Convergence of Values between Islamic Finance and Socially Responsible Investment (SRI): What are the Limits of SRI Sukūk Issuance?

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Published: Jul 6, 2022
Keywords:
Sukūk socially responsible investment Sharīʿah Islamic finance ethical investment

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Rafisah Mat Radzi
Senior Lecturer, School of Distance Education, Universiti Sains Malaysia
Minako Sakai
Associate Professor, School of Humanities and Social Sciences The University of New South Wales, Canberra, Australia

Abstract

Ethical investments, such as socially responsible investment (SRI), and faith-based investments, such as Islamic finance, have become commonplace in the economic development discourse. Given that SRI bonds dominate SRI markets, one might ask why SRI Sukūk (Islamic bonds) have not contributed more to certain social or sustainability-related causes or sectors to achieve the objectives of Sharīʿah (Islamic law). This study will mainly examine the aspects considered ethically or socially responsible as incorporated in SRI and Islamic finance. In doing so, this study will compare the values or principles of SRI bonds and the SRI Sukūk framework to enable Islamic finance players to make good use of the opportunity of the segment. This study further examines what limits the involvement of Islamic financial market participants in socially responsible investment. Drawing on the 2014 SRI Sukūk framework and other SRI legislation, this study reveals that both have similar qualities, characteristics and objectives. However, SRI sukuk are challenged by investors’ appetite for a profitable return, lack of awareness of social investment and lack of data and methodology associated with the Triple Bottom Line or 3Ps (people, planet and profit) approach. These problems have, to some extent, limited the Islamic financial market players from investing in social responsibility programes.

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How to Cite
Radzi, R. M. ., & Sakai, M. (2022). Convergence of Values between Islamic Finance and Socially Responsible Investment (SRI): What are the Limits of SRI Sukūk Issuance?. Journal of King Abdulaziz University: Islamic Economics, 35(2), 76–95. Retrieved from https://journals.kau.edu.sa/index.php/JKAUIE/article/view/325
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Vol. 35 No. 2 (2022)
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Article
Author Biographies

Rafisah Mat Radzi, Senior Lecturer, School of Distance Education, Universiti Sains Malaysia

Rafisah Mat Radzi is a senior lecturer at the School of Distance Education, Universiti Sains Malaysia. Previously, she was a lecturer in the Faculty of Business Management of the Universiti Teknologi Mara (UiTM), Perlis, Malaysia. She obtained her first degree from Universiti Kebangsaan Malaysia and holds a Ph.D degree from University of South Australia. Her current research projects are related to the credit rating process and methodology of corporate bonds, sukuk (Islamic bonds) and mortgage-backed securities. So far, her projects were funded by international sponsors, i.e Sumitomo foundation and Chartered Institute of Management Accounts (CIMA) and national grants in particular Fundamental Research Grant by Ministry of Education, Malaysia and a short term grant from Universiti Sains Malaysia. Email: rafisah@usm.my.  

Minako Sakai, Associate Professor, School of Humanities and Social Sciences The University of New South Wales, Canberra, Australia

Associate Professor Minako Sakai is an anthropologist of development studies and Deputy Head of School (Research) of Humanities and Social Sciences, the University of New South Wales (UNSW) Canberra. Her research interests include Islam and socio-economic development, gender equality, and disaster recovery.  Her latest co-authored book is Women Entrepreneurs and Business Empowerment in Muslim Countries (Palgrave MacMillan, 2022).  She has also published in in various academic journals such Indonesia and the Malay World, Intersections, Women's Studies International Forum, TRaNs, and Asian Ethnicity. Associate Professor Sakai hosted Dr Rafisah Mat Radzi at UNSW Canberra for research collaborations in 2019. Email: m.sakai@unsw.edu.au.