'+(&"(,*+(,)(-.+()$"-+"-/01,2&*0("+0%+*-"(,)(-.+(0#,3$#()&*$*'&$#( &*45"-167()1,%(89:;<<(3&##&,*(&*(;<<=(-,($*(+"-&%$-+4(89:>?@(-1&##&,*(&*(;<>A7(2&-.( 0#,3$#($""+-"(+BC+'-+4(-,("51C$""(89:=(-1&##&,*(36(;<;<? * The principles of Islamic finance that support socially inclusive and development promoting activities, the Islamic financial sector has the potential to contribute to the achievement of the Sustainable Development Goals in promoting strong growth, enhanced financial inclusion, and intermediation, reducing risks and vulnerability of the poor and more broadly contributing to financial stability and development.!"#$%&'() ;

26 THE ROLE OF ISLAMIC FINANCE IN ACHIEVING SDG S!"#$%&'() =

27 Sustainable Development Goals (SDG s)!"#$%&'()

28 * INNOVATION: + Innovation means innovative ways to promote wealth distribution, equality and social mobility (Sustainable Development Goals/SDG s). * IMPACT INVESTMENT: + With the Islamic finance industry pushing $1 trillion, why have we not seen larger scale social responsibly investment? * SHARIAH COMPLIANT: + Does the label Islamic mean it has a particular obligation to invest in economic or community development with social agenda? Or It is only about complying the Shariah contracts? D-(-.+(+*4(,)(;<>E7(0#,3$#("&F+(,)(-.+(!"#$%&'( )&*$*'&$#("+1G&'+"(&*45"-16(2$"(89:;7;H=(3&##&,* IJ!KL7(;<>MN!"#$%&'() A

29 1. Innovation - Innovative ways to promote SDG s * The traditional way in doing finance in a Shariah compliant framework should be improved in line with the emergence of fintech. * Islamic finance should also be used to mobilize, institutionalize and empower the funds of zakat, sadaqat, qard-al-hassan and waqf. + Zakat funds could be used to cover the default risk of microenterprises and to build capacity and skills. + Qard-al-Hassan resources should be made available to Islamic microfinance institutions to reduce the burden of high interest charges on their borrowers.!"#$%&'()

30 #2. Impact Finance - Increasing The Social Dimensions of Islamic Finance Thomson Reuters Survey (2015): The attitudes of many Islamic financial institutions is that socially responsible investing is either part of the corporate social responsibility they already do or is unnecessary, the reason is that their existing shariahcompliant mandate coupled with their corporate social responsibility activities fulfill their social responsibility. O.+1+),1+7! Framing the issue of SDG s and social responsibility as an add-on financial screening methodology that is complementary to the exiting Shariah compliance screening is likely to be the most effective route.!"#$%&'()

31 #3. SHARIAH COMPLIANT - Extended meaning to include ethical commitment and social orientation Shariah requires no distinction between legal imperatives and moral obligations. Law and ethics, from the Shariah perspective, should not be viewed as separable and should not be made contradictory in developing Islamic finance Islamic finance product structuring: marrying form and substance. The concern in product structuring is not merely to secure the narrow legal compliance of banking and finance practices by screening negative elements in conventional financial practices, but a more substantive movement towards inspiring a good financial system enshrining Islamic ethics and principles as implied in the concept of maqāsid al-shari ah (the goals of Shariah).!"#$%&'()

32 EXAMPLES & CASE STUDIES ON ISLAMIC FINANCE AND SDG s!"#$%&'() H

33 How to link Islamic Finance to SDG 3 Goal 3: Ensure Healthy Lives and Promote Well-being for All At All Ages FACTS: + >M7<<<()+2+1('.&#41+*(4&+(+$'.(4$6(-.$*(&*(>HH<7(35-(%,1+(-.$*("&B(%&##&,*( '.&#41+*("-&##(4&+(3+),1+(-.+&1()&)-.(3&1-.4$6(+$'.(6+$1? + 9&*'+(;<<<7(%+$"#+"(G$''&*+"(.$G+($G+1-+4(*+$1#6(>A?E%&##&,*(4+$-."? + P$-+1*$#(%,1-$#&-6(.$"()$##+*(36($#%,"-(A<(C+1('+*-("&*'+(>HH<? + Q5-(%$-+1*$#(%,1-$#&-6(1$-&,(R-.+(C1,C,1-&,*(,)(%,-.+1"(-.$-(4,(*,-("51G&G+( '.&#43&1-.(',%C$1+4(-,(-.,"+(2.,(4,(R &*(4+G+#,C&*0(1+0&,*"(&"("-&##(>S(-&%+"(.&0.+1(-.$*(&*(-.+(4+G+#,C+4(1+0&,*"? + D-(-.+(+*4(,)(;<>=7(-.+1+(2+1+($*(+"-&%$-+4(=A(%&##&,*(C+,C#+(#&G&*0(2&-.(T!U? + VG+1(E?;(%&##&,*(%$#$1&$(4+$-."(.$G+(3++*($G+1-+4(3+-2++*(;<<<($*4(;<>A7( C1&%$1&#6(,)('.&#41+*(5*4+1()&G+(6+$1"(,)($0+(&*("53/9$.$1$*(D)1&'$?( + Q+-2++*(;<<<($*4(;<>=7(-53+1'5#,"&"(C1+G+*-&,*7(4&$0*,"&"($*4(-1+$-%+*-( &*-+1G+*-&,*"("$G+4($*(+"-&%$-+4(=M(%&##&,*(#&G+"?(!"#$%&'()

34 W,*-X4Y!"#$%&'()*+%&(,(,-./%0"1123$%-(3) * O.+(!*-+1*$-&,*$#(K&*$*'+(K$'&#&-6(),1(!%%5*&"$-&,*(W,%C$*6(I!KK!%N( &""5+4(95Z5Z7(1$&"&*0(89:(A<<(%&##&,*(),1('.&#41+*X"(&%%5*&"$-&,*(&*(-.+( 2,1#4X"(C,,1+"-(',5*-1&+"(-.1,50.(J$G&7(-.+(U$''&*+(D##&$*'+? * O.&"(#$*4%$1Z(-1$*"$'-&,*(&"(-.+()&1"-(",'&$##6(1+"C,*"&3#+(95Z5Z2&-.( )5*4"(-,(3+(5-&#&"+4(),1(-.&"(C51C,"+?(!"#$%&'()

35 * FACTS: How to link Islamic Finance to SDG 4 Goal 4: Ensure Inclusive and Quality Education for All and Promote Lifelong Learning + Enrolment in primary education in developing countries has reached 91 per cent but 57 million children remain out of school + More than half of children that have not enrolled in school live in sub-saharan Africa + An estimated 50 per cent of out-of-school children of primary school age live in conflict-affected areas million youth worldwide lack basic literacy skills, and more than 60 per cent of them are women * GOALS: + Free, equitable and quality primary and secondary education + Equal access for all women and men to affordable and quality education + Build and upgrade education facilities that are child, disability, gender sensitive and inclusive and effective learning environments for all + Expand globally the number of scholarships available to developing countries + International cooperation for teacher training in developing countries!"#$%&'()

36 * CASE STUDY: + SUKUK IHSAN: the Malaysia s first Sustainable and Responsible Investment (SRI) issued by Khazanah Nasional Berhad and exclusively offered to institutional investors. + The proceeds were channelled to Yayasan AMIR, a not-for-profit organisation incorporated in 2010 to improve the accessibility of quality education in Malaysian government schools.!"#$%&'()

37 !"#$%&'()

38 How to link Islamic Finance to SDG 7 Goal 7: Ensure Access to Affordable, Reliable, Sustainable and Modern Energy For All 456%.-%"77%8(9"3#%720$%:2'8.('% Case Study: Saudi Electricity Global Sukuk * 9$54&([#+'-1&'&-6(J#,3$#(95Z5ZW,((!""5+(9DL(S?(A(3#*"5Z5Z$#/ &"-&-.%$1?( * \1,'++4"(2&##(3+(5"+4(-,()5*4(-.+( 4+G+#,C%+*-(,)(C,2+1(C#$*-($*4( 5-&#&-&+"(&*(9$54&(D1$3&$?(!"#$%&'()

39 !"#$%&'() How to link Islamic Finance to SDG 8 Goal 8: Promote Inclusive and Sustainable Economic Growth, Employment and Decent Work For All BASIC FEATURES OF IF CAN SPUR!*'#5"&G+(J1,2-.(Q$"+4(,*($*(+]5$#&-6( C1&*'&C#+(',%C1&"+"(3,-.(.('1.9$#$*4</.1$##$#7( &*G,#G&*0<"/'212<"'2.3$*4@$3$-2'A #8"/23B%I8^_\N!"#$$%&'%+% JLV`OT(`!OT(_!9OL!Q8O!V^(I,1( ",%+-&%+"(1+)+11+4(-,($"(C1,(C,,1( 01,2-.N GROWTH WITH DISTRIBUTION: * Promotes risk sharing, * Connection to real economy * Emphasis on financial inclusion and social welfare * Morality and Ethics in business can reduce cost and wastage * Respect for property rights and contractual obligations * Pursuit of good governance through * Social redistributive and philantropic tools such as waqf, zakat and sadaqah

40 How to link Islamic Finance to SDG 9 Goal 9: Build Resilient Infrastructure, Promote Sustainable Industrialization and Foster Innovation * Investments in infrastructure transport, irrigation, energy and information and communication technology are crucial to achieving sustainable development and empowering communities in many countries. * Facts from UN (2016): + Basic infrastructure like roads, information and communication technologies, sanitation, electrical power and water remains scarce in many developing countries + About 2.6 billion people in the developing world are facing difficulties in accessing electricity full time billion people worldwide lack access to basic sanitation and almost 800 million people lack access to water, many hundreds of millions of them in Sub Saharan Africa and South Asia billion people do not have access to reliable phone services!"#$%&'()

41 W,*-X4Y *!"#$%&'()*+%,-(#./0%12-3$4'%5$6$7-89$/'+%,-./0" ,789-: %A-3-0"12-30BC2-C B6.-.A0-.:0-0D8<D78>50:7E72<D37.>0 F<3D-.50;<<D78->706.0:7E72<D6.A0%GG<8:-=270H<C16.A0 I7E72<D37.>0>98<CA90%2JK-LG0H<370M6.-.;6.AJ6N0)O0 8716:7.>6-21-.:0P0;<3378;6-202<>109-10=77.0=C62>06.0B7.-.A0 QD8<R7;>0?<8>90$40&S0362TN!"#$%&'()

42 Moving Forward UNLEASHING THE POTENTIALS OF ISLAMIC FINANCE!"#$%&'() >H

43 "M09-10D86.;6D2710>9->0?<C2:0 1CDD<8>0A<<:0G6.-.;7U V00 "88$'.'$%"/)%"77-4"'.-/%J2$3$4'.-/% -H%./'$2$#'K%(/4$2'"./'*K%./3(#'.4$#%$'4LM o &-4."7%N$7H"2$%'--7#%'-%7$6$2"0$% 4-/4$##.-/"7%H./"/4$ o F<..7;>6<.0=7>?77.0G6.-.;70-.: ;<.<35 C&DBEC! EC!<=@C>B>!; " ">061071>63->7:0>9->0)&W0<G0 D7<D27026E6.A06.03C1263J3-R<86>50 ;<C.>86710:<0.<>0C170 G<83-20 G6.-.; E6;71N " X97071>63->7:016Y70<G0"12-36;0 36;8<G6.-.;70><:-50610ZO&[ < A7:0-117>10 Q&'((T0U0?96;90610'N[W0<G0>970 71>63->7:0><>-20 A2<=-20 46;8<G6.-.;703-8/7>0<G0Z)[0 =6226<.0Q&'((T0!"#$%&'() 89:(;7;H=(3&##&,*(&*( ;<>E the gap between the potential and existing islamic finance market remains large. 89:(=(-1&##&,*(&*( ">0610>970/750G<8071;-D6.A0 D<E78>501>->C1N0 `C78671V " X970D<<80-;;7110><0 "12-36;0G6.-.;7a " X970"12-36;0G6.-.;70 D7.7>8->6<.0><0>970D<<8a OBP@&%Q%RBSB: * X9703-8/7> A70-.:0 7\>7.:10A2<=-2250?6>90 2-8A70D86E->70?-LG1]0 Y-/->0><02-8A70.C3=780<G0 ^<E78.37.>03-.-A7:0?-LG1]0_-/->

44 Re-orienting the Mission of Islamic Finance * Islamic finance essentially plays a major role in addressing the problem face by society of Wealth Distribution, Equality & Social Mobility. * The establishment of Islamic finance is not only for the reason of having halal (shari ah compliant) financial structure. * Its establishment is also purported to achieve various socio-economic justice as mandated by the objective of Shari ah (maqasid al-shari ah) which aims at realizing human wellbeing (maslahah).!"#$%&'() ;>

45 "1F8751;45;A&4D1&(5==58;&GH8;4I<J * The target of Islamic finance is not only the rich, but for the whole segments of society: the poor, the small scale enterprise and the rural society. * Islamic finance should not prefer to finance the rich only, and neglecting the poor. * Islamic finance in the 21 st century should rethink financial strategy to ensure the financial access to all dimensions of society and hence promoting wealth distribution, equality and social mobility. * Islamic Finance should be able to address: The wide spectrum of poverty and underdeveloped social infrastructure in the Muslim world To attract under-banked and under-served economically active poor!"#$%&'() ;;

46 !"#$%&'() Thank You