Kuala Lumpur, 15 Nov 2023 – The 18th International Shariah Scholars Forum (ISSF2023), organised by ISRA Research Management Centre with the theme “Maximising the Application of Maqasid al-Shariah in the Islamic Finance Industry and its Impact on Sustainability”, concluded with a number of recommendations.
ISSF2023 was officially launched by INCEIF University Chairman Tan Sri Azman Mokhtar and attended by 150 participants with 35 presenters from among Shariah scholars, researchers and professional experts. The Forum discussed the term ‘sustainability’ in reference to investment with the aim to maximise returns and create positive change against social, environmental and ethical aspects. Participants also got to learn more about the term ‘value-based intermediation’ (VBI), which Bank Negara Malaysia has defined as a function to achieve the objectives of Shariah in Islamic finance through practices and conduct that generate positive and sustainable impacts on the economy, society and the environment – without compromising returns and the rights of shareholders.
After a two-day deliberation, ISSF2023 issued the following recommendations:
- A Maqāṣid approach must be adopted regarding the concept of sustainability as well as environmental, social, and governance (ESG) goals. Sharīah scholars, Islamic economics experts, and the Islamic financial industry should undertake to establish the appropriate Shariah, supervisory, and technical parameters.
- Due consideration should be given to the Islamic legal maxims related to sustainability goals and ESG activities within the framework of the objectives of Shariah, such as the maxims related to facilitation and relief of hardship, justice and benevolence, and mutual consent. Attention must also be paid to the parameters when applying them to ongoing developments related to the respective topic.
- The comprehensive principles and objectives of the Shariah should be relied upon in dealing with the challenges of activating sustainability and ESG activities, in particular: consideration of the consequences of actions, balancing benefits and harms, achieving justice, balancing contractual rights and responsibilities, and removing difficulty. This is to ensure discipline in contemporary ijtihād and its proper application.
- A framework and mechanisms need to be established for compliance with sustainability requirements emanating from Shariah rulings and their objectives in the current Islamic financial industry business model.
- Shariah rulings and their objectives should be relied upon in incorporating policies and initiatives to integrate sustainability requirements such as international basic standards, climate and environmental disclosures, and their convergence – in the plans and strategies of Islamic financial institutions.
- There is a need to identify the most prominent challenges facing ESG activities, and non-compliance with the overall objectives of Shariah and its provisions. The areas of sustainability and the distinctive nature of Islamic financial institutions need to be pinpointed with the aim of aligning them with the Shariah objectives.
- It is necessary to conduct in-depth applied studies of the technical requirements for meeting the demands of sustainability in Islamic finance within the objectives of the Shariah. Scholars and experts from different specialisations should participate in it with the aim of preparing the legal, regulatory and Shariah framework for sustainability from the Maqāṣid perspective.
- A framework and mechanisms should be developed for managing the risks facing complex ESG activities. It should aspire to manage financial and sustainability risks and to facilitate policies and initiatives aimed at managing sustainability risks.
- Studies should be conducted to evaluate the ESG practices of Islamic financial institutions in order to determine the indicators of sustainability and evaluate their risks so as to avoid sustainability risks, in particular Shariah non-compliance risks and climate risks.
- The international foundations for sustainability and ESG practices should be utilised to benefit the institutions that support Islamic financial institutions, which should set general frameworks and performance indicators for IFIs with the help of specialised institutions.
- It is necessary to hold periodic specialised sessions at different levels – international, regional and local – between Shariah scholars and specialised experts to discuss sustainability issues and ongoing developments; respond to the challenges and present solutions within the Maqāṣid dimension.
- The principles of justice and contractual balance should be given due consideration, and parameters based on them should be developed to organise the activation of sustainability requirements based on Shariah objectives.
- There is a need for the state as well as financial institutions to benefit from the best international, regional and local approaches to address the challenges of sustainability requirements, and establish enduring preventive measures.
- It is important that Islamic financial institutions innovate products based on sustainability within the VBI framework. They should combine the profit aspect with social and environmental responsibility, and contribute to achieving sustainable development, shared prosperity, and added value.
- There is a need to reduce obstacles to the institutional integration of the Islamic finance industry by reducing the gap of jurisprudential differences, establishing training programmes, and increasing public awareness of the objectives of Shariah in establishing sustainability.
ISSF2023 also recorded its gratitude to everyone in ensuring the success of the Forum including official bank Bank Rakyat and sponsors Co-opbank Pertama, Association of Shariah Advisors in Islamic Finance Malaysia (ASAS), ISRA Consulting and Islamic Financial Services Board.