As the ongoing Iran war and the stalemate at the Strait of Hormuz put severe inflationary and disruptive pressures on the global trade and investment, the Islamic banking and finance sector pitched for a broader and more socially responsible way of capital distribution.
The opinion emerged during the recently concluded “Third Global Islamic Economy Summit” in Istanbul, with participants discussing about how capital in Islamic economics should be shaped by ethical principles, financial inclusion and social benefit.
The summit, organized as part of the AlBaraka Summit Series, happened at Halkbank’s headquarters in the Istanbul Financial Center. During this, a panel discussion titled “Foundations of Capital in Islamic Economics: Concept, Principles and Purpose,” addressed the conceptual basis of capital in Islamic economics, principles shaping it and the ethical and sustainability dimensions of capital allocation.
Moderated by Umar Oseni, secretary general of the OIC Arbitration Center, the panel discussion saw Malek Khodr Temsah, general manager of Albaraka Turk Participation Bank, stating that the world has gone through major geopolitical and macroeconomic shocks in the last six to seven years, with concrete effects on countries, societies and individuals.
“Such periods create challenges and opportunities and the responsibilities of capital providers and banks extend beyond financing,” Temsah remarked.
As per Temsah, financial institutions should look to live up to the expectations of supporting financial inclusion, expanding the reach of capital to underserved communities, facilitating cross-border trade and investment during difficult periods and most importantly, making sure that the distribution of the overall growth is even among all the layers of the existing socio-economic structure.
He further underlined the need to provide access to finance and participation banking tools for disadvantaged groups that remain outside financial systems.
Khurram Hilal, CEO of Islamic banking at Standard Chartered Bank, said the Muslim world faces significant challenges, including a shortage of leadership.
“The global economy has come under pressure from tariffs, geopolitical conflicts and energy and commodity disruptions, which have deepened supply-side pressures and fuelled inflation. Sanctions, blockades and similar measures have effects beyond macroeconomic indicators, directly affecting people’s lives through higher prices and economic hardship,” he noted.
While issuing warning about the Islamic banks’ historical tendency to maintain a largely domestic and narrow focus, which leaves them more exposed during regional crises, Hilal suggested the financial institutions to adopt a broader and more diversified outlook instead of relying heavily on local markets.
Rafe Haneef, group CEO of MBSB Holding, which includes MBSB Bank and MIDF Group, said capital should be assessed through its social effect as well as its profitability.
“Capital must not create social harm and should be directed toward increasing social benefit,” he noted, while adding that the broader objectives of Shariah, including the protection of religion, life, intellect, family and property, should guide capital allocation.
“While capital is often managed with a focus on generating double-digit returns, profit should remain aligned with the ethical and social objectives of Islamic finance,” Haneef concluded.