www.islamica-me.

com • April 07

www.islamica-me.com • April 07
expertopinion expertopinion

expertopinion
Islamic
BringingFinance
Morality toin The best practices learned in the SRI experience can certainly
enrich the Islamic finance industry and they can add
substantially to the objectives of Shariah in terms of welfare

Material and well-being.

MOTIVES
By Michael Saleh Gassner
As an economic system based on values other than
pure monetary gain, Islamic finance tends to parallel
its natural benchmark, the Socially Responsible
Investing (SRI) and Sustainability industry. But the
relationship between the two sectors has not yet
reached its full potential. It is time to reflect on the
achievements of each and start learning from each
RI is based on a set of criteria to screen out Michael Saleh
S unwanted activities, similar to what our schol-
ars demand and call "avoidance of Haram."
Gassner is manag-
ing director of
Michael Gassner
There are criteria in common, but also differ- Consultancy Ltd.,
ences and these give incentive to improve on and specialises in
either side. Islamic finance
consulting. He
often writes about
Different Strengths related issues in
SRI focuses on environmental, social and gover- leading industry
nance issues. The best practices learned in the magazines and is
SRI experience can certainly enrich the Islamic the founding editor
finance industry and they can add substantially to of the
“IslamicFinance.de
the objectives of Shariah in terms of welfare and – Executive
well-being. News” newsletter.
Islamic finance tends to be more concerned with He speaks fre-
financial and legal criteria, specifically regarding quently at Islamic
Riba (increase in money for money) and Gharar finance conferences
and is the head of
(legal uncertainties resulting in restrictions, e.g. in Islamic Finance of
derivatives). These are concerns that SRI needs the International
to explore further, considering the social impact Active Ownership Banker’s Forum
of housing price bubbles, the mess in the back To move forward, clients need to be educated and organiser of
office of credit derivative swaps, the asset/liabili- and financial institutions need to think carefully the annual Islamic
Wealth
ty mismatches of hedge funds and the unsustain- about their objectives, whether set by the state or Management
able debt policies of even highly developed coun- not. The voluntary Responsible Investing Event in Geneva.
tries. These are but a few of high-risk factors for Criteria of the UNEP Finance Initiative are He holds a mas-
society caused by the financial industry. already in line with Islamic thought; the key lies ter’s degree in busi-
If environmental concerns are embedded from in being a more active owner, in considering ness administration
from the University
the beginning, a company will be more profitable social and ethical concerns, networking and of Siegen.
and will face fewer surprise costs than if it adds going forward with an inclusive set of criteria.
these concerns on at the end under pressure – Both Islamic finance and the SRI and
adding the smokestack as an afterthought to the Sustainability approaches can do more. They can
factory. But our Shariah compliance process reach out to the poor, defining them as customers
often works just in this way; products put forward with profitable needs rather than as an indigent
to the scholars are not designed to meet the and commercially nonexistent market segment.
objectives in the first place but are manoeuvred This concept is called “Bottom of the Pyramid
to fit within the legal principles in the end. (BOP)” by strategy professor C.K. Prahalad at
The objectives in themselves are the responsibili- the University of Michigan. Islamically, this is a
ty of all involved parties: client, bank, state and true innovation offering greater reward in the
society. The sustainability approach is a good here and in the hereafter.
starting point. It goes beyond screening out unde- The current focus on the rich will soon result in
sirable elements to screening in those companies decreasing margins, which will be seen first in the
which show outstanding achievements in terms of Saudi market, with all its newly established play-
environmental issues, social concerns (e.g. pover- ers this year. Those who do not widen their per-
ty alleviation and work conditions) and gover- spectives and act now will react later – leaving the
nance; basically, applying a proper code of ethics. profits to others.

other in order to compete for the greater good.

22 23