Reimagining Islamic Finance

Excerpts from A Socially Responsible Islamic Finance: Character and the Common Good

“Will you write?” the Shaykh asked. I sat down against a column before him. We had been walking around and around the mosque atrium counter-clockwise for some time. The cool marble floor comforted my tired bare feet. A seed had been planted in me with his inquiry. I like to think that this book, A Socially Responsible Islamic Finance: Character and the Common Good, was borne of that conversation. I wrote it after nearly twenty years of developing and designing various Islamic business transactions and products sitting in offices in New York, London, Jedda, Dubai, and Jakarta, on plane rides from West to East and back, and increasing exposure to tazkiyyah.

For nearly twenty years, since I saw my first Islamic finance transaction diagrammed, questions have lingered inside me. This book explores some of the most important ones: What is it that holds back today’s Islamic finance from generating the sort of impact its early thinkers expected – in more equitably distributing wealth, tackling poverty, and generating greater societal development? Why does stakeholder skepticism of Islamic finance persist? What can Muslims learn from other initiatives tempering the desire for profit with principle? And what can Muslims offer the worlds of business and trade? And given the rare interaction between American Muslim communities and contemporary Islamic finance markets, must we (American Muslims) be limited by the latter?

Islamic finance is no more than a representation of the Muslim condition, in its positives and negatives. Its most significant challenge, I believe, is a spiritual and ethical one. While that might seem to be a surprising or bold statement, this challenge is probably not unique to Islamic finance. “Purification of the qalb of the presence of other than God, emptying (takhali) it of attachments to other than God, and adorning (tahali) it with the attributes of the Divine, at the finite human level, is a central purpose of Islamic spiritual practices, in their various forms.”1 The central thesis of this book is that “Islamic spirituality, in its norms as well as its practices, establishes a methodological framework and impetus to establish businesses and markets that support sustainability and social and environmental well-being.”2

The Shari’ah does indeed call “for sustainable and responsible living, individually and collectively, empathic relationships with present and future generations, institutions and communities marked by good governance and resiliency, and persons and businesses in search of positive social impact. Much of how such goals will be achieved depends upon a certain ethos and impetus founded upon Islamic spirituality to illuminate hearts and engender and regulate this ethos and impetus and then to discover, research, and develop new frameworks and structures. For al-Ghazali, the cure for ‘what he saw as the excessive formalism of the day’ that so distressed him lies in such spirituality. His work ultimately ‘defined an equilibrium between letter and spirit which despite the continuing vitality of both extremes, was to determine the tenor of Muslim religious life from his day on.’ It would be an understatement to state that al-Ghazali’s work, his predecessors, and that of other Muslim scholars, remarkably integrate worship and submission with law. Their discourse, both spiritual and intellectual, remains so important that it previews the nexus between trade and commerce, on the one hand, and social and environmental responsibility, on the other.”3

Thus “[f]or Islamic finance and other Muslim markets and communities to create social impact, environmental welfare, and good governance,”4 as called for by the Shari’ah, “spiritual development and self-discipline are essential precursors. This is so because, first, organizations and communities are comprised of individuals, who establish objectives, products, and processes. Second, by embedding Islamic spirituality, the character of Islamic financial institutions and their products are expected to transform positively to meet the primary challenge facing the [Islamic finance] industry, which is an ethical one.”5 What this book calls for in many respects is a paradigm shift in how we produce, invest, and earn mindful of our role as servants of Allah, service to His creation, and of the context in which we, as American Muslims, presently find ourselves.

The Purpose of Business

“The purpose of the human, Islam teaches, is to worship God. What then is the purpose of a business entity, which cannot technically speaking believe, nor pray, nor fast? We begin to answer this question with the goals of the Shari’ah, particularly those of the ethical-legal realm of relationships and transactions (mu’amalat). Among them is the preservation of life (nufus) and wealth (mal). The former means to protect human life, individually and collectively,6 and some scholars extend it to preserve non-human life as well. With respect to wealth, it means preserving that of the community as well as the constituents of that wealth. Some objectives of the Shari’ah concern individuals and particulars (juz’iyyah) while others are the purview of the community and universals (kulliyah). Some pertain to the rights of individuals (huquq al-‘ibad), and others pertain to the rights of God (huquq Allah) by which Muslim scholars refer, firstly, to the rights of the community as a whole (such as prohibiting the bribery of public officials) and, secondly, of those incapable of self-protection (such as minors). Most legislation derived from the Shari’ah would appear to relate to individuals ‘because the benefits and utility of private property lead to the general public good of the community.’”7…According to Ibn ‘Ashur (d. 1973 CE/ 1394 AH), “none of [the jurists] will deny that if the welfare of individuals and the proper management of their affairs is intended by the Shari’ah, then the same applied to the community as a whole is even more important.”8

The same holds true for Islamic spiritual practices and principles. Typically prescribed to individuals, when applied by business and other collective bodies, they bring tremendous benefit “in preserving and protecting wealth and life and producing positive social and environmental impact. Muhasabah, for instance, serves as a principle and method supporting self-assessment and reporting, feedback, and constructive response. Muraqabah, as another example, produces greater transparency, trust, and confidence. But they are not tools proposed herein with an intent to achieve sustainable or fair outcomes, for such are consequences reflective of the continued wisdom and relevance of the Shari’ah.”9 The intent must be loving submission to the Divine.

The purpose of an Islamic financial organization and any other business the owners and directors of which wish to be guided by Islamic principles therefore begins with “fulfillment of applicable ethical-legal particulars, so that the objectives of the Shari’ah are more likely realized. Certain of these objectives are particularly relevant to business, namely the preservation of wealth, which, in turn, is linked to the objective of a life intended by the Divine. As wealth includes the Earth, its diverse inhabitants and systems, and natural resources, its preservation includes avoiding harms and affirmatively promoting its continuity and welfare. Life is protected not only by preserving wealth, but by businesses that create positive social impact. None of this is achieved in significant measure, however, without right conduct founded on the purification of hearts and the refinement of character.”10

Lessons From An Ice Cream Maker

Ben & Jerry’s, the famous ice cream maker, highlights many important lessons. “The Vermont-based business, which began in a modified gas station, distinguished itself from other large businesses by its social policies. The company offered voter registration, purchased its Brazil nuts from indigenous farmers in the Amazon, utilized local Vermont milk, bought brownies made by in a bakery employing former prisoners, used special environmentally friendly containers, paid liveable wages to employees, and donated 7.5% of its profits to charity. It also provided 5% of its pretax profits to employees annually and partnered with non-profit organizations to open facilities for the benefit of youth and young adults facing barriers to unemployment.”11

Ben & Jerry’s link to a private foundation for charitable purposes is particularly important, particularly if the relationship among Muslims, capital, and business evolves “from the more technical points of Islamic law”12 (which are of great importance and linked to notions of social responsibility) “to social and environmental responsibility, in areas of labor, suply and distribution chains, and the natural and built environments.”13 Such principles and practices are more readily appreciated and shared by a wider audience – be they producers, consumers, investors, or otherwise. There is rarely, if ever, a need after all to limit a product or service to Muslims, particularly if we believe that there is benefit in Islamic ethics. It is more a matter of understanding our own faith and its rationale and objectives and being able to articulate them in a language that is not exclusive.

Riba & Sadaqa

“The Qur’an interestingly juxtaposes its prohibition of interest (riba) with that of charitable giving (sadaqah) as if the two are opposites not only ethically but consequentially. Given the prohibition of riba, what relationship should contemporary Islamic financial organizations and Muslim businesses and communities have with charity and philanthropy?”14

“Charity is one of the fundamental values of Islam with direct spiritual, ethical, and historical implications for the distribution of wealth. It is a responsibility the discharge of which serves as a proof of faith and accountability metric by which the self and its attachments to the material are subdued.”15 Because readers are well aware of this point already, I will not belabor it here. The impact of awqaf is, however, worth noting: “Trusts and endowments have provided significant positive social and economic benefit throughout much of Muslim history, beginning with precedents established by the Prophet Muhammad ﷺ, such as the well of Rumah…Endowments grew significantly and became one of the most important institutions for poverty alleviation…[Their] impact, permeating across communities sometimes separated by thousands of miles, was brought about by not only the nature of supported projects but their size and scale. In the 19th century, the share of arable land placed in trusts was three quarters of arable lands in the area of today’s Turkey, one-fifth of Egypt, one-seventh of Iran, one-half of Algeria, one third of Tunisia, and one-third of Greece. At the end of the 18th century some 20,000 waqfs existed in the Ottoman Empire with a total annual revenue of one-third of annual government revenues and one-half to two-thirds of its arable land. In India, by 1997 more than 250,000 waqfs existed. Many survived for considerably longer than five hundred years, and some more than one thousand years.”16 Trusts thus became “integral actors in the realms of property, finance, and labor” with tremendous impact.”17 That impact is illustrated by a French traveler to the Ottoman empire:

You find poor people who have nothing to give who understand that offering help to people consists not only of food and drink, but all kinds of needs: some spend their lifetime repairing bad roads by bringing stones, wood, filling holes and improving their surfaces; others arrange the course of streams and water sources, bringing water to the roads and some dig wells, or bring water to the road in a shed of some sort, and there invite [the passersby] to drink with such enthusiasm that I was certain they drank wine that was to be found flowing from streams. In North Africa, because water is scarce close by the cities, you find foundations for water built at the tombs of some Muslims, and there is some sufi who is maintained by the foundation to keep the cisterns full of water, and to encourage passersby to pray for the soul of the departed and the living family. Such foundations for water on the roads are a common project of poor people. There are rich people more in Anatolia than any other part of Turkey, who, when they see travelers coming on the roads, they invite them to eat, drink and sleep in their homes, for the sake of their [own] souls, and take nothing for it from anyone; neither rich nor poor pays anything, and the next day one thanks them heartily, invoking God’s blessing on them in recompense. And these kind of people are most respected among the Muslims because they send their charity to Paradise ahead of them.18

A Paradigm Shift

According to several studies, “stakeholders view Islamic finance by the ethical and social goals they believe are intended by its underlying principles and that should be directed towards staff, clients, and the general public, ‘promoting sustainable development, equitable distribution of wealth, and poverty alleviation.’ Stakeholders expect that Islamic finance is, or will become, much more than refraining from riba and conforming to what they seem to perceive as formalities and technicalities. …Despite Islamic principles strongly supporting social impact, environmental concern, and inclusive governance models, the Islamic finance industry’s contribution to these has been below its potential.”19

“Muslim communities and markets must rediscover an integration of the financial alongside the common good.”20 In both the Shari’ah as well as their extensive history of giving, Muslim communities and markets find significant impetus to adopt and engage in what is today termed impact investing, “one of several points of convergence between responsible markets and Muslim businesses and financial communities.”21 Impact investing involves “a collaboration among risk, capital, and public benefit, which may be mirrored in concept by Muslim communities through the well-established vehicle of waqf (pl. awqaf) under Islamic law, which finds parallel in many contemporary systems of trusts and endowments, and through not-profit or public service organizations…”22

Muslim business organizations and communities can then educate as to what offer Islam offers to the worlds of earning, investment, and consumption “not by the heavy financial design and structuring by which [Islamic finance today] is often perceived and identified, but by concerns and measurable outcomes of responsibility and welfare.”23 While this should loosen the hold of persistent skepticism over the Islamic financial industry, it more importantly offers Muslim communities a critical, heretofore underutilized opportunity to demonstrate the spiritual and moral benefits of an Islamic approach to trade and finance.

Beyond Islamic Finance

Regardless of what contemporary Islamic finance chooses to do or when it more wholly embraces notions of social and environmental responsibility, American Muslim communities and their businesses hold an opportunity to reorient an Islamic finance of their own. “By collaborating with waqfs and embracing impact investing to fulfill notions of responsibility, business organizations bring themselves under the umbrella of Islam, even when finance is absent. Indeed, the Shari’ah has much more to say about building inclusive governance, labor relations, community well-being, care for the earth and its diverse inhabitants, and designing responsible built environments than finance,”24 which it brings under the rubric of socioeconomic justice in any case.

Positive social and environmental impact should be designed into business models through the institutionalization of partnerships with awqaf, in the form of trusts, endowments, and not-for profit initiatives under local law. In short, business dedicates income producing assets to social and environmental welfare. Muslim communities can certainly work, as they have, “to promote social and environmental goals by discretionary and periodic giving. A more successful approach is likely one that institutionalizes strategic giving because the gaps and needs to be filled are often structural in nature. Poverty, for example, may be conjectural or structural…The latter is a long-term deprivation ‘created or maintained by shifting demographic or economic cycles, lack of land or work, life-cycle stages, such as youth, childbearing, or old age, lack of marketable skills or social prejudices against gender, age, or race… that prevent people from overcoming poverty. Many of the more universal categories of people – such as widows, orphans, the elderly, prisoners, and the disabled – are victims of structural poverty made permanently dependent on others for their basic needs and unable to escape this condition…’ Such challenges require solutions that are long term and structural in nature.”25

In so doing, American Muslim businesses demonstrate the relevance of their faith. They evidence their commitment and importance to the communities in which they live and work. They thereby construct a reputation of empathy and selflessness – not one merely intended to achieve self-directed benefit, but in worship of the Divine and in service to His creation. And hopefully that reputation is becomes widespread because of the numbers of participating Muslim businesses and far less so because of the amounts they contribute. The consequent secondary benefits, namely, trust and goodwill should help to proactively address many of the deficiencies and challenges faced by American Muslims (and beyond), particularly as they seek recognition for themselves and their faith as valuable citizens.

These “communities” and “stakeholders” to which I propose contributions are not limited to the Muslim. Habib Abu Bakr al-‘Adni b. ‘Ali al-Mashhur, commenting in his Al-Nubdhah al-Sughrah on the Hadith of Jibril with a rare focus on its ‘fourth’ element (i.e., the signs of the Hour), explains that the text addresses humanity and not only the ‘Muslim community’ and its institutions. To spread “optimism” in these times of “tribulation and moral deviation”, he recommends, among other things, zakah inititives, endowments, and other forms of sadaqah to combat poverty, advocacy in support of corporate responsibility, and mechanisms to address both spiritual and material diseases.26 These he draws from the hadith of the Messenger, may Allah bless, and grant to him, his Family, and Companions: “If the Final Hour comes while you have a palm-cutting in your hands, and it is possible to plant it before the Hour comes, then you should plant it.”27

"A Socially Responsible Islamic Finance: Character and the Common Good" by Umar F. Moghul is available through its publisher Palgrave-MacMillan and also on Amazon.


“Moghul’s book is critical reading, for he shows us it is possible to have peace within oneself and social prosperity. Moghul is never saccharine nor simplistic in his assessments and recommendations, some of which relate to complex financial systems which he explains with great clarity. At the heart of the book is the demonstration that true spirituality is not about shunning the world. Rather, it is about bringing the best part of ourselves to all our relationships, including our financial relationships.”

(Ingrid Mattson, Huron University College, Canada)

“This book’s uniqueness is its identification of intersections among classical Islamic ethics and spirituality, contemporary Islamic finance, and global responsibility initiatives. Using an authentic Shari’ah-based argument, Moghul convincingly posits that by developing individual and organizational values, Islamic finance and Muslim communities can participate in producing positive impact through business, reach the objectives of the Shari’ah, and offer its principles to others. This is, and must be, the future direction of Islamic institutions and economies.”

(Shaykh Yusuf T. DeLorenzo, Dow Jones Islamic Markets Indexes)

“Umar F. Moghul has superbly integrated the ideas of spirituality, morality and Islamic finance in this must-read book on Islamic finance. As long as Islamic finance encourages individual and collective character development consistent with Shari’ah, it can present a great opportunity to grace the world with the Islamic values of equitable and stable economic growth, inclusive and trustworthy social institutions, and responsible stewardship of the environment.”

(Professor M. Kabir Hassan, University of New Orleans, USA)


1. Moghul, 31. Unless stated otherwise, all references are to Umar F. Moghul, A Socially Responsible Islamic Finance: Character and the Common Good (Palgrave-MacMillan, 2017). Citations found within this book have been omitted.
2. Moghul, 20.
3. Moghul, 73-74.
4. Moghul, 21.
5. Moghul, 21.
7. Moghul, 74-75.
8. Moghul, 75.
9. Moghul, 75.
10. Moghul, 79.
11. Moghul, 618.
12. Moghul, 650.
13. Moghul, 650.
14. Moghul, 640.
15. Moghul, 627.
16. Moghul, 634-35.
17. Moghul, 639.
18. Moghul, 632-34.
19. Moghul, 641-42.
20. Moghul, 654.
21. Moghul, 612.
22. Moghul, 654-55.
23. Moghul, 657.
24. Moghul, 663-64.
25. Moghul, 665-666.
26. Habib Abu Bakr al-‘Adni b. ‘Ali al-Mashhur, Al-Nubdhah Al-Sughra, pages 64-65.
27. Al-Bukhari, Adab al-Mufrad.


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