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Journal cover: International Journal of Islamic and Middle Eastern Finance and Management

International Journal of Islamic and Middle Eastern Finance and Management

ISSN: 1753-8394

Online from: 2008

Subject Area: Accounting and Finance

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How socially responsible investing can help bridge the gap between Islamic and conventional financial markets


Document Information:
Title:How socially responsible investing can help bridge the gap between Islamic and conventional financial markets
Author(s):Michael S. Bennett, (The World Bank Treasury, Washington, DC, USA), Zamir Iqbal, (The World Bank Treasury, Washington, DC, USA)
Citation:Michael S. Bennett, Zamir Iqbal, (2013) "How socially responsible investing can help bridge the gap between Islamic and conventional financial markets", International Journal of Islamic and Middle Eastern Finance and Management, Vol. 6 Iss: 3, pp.211 - 225
Keywords:Capital markets, Finance, Islam, Islamic finance, Socially responsible investments, Sukuk
Article type:Conceptual paper
DOI:10.1108/IMEFM-Aug-2012-0078 (Permanent URL)
Publisher:Emerald Group Publishing Limited
Acknowledgements:JEL classification – G1, G2
Abstract:

Purpose – Islamic finance and socially responsible investing (SRI) have been two of the most rapidly growing areas of finance over the last two decades. During this period, they have each grown at rates that far exceed that of the financial markets as a whole. The purpose of this paper is to find similarities and commonalities of both markets and identifies how both could benefit from each other.

Design/methodology/approach – The paper takes a comparative approach in comparing and contrasting two markets. The paper reviews the progress and driving forces in both markets and makes policy recommendations.

Findings – Islamic finance has grown at a very impressive rate over the last two decades, but the Islamic fixed income market remains under-developed. SRI has become an increasingly common investment strategy during that same time period, but there is still insufficient supply of SRI fixed income instruments. The convergence of these two facts creates the opportunity for a fixed income product to be developed that could appeal to both SRI and Shariah (Islamic Law) compliant investors, and thereby serve as a bridge between the Islamic and conventional financial markets. The paper believes the product that could play this role is Sukuk for which the proceeds are used to fund economic development.

Research limitations/implications – The paper takes a view from a financial expert's point of view which could be different from the scholars of Islamic legal system.

Practical implications – The paper provides an innovative view to two different markets and suggests that there are commonalities which need to be exploited for the benefit of both markets.

Originality/value – This is probably the first known attempt to related SRI financing to Islamic financing particularly Islamic capital markets.



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