Dubai: It is well accepted that Islamic finance today is a prohibition oriented industry: avoiding Riba (interest), Gharar (uncertainty), Maysir (speculation) in contracts and transactions, and staying clear against financing, funding or investing in the ‘sin' sector.
But is it too simplistic to assume that an Islamic institution's obligatory responsibility is merely avoiding the negative as a core business model?
There must be a role, call it ability responsibility, within the parameters of the Sharia principles or the way to the watering-hole, for such institutions to undertake the positive, that is, justice, equitable distribution, sustainability and prosperity.
It is such attributes that distinguish Islamic finance from conventional (Riba) financial institutions. But, in certain increasingly vocal quarters, including Muslims, there are concerns that Islamic finance today, especially on the financing side, is about "Sharia arbitrage," "Islamic wrappers veiling conventional products," or "smoke and mirrors!"
It is well accepted, possibly not well understood by the ‘Muslim man on the street,' that Islamic finance is not charity, defined as redistributing wealth to the ‘have nots.' Islamic banks have a primary fid-uciary duty to maximise shareholder value within constraints of Sharia, and secondary "ability responsibility" as model corporate citizen.
Today, Sharia scholars advise on issues presented to them, be it screening, transactions, and so on, but, what about their role tomorrow.
As an important stakeholder in the industry, has the time arrived for scholars to become facilitators, by guiding beyond the negative prohibitions, as bare minimum, to the positive?
The positive entails active efforts of newer paradigms of engagement that not only meet the by-laws of Islamic financial institutions, but, more importantly, Allah's "by-laws," Quran and Sunnah, of enjoining the good.
The Quran states Allah will test mankind, as we are His assigned representative or vice-regent (Khilafah) on earth. Thus, the world does not belong to mankind, but we are accountable trustees holding as a trust (Amanah) for successor generations. Surah Al Zalzala, V. 7-8, "... Then anyone who has done an atom's weight of good shall see it and anyone who has done an atom's weight of evil, shall see it."
So, what's the record of Islamic banks?
In financing projects, in the real estate and construction sector, are Islamic banks (in GCC) taking into account environmental impact considerations? Is this a responsibility of the advising Sharia scholars?
Embedded in the Sharia principles, are responsibilities of enjoining the good. For Islamic banks, social responsibilities need to raised without ‘undue' hardship in bank's operations.
Islamic banks, like conventional banks, serve as financial intermediaries by providing (compliant) capital for permissible projects. Yet, unlike conventional banks like Citigroup and JP Morgan Chase or Munrich Re and HSBC, Islamic banks have yet to establish best practices concerning financing projects and corporates impacting the environment.
One cannot find an Islamic bank as participant of the Climate Principles, Carbon Principles or Equator Principles, social and environmental risks in project financing.
Yet the GCC, home to the largest Islamic banks, is also the home for the largest carbon footprint in the world. However, Masdar City presents a once in a lifetime opportunity, to date, for Islamic banks, be they in the GCC or Malaysia, to partake in (remaining) financing, be it the electric vehicles, resident/office buildings, etc., but, more importantly, better understand social responsibility in real time for this landmark project.
In the aggregate, Muslim majority countries have lower levels of literacy and higher levels of unemployment and underemployment, hence, the pursuit of knowledge based economies is more of a continually updated vision than today's reality.
Its well documented education not only graduates emerging economies to developed markets, like a South Korea or Singapore, but also reduces poverty, increases health standards, that is, virtuous cycle.
His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, has long been an advocate of education. Dubai Cares, launched in 2007, mission states "… partnerships with … The Bill & Melinda Gates Foundation, Microsoft, Room to Read, Unicef … to improve children's access to primary education in  developing countries … to help attain the United Nations Millennium Development Goal 2 of achieving universal primary education."
This is the need of the hour for a more far-reaching education contribution by Islamic banks.
The prohibitions in Islamic finance saved it from the financial crisis, and now it must show the breadth of its social responsibility, from environment to education, and lead without cheerleading.
The writer is Global Head of Islamic Finance at Thomson Reuters. The views expressed are his own and do not reflect that of his organisation or Gulf News.