“Maqasid Social Goals:
An Agenda for Maqasid-based Transformative Change in a Post-Pandemic World”
SPECIAL KEYNOTE ADDRESS BY
HIS ROYAL HIGHNESS
SULTAN NAZRIN MUIZZUDDIN SHAH
ROYAL PATRON FOR MALAYSIA’S ISLAMIC FINANCE INITIATIVE
AT THE 12TH SC-OCIS ROUNDTABLE (VIRTUAL)
DATE: 23 SEPTEMBER 2021 (THURSDAY);TIME: 3.50 PM
“Maqasid Social Goals:
An Agenda for Maqasid-based Transformative Change in a Post-Pandemic World”
Bismillahirrahmanirrahim. In the name of God, the most Merciful and the Most Gracious.
Distinguished guests, Ladies and Gentlemen,
Assalamualaikum warahmatullahi wabarakatuh.
- It gives me great pleasure to address you at this year’s 12th SC-OCIS Roundtable, the second of these events to be held virtually. As we approach the second anniversary of the emergence of Covid-19, the pandemic is not yet over. It is still dominating all our lives to some degree. While its total costs are yet to be counted, its impacts – in health, social, and economic terms – will undoubtedly be felt for many years to come.
- If there was ever a time for the finance sector to step up, it is now. But it needs to do so with a new approach – one in which ‘Maqasid’ is reclaimed as the basis for transformative change, and ‘Mammon’ is jettisoned. This is one answer to the famous dilemma that “You cannot serve both God and mammon,” posed by the great economist, J. A. Hobson, in 1931. To put this another way, wealth must be valued for its distributive, and not its accumulative quality. The economy must be driven by generosity, not greed.
- There has been some recovery in the first half of 2021. The International Monetary Fund (IMF) projects global growth of 6 per cent in 2021, moderating to between 4 and 5 per cent in 2022. But a full recovery for global trade, investment and travel depends on rapid and equitable access to Covid-19 vaccines around the world. This has not happened. Sub-Saharan Africa, where vaccine access is so far negligible, will be the world’s slowest growing region this year.
- The statistics on the disruption caused by the pandemic are dire. Global trade in goods and services has declined by 12 per cent year on year, the deepest slump since the 2008 financial crisis. World hunger is worsening. The number of people with inadequate access to food increased by 320 million in 2020, to reach 2.37 billion. An estimated one tenth of the world’s population are under-nourished. According to a UN report, Africa is posting the biggest jump. But what is scandalous is that many of the structural shortcomings relating to food insecurity and poor nutrition pre-date the pandemic. These include conflict, climate change and natural disasters, economic downturns, poor governance, low productivity, and inefficient food supply chains.
- These difficult times have exposed terrible global inequities. But periods of adversity can also bring out the best in society. Governments around the world have responded to the pandemic with rescue packages, extending these during second and third waves. The finance sector has played a major role in these efforts. Like their conventional counterparts, Islamic financial institutions have shown remarkable resilience in coping with the various moratoriums and write-offs that have been necessary, as well as the unexpectedly rapid transition to digitization.
- Many Islamic financial institutions are going that extra mile to help their customers, and thereby their countries’ economies in these difficult times. Some are also innovating new ways of dealing with the implications of the pandemic:
- Kuwait Finance House, for example, has written off US$65 million in customer Covid-era debts, benefiting 10,000 defaulting debtors against whom litigation had been started. This debt forgiveness action happened following collaboration between the bank and the Ministry of Justice in Kuwait.
- Another innovating institution is Amana Bank, which is Sri Lanka’s premier Islamic bank. It granted a year-end bonus to 2,000 children’s savings accounts in 2020. This was part of a strategy to encourage parents to nurture the habit of regular savings for and by their children.
- The great potential of Islamic finance to lead in an equitable, global economic recovery is demonstrated by the actions of the Islamic Development Bank during the pandemic itself. Of all the Multilateral Development Banks, the IDB may have had the greatest positive impact during the pandemic, with a few of its initiatives. After the World Bank, the IDB has the second largest subscribed capital of any MDB, at USD 70 billion. It mobilized its resources in response to the pandemic in several ways:
- In 2020, it established a USD 2.4 billion ‘Group Strategic Preparedness & Response Programme,’ to help combat the health and socio-economic impacts of the pandemic in member countries. This comprised soft loans, grants, private sector finance, trade finance, and credit and investment insurance.
- Jointly with its export credit agency, the ICIEC (Insurance of Investments and Export Credit), the IDB also launched a USD 2 billion Covid-19 Guarantee Facility. This is intended to support the private sector in Covid-hit industries, and to attract cross-border investments.
- In May 2021, it launched a USD 850 million ‘IDB Covid-19 Vaccine Access Facility.’ This complements similar facilities offered by its sister entities.
- The IDB and ICIEC have also set up a ‘Covid-19 Emergency Response Initiative’. This initiative, known as, ‘The Islamic Solidarity Fund for Development’, has been allocated a grant of USD 400million to support the procurement of urgent supplies, such as medical resources and food, for member countries.
- While these are all very welcome Maqasid-inspired actions, they are undermined by their piecemeal nature. The challenge, then, is how to coordinate these scattered if impressive actions into a more comprehensive Maqasid-driven agenda. What we must seriously consider is how to inculcate Maqasid values into the very architecture of operational Islamic financial services. So that the legitimate quest for profits and wealth creation is balanced with the achievement of social good and positive broader impacts. So that the economy benefits not only the privileged few, but our wider society and communities. So that it is not a question of the economy servicing the rich, but rather of the rich serving the country. I believe the philosophy of Maqasid has yet to be fully embraced across all the operations of the sector. This is how we can bridge the age-old gap between “God and mammon”.
- We must therefore ask ourselves whether finance in general, and Islamic finance in particular, requires a transformative change. Does the entire sector need recasting, with a new normal, post-pandemic, or even a new social contract, as current debates may imply?
Ladies and Gentlemen,
- No sector operates in a vacuum, of course, and in any society, all are expected to contribute to the common good. But our era is characterized by populist and increasingly polarized politics, by growing inequalities, racial and gender-based discrimination and violence, and inter-generational tensions over climate change. There are many such flashpoints of potential conflict, all of which have been exacerbated by the pandemic. What they reflect is an underlying fraying of the existing social contracts, which may no longer be fit for purpose. There is a growing sense that our systems are too heavily skewed against the interests of the majority. Too many people feel that they are only scraping by in the harsh new climate, or worse, that they are being left behind. Existing resentments and divides are deepening.
- In the Islamic finance sector, we are fortunate that the Maqasid philosophy provides us with the ideal template to address these troubling dynamics. It gives us a foundation for forging an agenda for transformative change that aims to heal these divisions and bridge these divides. It is now up to us to deliberate, consult, and formalize this common agenda. It must combine the rule of law; shared values; risks and rewards; and equal opportunities, in order to harness the resources and talents of everyone in pursuit of the greater good.
- This agenda should introduce ‘Maqasid Social Goals’ as the norm towards which all our financial institutions should strive. These goals, developed in consultation with regulators and industry bodies, should be incorporated into the constitutions of all the companies and institutions involved in the Islamic finance space. The Social Goals should include:
- Adopting an ‘Impact Investment’ approach, by ensuring that all transactions and products contribute to the greater social agenda.
- Addressing inequality, by improving access for minority groups and women to education, employment and services of all kinds, as well as by ensuring decent wages and working conditions.
- Harnessing Fintech and digitization, so that all operations are implemented as efficiently as possible, thereby maximizing positive social impacts.
- Strengthening mechanisms for good governance and oversight, in order to minimize damaging corruption and cronyism.
- Promoting new connections between finance and philanthropy, for instance through Public-Private Partnerships or PPPs.
- PPPs are a key area where financial and philanthropic goals may coincide for the greater good. They play a particular role in funding infrastructure investment. Having been brought to a near standstill during the pandemic, infrastructure development now has the potential to serve as an important driving force in post-pandemic economic recovery. One estimate puts the current pipeline of global infrastructure projects at USD 12 trillion, with rail and renewables the leading sectors.
- A traditional barrier to private investment in infrastructure is exposure to risk. As the leading Shariah-compliant Export Credit Agency in the world, the ICIEC has sought to overcome this challenge during the pandemic, by forging strategic partnerships; ensuring the continuance of critical trade flows; and creating innovative de-risking solutions. Their approach of political risk insurance and credit enhancement serves to effectively de-risk and thus catalyze private investment into emerging markets.
- The coming together of governments and the private sector to address complex societal needs jointly through PPPs is a growing trend in Asia. A survey by the Centre for Asian Philanthropy and Society revealed that 88 percent of top Asian business leaders believe these partnerships will become more common in the next five years. According to this report, successful partnerships leverage networks of trust, embrace champions and think long-term. To maximize their social impact, they must also be grounded in the principles of Maqasid.
Ladies and Gentlemen,
- The urgency of the challenges confronting humanity cannot be overstated. It is my strong conviction that the Islamic system of economic and financial intermediation, based on the principles of Maqasid al-Shariah, has become more relevant than ever. While we need to consolidate further our shared values and experiences, the response of the Islamic finance industry to the pandemic has shown that it can lead from the front, as opposed to merely following the consensus. We now have to be even more proactive, by developing a common set of Social Goals for the sector, based not only on global best practice but also on Maqasid. This will enable us to deliver the real social impacts that are so sorely needed.
- It is my fervent hope that the industry will embrace this vital challenge and set out a strong and practical agenda for Maqasid-based transformative change. I wish you all a fruitful conversation over the next two days, as we work together towards achieving this noble ambition!
Matthew 6:24. ↑
‘Maqasid’ or its complete phrase, ‘maqasid al-shariah’, is the Arabic term referring to the underlying principles and spirit behind Islamic law to protect among other things: religion, life, livelihood and wealth and/or property. ‘Mammon’ is the Aramaic word meaning ‘wealth’ or ‘property.’ For a classic account on the relations between economics and religion, first published in 1931, see J. A. Hobson, God and Mammon: The Relations of Religion and Economics (London: Routledge, 2012). ↑
World Trade Organization, World Trade Statistical Review 2021 (Geneva: WTO, 2021), 11. ↑
World Health Organization, ‘UN Report: Pandemic Year Marked by Spike in World Hunger,’ WHO News Release (12 July 2021): https://www.who.int/news/item/12-07-2021-un-report-pandemic-year-marked-by-spike-in-world-hunger. ↑
Centre for Asian Philanthropy and Society, Public-Private Partnerships for Social Good: Rethinking PPPs (Hong Kong: CAPS, 2021). ↑