In the name of God, the compassionate the merciful
Islamic finance is a great tool for attracting capital for investment and most importantly creating trust in the financial system. Today, the world hosts about 1500 Islamic financial institutions including a greater number of Islamic microfinance companies for poverty alleviation. The industry is growing at a staggering rate of 14% per annum, and its market worldwide is estimated to be worth four trillion dollars.
Islamic banks hold more capital and are more profitable than conventional banks and performed better during the global financial crisis. In fact, during the global financial crisis, not a single Islamic bank anywhere has needed to be bailed out by taxpayers’ money. Again, Islamic banks were not caught up with the exposure of the ‘toxic assets’ that blighted conventional banks.
This show of resilience by Islamic financial institutions in general during the global financial crisis has stimulated some profound questions including the most prominent; “would the global crisis have occurred if Islamic principles had been followed?”. Well, I leave this question for our distinguished readers to ponder over. Now let’s come to our main topic.
Islamic finance can attract capital through several key strategies that align with Islamic principles and cater to the unique preferences of investors seeking Sharia-compliant opportunities. The steps are as follows:
Ethical Investment Appeal: Emphasize the ethical and socially responsible nature of Islamic finance, appealing to investors who prioritize ethical and sustainable business practices. Highlight the alignment of Islamic finance principles with environmental, social, and governance (ESG) criteria, attracting socially conscious investors.
Transparency and Accountability: Ensure transparency in financial transactions and adhere to the principles of accountability, assuring investors that their funds are managed ethically and under Islamic principles. Regularly publish financial reports and adhere to Sharia governance standards to build trust among potential investors.
Innovation in Financial Products: Develop innovative and competitive financial products that comply with Islamic principles, catering to a diverse range of investors with varying risk appetites. Introduce Sukuk (Islamic bonds), Islamic mutual funds, and other financial instruments that provide viable alternatives to conventional investment options.
Global Market Integration: Actively seek partnerships and collaborations with international financial institutions to expand the reach of Islamic finance globally. Participate in cross-border initiatives and projects, attracting capital from diverse regions and contributing to the growth of the Islamic finance market.
Educational Initiatives: Conduct awareness campaigns and educational programs through mainstream media outlets and other social media to inform potential investors about the principles and benefits of Islamic finance. Foster a better understanding of Sharia-compliant financial products, addressing misconceptions and promoting the advantages of this ethical and inclusive investment approach.
Technology Integration: Embrace financial technology (fintech) solutions to enhance the efficiency, accessibility, and convenience of Islamic financial services. Develop user-friendly digital platforms for banking, investment, and other financial activities, attracting tech-savvy investors and promoting financial inclusion.
Collaboration with Islamic Scholars: Engage with Islamic scholars to ensure that financial products comply with Sharia principles, providing investors with confidence in the religious legitimacy of their investments. Seek endorsements and certifications from reputable Sharia scholars to enhance credibility in the eyes of potential investors.
In a nutshell, by combining ethical practices, financial innovation, global integration, education, technology, and collaboration with religious authorities, Islamic finance can create a compelling environment to attract capital from a diverse range of investors. And Allah knows best! “Praise be to Allah in Whose favor good deeds are accomplished” (ibn Majah 3803).
YAHAYA ILIASU MUSTAPHA
The writer is an Islamic Banking and Finance patron and advocate in Ghana and beyond.
Email: yahaya0246873726@gmail.com
https://www.facebook.om/Yahaya.iliasu.94
0506218343 / 0246873726