The social challenges in different nations of the world have been on increase, putting pressure on limited public funds. It is becoming clearer by the day that the government cannot meet every need with limited resources alone. The need to invest in organizations whose operations will bring financial as well as social returns has become a necessity. Now, this is where Islamic Impact Investing comes into play. You may be wondering if these are the same thing or not. Let’s take a sneak peek.
What is Islamic Finance?
Islamic finance is the way individuals as well as corporate bodies, raise capital in line with the provisions of Islamic laws. Islamic Finance also covers every form of investment that is permitted by Sharia.This type of finance encourages investments that give back to society in a way.
What is Impact Investing?
Whenever you think of an investment technique to impact the society and environment positively, impact investing easily comes to mind. The result of impact investing is positive financial and social effects through invested capital.
What is the meeting point between Islamic finance and impact investing?
Islamic Finance and Impact Investing champion investment that is not only focused on financial yields. The impact of such investments on the social and environmental wellbeing of the people is also important. While it is unlikely to talk of Islamic finance without impact investing coming to mind, impact investing can exist outside of Islamic law. What then are the similarities between Islamic Finance and impact investing?
1. The relationship between society and business.
Investors, upholding the principles of Islamic Finance and Impact investing understand and recognize the relationship that exists between business and society. Investors understand that financial returns are but one aspect of investing. The aim of Islamic Finance and impact investing, therefore, is to create positive and lasting social change even as investors earn. So, socially responsible investment companies will have access to more investment capital than those that are not.
2. An investment that is based on value.
One of the aims of Islamic Finance and Impact investing is to have investment structures that pay much attention to value. Investors under this system invest not only to increase their income but to satisfy their morality. An investor will therefore try as much as possible to invest and ensure that such investment does not cause harm to anyone. An Islamic finance and impact investor, therefore, is guided by his or her morals and not only the desire to make money.
3. An all-inclusive financial system
Given the right support, Islamic impact investing will build a financial system where none is left behind.
With the continuous rise in challenges across the globe, certain things have become clearer. The similarities and close relationship that exists between Islamic Finance and Impact investing separate it as a possible solution to these challenges.
There has been a rapid increase in the growth rate of impact investing in particular and Islamic financing in general. Islamic finance industry players can find ways to generate returns from impact investing while making a positive impact on society.
Going Forward
If the gap between Islamic Finance and impact investing is breached, so many possibilities can come out of it. It will help to create a more effective strategy in responding to challenges associated with funding development projects. It will also foster growth and ensure that everyone is catered for.