Islamic finance has become increasingly relevant as a means to fund development, including in non-Muslim countries. Since its origins, Islamic finance has embodied socially responsible investment principles. It provides safeguards for vulnerable populations and prohibits investments in activities related to tobacco, alcohol and drugs, speculation, gambling, pornography and weapons manufacturing. The core principles of Islamic finance are also the main tenets of the 2030 Agenda and are similar to those of impact investment: inclusiveness, equitable and participatory growth, social and distributive justice, open and accountable institutions, sustainability and women’s empowerment.
Islamic financial instruments are many, yet the Sukuk and the Micro-takaful stand out. The Islamic equivalent of bonds— Sukuk grants the investor a share of an asset along with the corresponding cash flows and risk. They can provide a significant source of financing for infrastructure development and impact-driven initiatives, thereby contributing to the achievement of the SDGs. For example, International Finance Facility for Immunization issued its first Sukuk in December 2014, a three-year, US$500 million transaction that was the largest debut Sukuk ever issued by a supra-national entity. Referred to as the “Vaccine Sukuk”, it brought the concept of socially responsible investing.
On the other hand, insurance products such as the Micro-takaful is a type of Islamic insurance, where members contribute money into a pooling system in order to guarantee each other against loss or damage. In Bangladesh, Micro-takaful products also protect the livelihoods of low-income households. These are profitable, for the insurance company and also have a positive social and community impact.