Chapter in Book

The announcement of the SDGs in 2015 marked a dramatic shift in global development, culminating in an age of international cooperation where the international community bands together to tackle the world's most pressing challenges. This chapter discusses the peculiar connection between Islamic financing and the SDGs and focuses on the possible harmony between these two sectors. It emphasizes the need for significant financial resources to advance sustainable development. Researchers argue it is crucial to bring digital technologies together with Islamic finance to reach sustainable economic growth through innovations like artificial intelligence (AI), blockchain, and fintech. In addition, the chapter explains core principles of Islamic finance that conform to Shari'ah, which will eradicate poverty and promote conscientious consumption. Islamic finance opens the opportunity for financially and socially excluded groups, poverty reduction, and environmental sustainability through programs like renewable energy projects. However, SDG integration with Islamic finance still poses some challenges, namely, Shari'ah scholars' understanding of the SDGs, regulatory and operational difficulties, the necessity for innovation, and measuring nonfinancial benefits. Through case studies, the authors provide pragmatic insights into successful integration processes as well as practical lessons for the concerned parties. The chapter ends by making policy recommendations grounded on active support by governments, compulsory educational initiatives, new interesting Islamic finance products, and shared efforts (or undertakings) among various stakeholders. In short, this chapter positions Islamic finance as a potent catalyst for SDGs, furnishing a sustainable economic and social development framework while acknowledging and addressing challenges on the integration journey.

Research and innovation are crucial for the progress of the Islamic economy and finance, as they provide the foundation for its growth and long-term sustainability. Engaging in ongoing research, creates novel financial solutions that not only adhere to Shariah principles but effectively cater to the specific requirements of various markets and stakeholders in Muslim countries. This innovation is essential for the expansion of Islamic finance, as it guarantees accessibility to all sectors of society, including those who are unserved and underserved. Research also plays a crucial role in developing maqasid-driven financial solutions that promote financial inclusion and empower individuals and communities. By optimizing research and fostering innovation, Islamic finance has the potential to adapt and address contemporary difficulties while adhering steadfastly to its ethical and social justice values. Furthermore, research plays a pivotal role in the establishment of a strong regulatory framework that promotes the expansion of Islamic finance, guaranteeing its durability and stability. This is the process of establishing uniform standards across many countries, which enables more seamless transactions across borders and enhances the worldwide influence of Islamic finance. Research and innovation enhance the inclusivity and resilience of Islamic financial sectors, aligning them with the Islamic worldview that helps understand the universe, people, and their connection with Allah and serve as guidance on morality, social interactions, and influence our behaviour and decision-making. Islamic finance may contribute significantly to the sustainable development of Muslim nations by advocating for ethical investment, environmental stewardship, and social justice.

Islamic economics is ethical as its principles are derived from the religion Islam that gives paramount consideration to application of moral principles in all aspects of human lives. As such, there is no need to mention the word ethics with Islamic economics to describe its moral dimension since ethical values are inherently included in Islamic economics. This chapter provides a basic overview of the lex loci applicable to Islamic economics, which is Shariah, in order to understand the Islamic world view surrounding the subject and its economic teachings derived from tawheed. Furthermore, the differences between an Islamic economic system, on the one hand, and socialism and capitalism, on the other hand, are also provided, followed by a discussion of Islamic economic governance via the institution of hisbab and the practice of Islamic economics in classical and contemporary times. This chapter aims to provide readers with an understanding of Islamic economics by presenting the theoretical foundations undergirding it contemporaneous practical application.

Islamic digital banks are the forefront of financial technology which means they can offer innovative products and services in line with Shariah. However, having only recently set foot in Malaysia has its own set of challenges. In countries where technology advances, coupled with significant Muslim audiences, such as Dubai and Kuwait, prominent Islamic digital banks paved their way. In 2022, the Central Bank of Malaysia (BNM) announced five successful digital banking licence applicants. In the spirit of financial inclusion and regulatory support, two of the applicants are establishing Islamic digital banks. The purpose of this study is to examine the Islamic digital framework in Malaysia and identify the obstacles associated with it. Qualitative case study research has been optimized by collecting data from professional experts in the Islamic finance industry from four different countries through semi-structured interviews. This chapter then finds six main challenges, namely operational risks, lack of compliance and Shariah adherence, profitability, scarcity of Islamic finance experts, technology adoption and lack of trust and regulatory compliance. This study is amongst the pioneers in Malaysia that explores the challenges in establishing Islamic digital banks. The outcomes of the study are relevant to governments, regulators, institutions, and central banks to structure the right interventions to counter the hurdles. Future regulatory enhancements are required to spearhead the development of Islamic digital banks in Malaysia.

The growth of Islamic finance in Commonwealth of Independent States (CIS) countries generally is slower in the Central Asia region compared to other regions in the world. With its population of more than 34 million, Uzbekistan is probably one of the most promising markets for Islamic finance in Central Asia. Therefore, the emergence of intensive public debates around this matter and officially announced plans of the government to create an infrastructure for Islamic finance prompt that the relevant authorities are taking a drastic U turn regarding the sector because the country has not clasped the potential of Islamic finance. This research aims to examine the challenges facing pioneering Islamic finance in Uzbekistan. Specifically, it attempts to explore the current state of Islamic finance within the country, identify the current obstacles it faces and recommend practical ways to resolve the obstacles identified. Apart from that, the research investigates the Islamic financial products and services suitable in Uzbekistan. The findings of this research suggest some specific challenges facing the country in this regard. Inexistence of robust legislation and transparent regulatory framework coupled with lack of talents and those who are ready to contribute to the development of the new financial system in Uzbekistan are the major challenges, followed by public awareness and fully understanding the new financial system, that the country is facing. Introduction of the Banking Act that will suit the implementation of the Islamic finance for all three segments and talent acquisition with necessary skills and knowledge are practical recommendations to solve the challenges. This will in turn provide better promotion of the new system, increase demand from the population and diversify the range of products offered. It is therefore anticipated that the outcome of this research would assist government officials, policymakers, all other stakeholders as well business leaders to deeply understand and review the results and findings.

Indonesia's micro, small and medium enterprises (MSMEs) sector, with over 65 million businesses, is globally the largest. The sector accounts for more than 60 per cent of the country's GDP and employs over 97 per cent of its workforce. Yet, lack of access to finance due to the nature of the business, has constrained development of the sector. This study aims to examine usage of blockchain to aid microfinance and expedite MSMEs' access to finance in Indonesia. Employing qualitative research techniques, the study focuses on Baitul Maal Wa Tamwil's use of blockchain in providing micro sukuk for financing MSMEs. The study finds that using blockchain to offer microfinance services facilitates greater transparency about MSMEs, enables efficiency and accountability in their access to finance. It bridges the gap to MSMEs' access to finance, reduces cost of transactions and mitigates setbacks related to them. As blockchain drives the evolution of enterprises and microfinance institutions in Indonesia, regulatory bodies must stay abreast of these advancements to ensure that innovation progresses in tandem with appropriate regulations. As a learning experience, appropriate governance and legal framework needs to be phased in to accommodate blockchain, its peculiarities, and for it to foster financial access and deepen inclusion.