Social Responsible Investing is “a relative” of Islamic Finance. A Muslim has to consider himself as a trustree of supreme ownership and act accordingly. In his usage of private and public ownership he is bound by ethical and social considerations to avoid harmful goods and activities which are not permissible such as alcoholics, gambling, pork, pornography to name a few. Wasteful use (or not making use of resources) and extravagance is undesirable. Any usage which injures or harm public interest has to be avoided. Wealth creates an obligation to support needy family members and the duty of obligatory social tax (Zakat) to support the needy of the society.
This thoughts are very much in line with the objectives of the Shariah (Maqasid Al Shariah) which demands the wisdom and welfare of the people in this world as well as in the hereafter. Welfare is defined as complete justice, mercy, wellbeing and wisdom. “Anything that departs from justice to oppression, from mercy to harshness, from welfare to misery and from wisdom to folly, has nothing to do with the Shariah” (Ibn al-Qayyim). The definition of Al-Ghazali, one of the most prominent scholars of history, reads as follows: “The very objective of the Shariah is to promote the welfare of the people which lies in safeguarding their faith, their life, their intellect, their posterity and their property. Whatever ensures the safeguard of these five serves public interest and is desirable.”, cited after Umer Chapra, (Towards a Just Monetary System).
Many of these general thoughts are not widely applied nowadays inside the Muslim world. The duties of the public sector following from these religious requirements might only be applied in parts. M. Nejatullah Siddiqi defines these duties as
- Ensuring compliance with the Islamic code of conduct by individuals through education and, whenever necessary, through coercion.
- Maintaining healthy conditions in the market to ensure its proper functioning.
- Modifying the allocation of resources and distribution of income effected by the market mechanism by guiding and regulation it as well as by direct intervention and participation in the process.
- Taking positive steps in the field of production and capital formation to accelerate growth and ensure social justice.
Many of these considerations are part of Western modern economic policies to a varying degree also influenced by similar thoughts of ethical discourse influenced by Christian scholars.
A clear differentiator is the positive view of Islam in regard to trade and entrepreneurship. The Prophet (pbuh) is reported to have said: “The trader who is honest and trustworthy is with the Prophets, the truthful and the martyrs.” The conditions of honesty are to measure and weight correctly, to obey clarity and transparency in contracts, exclusion of impermissible transactions as above stated, modesty in pricing, honesty and justice in trade exchange as well as avoidance of price manipulation by hoarding or monopolistic approaches. Last not least the treatment of Riba issues needs to be observed.
All this economic aspects discussed shall lead to an economy in wellbeing and full employment, an optimum rate of growth, which does not leave resources underutilized, nor spoils the environment. Socio-economic justice shall be achieved alongside an equitable distribution of income and wealth. Zakat, the obligatory social tax, supports the poor and motivates funds to be invested rather than stored and withhold from market activities. Money not invested will depreciate in value and should be seeked to be invested to maintain its value. Of course, positive effects cannot be imposed by a government alone; it is always needed to achieve a combination of individual and collective action caused in belief or god fearness (arab. taqwa).
- CSR Trends Islamic financial institutions and CSR