Eight years after the signing of the 2030 Agenda, once we have crossed the equator, progress towards achieving the Sustainable Development Goals (SDGs) is not adequate. In fact, United Nations declared in 2022 that “the 2030 Agenda for Sustainable Development is in serious danger.” Starting from this basis, it is extremely urgent to accelerate progress, for which it is vital to identify the key factors that lead us to this.
In this regard, there is a broad consensus in identifying finances as fundamental, not only in the direct financing of the entire Agenda, but especially in drastically reducing levels of poverty and inequality. In this sense, financial inclusion, defined as access to the financial system, is directly linked to poverty reduction from a multidimensional point of view, This is how John Kuada explains itprofessor at Aalborg University (Denmark).
However, it is currently estimated that a total ofe 2.5 billion adults do not use financial services throughout the world. An investigation published in the magazine The Singapore Economic Review In 2020, he revealed that this fact is especially serious in the Islamic world, where “many people choose voluntary financial exclusion due to their religious beliefs.” Taking into account, furthermore, that 50% of people in extreme poverty live in these countries, it is crucial to find a solution capable of reversing this reality. To achieve this, a financial model aligned with Islamic doctrine and the principles of sustainability is essential.
Faced with this colossal challenge, the so-called islamic finance could be the ideal solution. This finance model, based on the doctrine of Islam, has social justice as its ultimate goal, and its main characteristic is compliance with Islamic law or sharia. According to these precepts, certain activities of traditional Western banking, such as interest payments or excess uncertainty in operations, are not feasible.
However, the great doubt that may arise regarding the compatibility of the aforementioned model with the Agenda is based on the situation of great inequality suffered by many women in certain Muslim countries. In this regard, it is vitally important to underline the distinction between what is Islamic doctrine itself, “that considers both genders equal” and Islamist politicization, which is nothing more than one of the many interpretations of the doctrine, as the researcher highlights Ziba Mir-Hosseini. In fact, it is worth highlighting the existence of traditionally matrilineal ethnic groups such as the Indonesian Minangkabau or the Malaysian Adat Perpaith, who in turn practice the Islamic faith. The practice of a matrilineal culture, in parallel with the practice of a discriminatory faith with respect to the female gender at its roots, is incompatible, which demonstrates that the Islamic faith, per se, is not discriminatory. Furthermore, there are Islamic feminism movements such as Musawah Malaysian, which reinforce the previous notion.
Based on everything mentioned, and the fact that Islamic finance has social justice as its ultimate goal, it is concluded that this finance model is perfectly aligned with the 2030 Agenda. What’s more, United Nations explained in 2019 that Islamic financial instruments “promote socially responsible development and link economic growth and social well-being.” Taking into account, furthermore, the context of extreme poverty and financial exclusion in Muslim countries, the expansion and knowledge and understanding of Islamic finance is extremely necessary. Thanks to this, progress towards achieving the SDGs will be accelerated, particularly SDG 1 (End of poverty), and SDG 10 (Reduce inequality within and between countries). Additionally, it should be noted that it is necessary to include the environmental perspective in this model. In this way, the three legs of sustainability will be encompassed: economic growth, social inclusion and environmental protection.
Using strategies such as that of the Central Bank of Malaysia or the Indonesian Ministry of Finance as a reference, the optimal way to implement Islamic finance would consist of developing, on the one hand, a financial inclusion strategy built on two axes. First of all, a free financial literacy plan that aims to reach the greatest number of people. This plan will empower those most in need to make appropriate financial decisions, which is extremely important in order to make good use of available resources.
Secondly, it is vital to create a suitable environment for the establishment of microfinance institutions, including a legal framework to assist and protect them. These institutions have demonstrated their great capacity in offering financial services to people in poverty, in addition to economically empowering women, which is of special interest in certain Muslim countries. Third, the increase in the supply of sukuk Green (Islamic bonds) will mobilize huge amounts of money to finance projects that defend the planet, which undeniably integrates the environmental perspective of sustainability. Good example of this are the sukuk sovereign greenscreated in Indonesia in 2018 and 2019, which channeled more than 1.8 billion euros in investments in climate change mitigation and adaptation projects.
Going back to the beginning, after passing the halfway point of the deadline to achieve the SDGs, experts do not predict the best scenario once this ends. Therefore, it is necessary, now more than ever, to get down to work and commit to the Agenda. Financial inclusion is one of the keys to reducing poverty and inequality, latent especially in the Islamic world. To tackle this problem, it is necessary to put prejudices aside and address the issue using tools that already exist and have proven to be effective. The expansion, knowledge and understanding of Islamic finance are key in this sense, and are called to pave the way to the end of poverty and inequality, as well as help reverse the gender inequality that exists in many parts of the world.
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