<Special Feature"Socio-Economic Role of Islamic Finance and its Potential in the Post-Capitalist Era">Parallel Universes: What Islamic Finance can Learn from Socially Responsible Investment

Abstract

The paper suggests that Islamic banks and financial institutions (IBFs) are by definition part of the ethical banking/investment niche, although they are rather oriented towards the conventional financial industry. The paper then sets out to explore what IBFs could learn from socially responsible investment (SRI). Two areas are identified that could provide fruitful solutions for the general critique of the Islamic financial industry as focusing too much on form and too little on substance: IBFs could seek cooperation with Muslim civil society actors in order to better understand the ethical requirements of their customer and potential customer base and it could use methods developed in SRI such as positive screening and impact investment to guide investment or more generally business decisions. The research presented in this paper is largely based on data collected in semi-structured depth interviews with Muslim representatives in Germany.