Finance Offers Meeting Point for Discussion With Islam

The TakeAway: The CSR and SRI communities can discover shared values with Islamic finance over goals of sustainability, prosperity, and justice.

The frenzy surrounding a Southern preacher’s threat to burn the Koran – on the eve of the ninth anniversary of 9/11 and in the midst of ongoing controversy around the Park51 Islamic community center to be constructed near Ground Zero – highlights how little most Americans know about the Islamic faith. For example, few realize that Islamic finance, based on Shari’ah law, integrates ethical principles into decisions about money – just as socially responsible investing (SRI) and corporate social responsibility (CSR) do.  Establishing ties between the rapidly growing Islamic finance and SRI/CSR communities – who share commitments to sustainability, prosperity, and justice – could help create opportunities for mutual understanding and collaboration.

In March 2010, I was a plenary speaker at the Ninth Harvard University Forum on Islamic Finance, held at Harvard Law School and sponsored by the Harvard Islamic Finance Project (IFP). Its theme was Building Bridges Across Financial Communities: The Global Financial Crisis, Social Responsibility, and Faith-Based Finance. (The full program can be viewed here.)

Held on day two, our session on Islamic finance and CSR featured summaries of two discussion papers, followed by a panel moderated by Kennedy School Public Policy Professor Asim Ijaz Khwaja. Sayd Farook (the director of the Oxford Centre for Islamic Studies and Dar Al Istithmar) and Rafi-uddin Shikoh (the managing partner of and DinarStandard) presented their paper on the integration of social responsibility in Islamic financial institutions (IFIs).

“With the exponential growth of Islamic finance, there has been a simultaneous increase in the expectations gap between Islamic finance practitioners and civil society members about the role that Islamic financial institutions should play in society,” Farook and Shikoh stated in their Introduction. They found that, overall, IFIs “have a good start on most aspects of social responsibility, contrary to criticisms leveled at the industry. However, this varies widely between institutions.” The authors then profiled some socially responsible programs, including a Charitable Takaful Savings plan, a social impact based investment program, and a Shari‘a compliant micro-finance initiative.

Dr. S. Nazim Ali, organizer of the Forum who serves as acting director of the Law School’s Islamic Legal Studies Project, summarized the discussion: “In their presentation, Farook and Shikoh raised the question of how Islam can influence business strategy to affect social change and justice through financial institutions… [They concluded] that the role of financial institutions within business and industry is one of high-impact, serving as engines of social responsibility and as a means of mitigating poverty and other transnational challenges such as global warming.”

In subsequent comments, respondent Steve Lydenberg of Domini Social Investments reiterated the three primary assertions of their paper: that financial institutions owe a contribution to a public good, that their social practices should be exemplary, and that they have an obligation to address social justice.

In my presentation, “Money and Morality: Pathways Toward a Civic Stewardship Ethic,” I pointed out that the roots of economic activity lie in exchange relationships that are nourished by a vocabulary of values that, in turn, are informed by faith traditions and their teachings about the obligations of wealth.

“Lydenberg summarized that Murninghan believes institutions need to integrate universal values, that doing so requires the appropriate vocabulary, and that integra­tion also means a blended engagement with other SRI communities,” Dr. Ali wrote in his summary.

Interfaith Center on Corporate Responsibility Executive Director Laura Berry, another respondent, spoke of the need for collaborative engagement and the importance of shared respect and learning, which she has demonstrated through extensive outreach to the Islamic community through her interreligious work at ICCR.

The polarities of American ignorance and Islamic extremism make it hard to have authentic conversation about common ground. We don’t deny the challenges of forging new pathways, but perhaps we can make a start, because economic and sustainability matters affect everybody, regardless of culture or class. Let us include this in our thinking, as we ponder the meaning of 9/11.

As-Salaamu `Alaykum.  Peace be upon you.

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Author’s note: In 2014, the Harvard Islamic Finance Project ended operations after merging with the Harvard Islamic Legal Studies Program, whose history is described here. The Islamic Finance Project archives can be viewed here. An online compendium of the papers presented at the 9th Forum can be accessed here.