Many analysts and economists view the integration of ethics and values into finance as a necessary step forward in the aftermath of the Global Financial Crisis. The conventional financial system, built on a doctrine of capitalism and self-interest, is said to be value-neutral. It therefore relies heavily on the assumption that the satisfaction of self-interest, through rational decision making, will result in the development of society.
It is no coincidence then that, while we are obliged to acknowledge some similarities in function between conventional financial systems and Islamic Finance, we are encouraged to highlight the fundamental differences between the two as well. Of them the most evident being the advocating of value propositions by Islamic Finance.
Every economic system can be seen to be based on a foundation of values and premises. In the case of conventional economics, though it may be said to be value-neutral, it is subject to change through social consensus when the need arises. These changes, deprived of any moral values, are often driven purely by greed and self-interest.
Contrary to the conventional economics, Islamic finance is based on the teachings of the Shariah and cannot be found to be in violation of those at any time. Maqasid al-Shariah, or the objectives of Shariah, can best be understood as the core teachings which are constituted in the Shariah – further expanded upon in the Islamic finance whitepaper linked below. Islamic economics and finance is therefore guided by the Shariah’s objectives to promote public interest and prevent harm. Inspired by this, Islamic finance strives for justice, fairness, trust, honesty, integrity and a balanced society. Ethical norms and social commitment as envisioned in the moral framework of the Shariah are what characterize Islamic finance. Principles of Halaal (permissible) and Haraam (prohibited), for example, act as a sort of moral filter for actions taken by individuals and form the legal framework for Islamic Finance.