Islamic Moral Economy: Bringing Back Substantive Morality to Humanise Islamic Finance

Abstract

The theoretical foundation of Islamic finance is constituted by the Islamic moral political economy, which aims to provide resource accessibility within the permissibility of Islam to all stakeholders. The complementarity and unitarity nature of the Islamic cognitive system essentialises the interest of all the stakeholders in economic and financial decision-making to rescue humans, the environment and land/water. In this privilege-based understanding paradigm, mutuality and solidarity are considered essential pillars. After its initial emergence in the 1970s in its modern form, Islamic finance has been deviating from its origin towards conventional finance's institutional logic rather than locating itself with the objectives of Islamic moral political economy. This paper argues that sustainable development challenges, along with the refugee and immigration crisis, provide Islamic finance with an opportunity to develop its practices within the substantive morality of Islam as an embedded necessity. This paper suggests that developing qard al-hassan (beneficence loan), funds can help Islamic banks and financial institutions at least partially respond to the call of Islamic moral political economy and can also be an effective instrument to ease the challenges faced by refugees and immigrants.