Aligned with its role as an advocate of the Islamic financial services industry (IFSI), the General Council for Islamic Banks and Financial Institutions (CIBAFI), the global umbrella of Islamic financial institutions, announces the submission of its comments on 10th April 2019 to the United Nations Environment Programme Finance Initiative (UNEP FI) on the Principles for Responsible Banking.
The Consultative Document (CD) of the Principles has been issued in November 2018 and is open for public consultation until 31st May 2019.
In its comments, CIBAFI thanked the UNEP FI for giving the opportunity to the Islamic Financial Industry to comment on the CD and provided collective feedback of its member institutions from 34 jurisdictions, comprising the following key points.
First, CIBAFI sees a very considerable overlap between the Principles and the underlying ideals of Islamic finance, which see finance as in the service of society and of human development. The Principles are therefore of great interest to our members. Although our members vary in size and location, they are mainly smaller institutions in emerging markets and therefore need to be able to apply the Principles in terms of local action. Thus, our comments largely reflect this perspective.
Second, it is noted within the CD that there is generally a focus on environmental objectives, although frequent references are made to the Sustainable Development Goals (SDGs). In general, smaller banks in emerging markets are well-placed to contribute to some of the other SDGs including Goal 1 (No Poverty), Goal 8 (Decent Work and Economic Growth) and Goal 9 (Industry, Innovation and Infrastructure). Therefore, CIBAFI and its members believe it would be better if the Principles had a broader emphasis on the SDGs, including some that smaller and emerging market banks may have more impact on.
Third, the implementation guidance, under Principle 1, discusses briefly but helpfully the alignment between the SDGs and Islamic banking. CIBAFI and its members noticed that there would be scope to expand this further, for example by referring to the ability to use zakat, waqf and other philanthropic funds in support of the SDGs.
Fourth, under Principle 2, the CD mentions a number of initiatives to be taken for continuous improvement. CIBAFI members noted that these practices may be quite costly on the banks, in addition to their increased regulatory requirements. Thus, it is suggested for the Principles to give more flexibility for the banks in their implementation, stating clearly that not all these are enforced on the banks when registering with the Principles. This is advised to be considered for other initiatives as well.
Full comments submitted to the UNEP FI are available on CIBAFI’s website: http://www.cibafi.org.
This initiative is aligned with the CIBAFI’s first strategic objective of Advocacy of Islamic finance Values and related Policies & Regulations. CIBAFI continues to support the Islamic Financial Services Industry through various activities and initiatives, including providing industry stakeholders with a platform to discuss emerging issues, representing the industry at major global financial events, and sharing knowledge through specialized publications and comprehensive training programmes.