Sustainable Islamic Financial Engineering with Special Reference to Gulf Cooperation Council’s Economies

Abstract

ABSTRACT

Purpose — This paper explores how Islamic economics and finance, when developed as an embedded framework for regenerative development in line with maqāṣid al-Sharīʿah (the objectives of Islamic law), can facilitate the design of sustainable contracts and Islamic financial engineering. This framework provides a mechanism to achieve the paradigm shift advocated by Islamic finance scholars to accommodate the sustainability agenda into the practical applications of Islamic economics and finance. The paper specifically focuses on the Gulf Cooperation Council’s (GCC) economies.   

Design/Methodology/Approach — This study employs an analytical research approach to evaluate the compatibility of Islamic social and commercial finance with sustainability objectives. The analysis is primarily qualitative and relies on the One Earth Framework proposed by Simpson et al. (2021) to structure the assessment of opportunities and challenges related to sustainability that Islamic economics and finance in the GCC region can help address.

Findings — The paper highlights the potential of Islamic economics and finance as an embedded framework to address sustainability challenges in the GCC countries. By examining the capacity of Islamic finance to accommodate sustainability pathways, it elucidates avenues for integrating sustainable practices within Islamic financial contracts and institutions.

Originality/Value — One of the key contributions of this paper is the introduction and development of Islamic economics and finance as an embedded framework. This pioneering concept not only lays the groundwork for a practical mechanism but also signifies a fundamental step in realising the paradigm shift within Islamic finance. This transformative approach enhances the relevance and effectiveness of Islamic finance in fostering sustainability, marking a significant advancement in the field.

Research Limitations — While the study provides valuable insights, it primarily follows an analytical approach and does not involve quantitative analysis. It serves as a starting point for further research on the integration of sustainability objectives in Islamic finance.

Practical Implications — The paper suggests practical implications for Islamic finance stakeholders, highlighting the potential for sustainable contract design and financial engineering.

Keywords — Islamic finance,  Islamic financial engineering, Natural capital, Regenerative development, Sustainable contract design 

Article Classification — Conceptual paper