Unraveling the Sustainable Development Impact of Islamic Finance

United Kingdom – The Indonesian Association of Islamic Economists in the United Kingdom (IAEI-UK) proudly marked its third year with the successful Annual Opening of IAEI-UK 2025, accompanied by an insightful International Webinar themed "Moral, Ethics & Economics: Unraveling the Sustainable Development Impact of Islamic Finance." The event took place on Saturday, 15 February 2025 and was held online.

The webinar featured distinguished speakers including Professor Alija Avdukic (Professor in Political Economy and Islamic Finance, University of Dundee) and Dr. Media W. Askar (Founder of CELIOS, University of Manchester Alumnus). Moderating the discussion was Happy Febrina Hariyani, MSi (Programme Officer of IAEI-UK, a postgraduate researcher at Coventry University).

The webinar was attended by over 340 participants, signifying strong interest in intellectual discussions in Islamic economics that drive meaningful changes. The event also officially introduced the IAEI-UK committees for 2024/2025, followed by opening remarks from IAEI UK Chairman, Muhammad Rizky Rizaldy. He emphasized the importance of collaboration in advancing Islamic finance and called for collective efforts in addressing inequality through sustainable economic policies. He underlined IAEI-UK's commitment to facilitating impactful discussions that inspire real-world solutions.

The webinar topics covered included Islamic financial inclusion, alternative financing mechanisms such as zakat maal, and Islamic moral economy. Dr Askar highlighted how zakat maal functions with a 2.5% contribution, demonstrating its alignment with modern economist thought advocating for a 2% wealth tax. The importance of increasing Indonesia’s tax ratio to enhance public welfare was emphasized. Islamic finance was presented as a moral and ethical framework that moved beyond compliance, promoting faith-driven economic redistribution.

Insights were shared on how Indonesia’s super-rich continue to grow despite widespread economic disparities. The lack of a wealth tax in Indonesia drives inequality, with discussions pointing towards zakat maal as a potential solution to bridge this gap. The discourse also highlighted the need for robust data on zakat maal’s impact in fighting inequality, advocating for deeper research and implementation strategies.

The speakers discussed strategies for integrating zakat with broader development goals, ensuring its benefits extend beyond the Muslim community. Comparisons were made to Saudi Arabia’s state-mandated zakat and Malaysia’s tax incentives for zakat payers, illustrating various approaches to institutionalizing Islamic finance.

Professor Avdukic highlighted the concept of Mizan, or balance in Islamic teachings, emphasizing that economic and environmental sustainability must be aligned. The discussion explored how Islamic finance can integrate sustainability, particularly in circular economy initiatives.

Professor Avdukic also elaborated on the principles of Maqasid al-Shariah (the objectives of Islamic law) and their relevance in modern economic systems. He explained how Islamic finance must go beyond profitability and align with justice (adl), public interest (maslahah), and social welfare (rahmah). The integration of Maqasid al-Shariah into economic policies ensures that financial systems prioritize ethical considerations and equitable distribution, promoting long-term sustainability.

As emphasized by Muhammad Fariz, MBA (Project Manager of International Webinar, IAEI-UK), embracing a positive mindset is crucial in shifting narratives from #kaburajadulu (escaping the challenges) to #yukbisayuk (let’s make it happen!).  IAEI-UK aims to be a catalyst for change, facilitating collective initiatives to strengthen the role of Islamic finance in achieving sustainable development. This event marked a significant step in promoting alternative economic systems that prioritize equity, sustainability, and social justice.

Contributor: Nita Wakan, Master of Finance (Cand.) Cambridge University, IAEI UK committee