There is a strong overlap between Islamic finance and the principles of environmental, social and governance (ESG) which we see today. For example, a key pillar of Islamic finance is being a good steward to society, the economy and the environment through the prevention of harm and attainment of benefits. There is an underlying sense of social justice by supporting activities that benefit society. As a result, Islamic finance does not invest in companies that deal with gambling, alcohol, weapons, tobacco, etc, due to their potential negative impact on the community.
There is also a strong drive toward the equitable distribution of wealth by putting money to productive purposes related to real underlying assets in the economy where risks and rewards are shared. The objective behind this is to promote job creation, financial inclusion and greater well-being.
Hence, adhering to the values of Islamic social finance, Standard Chartered Bank in Bangladesh has launched a deposit account for its clients with the underlying objective of supporting the local communities.
Identifying the opportunity
Through research, we have found that socially-inclusive finance is appealing to clients looking for ethical solutions. In Bangladesh, we saw an opportunity to develop sustainable products through which clients can directly participate in the social development of their communities. The current practice is comprised of generating donations which are collected and distributed mostly through informal channels. Also, clients face challenges in identifying the segments that are truly in need of such donations.
Developing the product
How about having a savings account which helps customers contribute toward society? This question led to the birth of the Saadiq Sadaqah Account. It is a Shariah compliant deposit account based on the principles of Mudarabah (profit-sharing). This account is designed to support the philanthropic objectives of Sadaqah (charity) leading to the sustainable development of society.
Through the Saadiq Sadaqah Account, clients can donate the profit earned on the account to the charity of their choice. We support various causes, such as female well-being, education for underprivileged children, climate change and healthcare, which lead to the sustainable development of society. Clients can select the charity of their choice at the time of account opening and thereafter the profit earned on the Saadiq Sadaqah Account will go to the pre-assigned charity’s bank account automatically.
Charities and the social impact
The following charities were shortlisted for the customers to select where they would like the profit earned on their account to be donated to:
• Jaago: Education for underprivileged students, awareness-generating programs on climate
• Underprivileged Children’s Educational Programme: Skill development for women
• Friendship: Women and child health, sustainable economic development (artisan employment), climate action
• Centre for the Rehabilitation of the Paralysed: Rehabilitation and support for the disabled, and
• PFDA: Skill development in autistic children.
The benefits arising from the Sadaqah savings account are also in line with the UN Sustainable Development Goals (SDGs) pertaining to SDG 1 (no poverty), SDG 3 (good health and well-being) and SDG 4 (quality education). This provides an efficient avenue for banks and clients to contribute toward the well-being of society through supporting children education, developing skills for women, rehabilitating the incapacitated and helping local artisans.
Therefore, we can say that the Saadiq Sadaqah account is not just a Shariah compliant account, but it also meets the intended objectives of Shariah (Maqasid Shariah) which are much broader and aims to be a good steward to society, the economy and the environment.
Ali Allawala is the head of Islamic banking – UAE and global head of Islamic consumer, private and business banking at Standard Chartered Bank.