03_Franciosi


 
 

European Journal of Islamic Finance - ISSN: 2421-2172 
DOI: 10.13135/2421-2172/11175 Published by University of Turin https://www.ojs.unito.it/index.php/EJIF/index 
EJIF content is licensed under a Creative Commons Attribution 4.0 International License   

30 

Islamic Finance and Sustainable Development: Key 
Ethical Features and Proactive Initiatives 
Promoting Financial Inclusion 

Laura Maria Franciosi1* 

 

1 University of Bologna, Department of Legal Studies, Ravenna Campus, via G. Oberdan 1, Ravenna, Italy.  
  Email: lauramaria.franciosi@unibo.it  
 

 
 
Received: 10/10/2024 
Accepted for publication: 25/03/2025 
Published: 31/07/2025 
 

Abstract 

The 17 Sustainable Development Goals set forth by the UN 2030 Agenda require the adoption of proactive initiatives by 
countries in a global partnership and by companies, consumers, and citizens. SDGs recognise that ending poverty is strictly 
intertwined with strategies to reduce inequality and spur economic growth, all while tackling climate change and preserving 
the environment. In this context, the lack of financial inclusion increases poverty and frustrates economic development since 
access to essential financial services helps people nurture their education and financial plans, and financial inclusion can help 
alleviate poverty and lift economic development. The study highlights how, within this scenario, Islamic finance can play an 
important role in promoting sustainable and ethical development and financial inclusion, specifically in environmental 
sustainability, by increasing the so-called “green sukuk” or “ESG Sukuk.” Accordingly, the article analyses, from the 
comparative law perspective, the context of two Asian countries, Malaysia and Indonesia, that are pivotal markets for 
developing Islamic financial instruments and that of Sub-Saharan Africa, highlighting the potentialities of Islamic finance to 
foster sustainable development (in particular, SDG-01 No Poverty; SDG-05 Gender Equality; SDG-08 Decent Work and 
Economic Growth; SDG-09 Industry Innovation and Infrastructure; SDG-10 Reduced Inequalities; SDG-11 Sustainable Cities 
and Communities). It also provides significant examples of initiatives adopted by Malaysia and Indonesia, grounded on the 
tools of Islamic finance, to support sustainable economic and social development in sub-Saharan Africa. As a result, the article 
stresses, through the adoption of the comparative law methodology, the importance of a proper transnational legal framework 
– in a broad sense, including legal language and formation of scholars and practitioners - to promote Islamic finance and 
financial inclusion: such aspect tends to be neglected in current literature, seemingly more focused on techno-economic aspects.  

Keywords: Islamic finance; Sustainable Development (SDGs); Green or ESG Sukuk; Fintech; South-East Asia; Sub-Saharan 
Africa 

1. Introduction 

The UN Agenda 2030 has set seventeen sustainable development goals (SDGs): SDGs recognise that ending poverty is 
strictly intertwined with strategies that reduce inequality and spur economic growth, all while tackling climate change and 
preserving the environment. Islamic finance, with its core ethical principles, is crucial in promoting sustainable development 



 
 

European Journal of Islamic Finance - ISSN: 2421-2172 
DOI: 10.13135/2421-2172/11175 Published by University of Turin https://www.ojs.unito.it/index.php/EJIF/index 
EJIF content is licensed under a Creative Commons Attribution 4.0 International License   

31 

and financial inclusion (Jimoh and Kolawole, 2024), particularly in environmental sustainability through the rise of ‘green 
Sukuk’ or ‘ESG Sukuk’.  

1.1 The key features of Islamic finance 

In consideration of the decisive role played by the doctrinal formant, where the figure of the jurist tends to coincide with 
that of the theologian, Muslim countries are classified as belonging to the so-called rule of tradition, i.e., those countries in 
which the divorce between law and religious (or, in other cases, philosophical) tradition has not occurred (Mattei and Monateri, 
1997). The absence of separation between the religious and legal spheres and the need for regulatory rules to comply with the 
precepts of sharia (Hallaq, 2009) are the salient features of such a legal model (Gambaro and Sacco, 2004). In this context, it 
is crucial to identify the guidelines of Islamic business law because religion, morality, law, economics, and finance constitute 
an inseparable whole in the Muslim world (Biancone, 2020). At the same time, it has been authoritatively observed that, for a 
correct understanding of the Islamic model, it is also necessary to consider the historical dialectic between sharia and siyàsa, 
that is, between religious law and political power-secular law, which is the primary key to understanding the legal dynamics of 
the Islam, so that the claimed formal supremacy of sharia must be confronted, at an operational level and State by State, with 
its implementation in concrete norms and applications (Castro, 2007). Hence, the diversity and heterogeneity of the individual 
legal systems are attributable to the Islamic model.  

This dialectic is even more evident when regulating financial markets. It takes on particular importance because, alongside 
state legislation, legal tools and rules of other legal systems, widespread law, concur in shaping such markets (Giustiniani, 
2006). In Islamic law, therefore, since there is no separation between the religious and legal spheres, even the sector of 
contractual relationships and financial investments must conform to the Koranic precepts and other sources specific to that 
tradition: even business relationships and Islamic finance must, therefore, be sharia-compliant. The notion of “Islamic” finance, 
thus, indicates the set of financial activities that conform to the principles of the Shariah (Biancone, 2020).  

In this regard, the term “Islamic finance” can be understood according to two meanings: in the strict sense, as a banking-
financial activity subject to the precepts of Islamic law; in a broad sense, as a complex of legal-economic relationships, also 
subject to the same precepts. This second meaning, therefore, also includes contractual relationships and commercial 
exchanges. In the Islamic context, the distinction is not always so clear, especially in light of those doctrinal interpretations that 
advocate creating a general Sharia-compliant economy. Accordingly, in the article, the expression “Islamic finance”, unless 
otherwise specified, will be used in the broader sense. 
In this context, a leading role is attributed to fiqh, which has reworked Sharia rules (Lambton, 1981). Fiqh is intended for 
“Islamic jurisprudence as an important source of Islamic rules” (Biancone, 2020). It is, therefore, the knowledge of the fivefold 
Shariatic division of human actions, in the sense of obligatory (fard or wàgib), prohibited (haram), recommended (mandùb), 
discouraged (makrùh), and permitted acts (halal) (Castro, 2007). Fiqh Muamalat, or Islamic Commercial Law, is a subdivision 
of the fiqh discipline related to human activities. It deals with Shariah rulings related to business and financial activities in 
Islamic society, but not comprehensively with factors impacting economic behaviour, since it is concerned solely with the legal 
relationships between members of the society (Ridhwan Ab. Aziz, 2016). 

The interpretation of the sources and the deductions deriving from them through ijtihad (intellectual ‘effort’) is carried out 
taking into account two essential principles: the common good (maslahah) and the state of necessity, whereby a prohibited 
behavior can be allowed when compliance with the prohibition leads to a greater evil (Aldeeb Abu-Sahlieh, 2008; Mustafa and 
Ab Rahman, 2023). Organisations such as the Accounting and Auditing Organisation of Islamic Financial Institutions 
(AAOIFI) and the Islamic Fiqh Academy based in Saudi Arabia are considered authoritative sources for developing Islamic 
finance rules. The AAOIFI is a body created in 1991 in Bahrain, which was responsible for drawing up the Sharia-compliant 
standards (AAOIFI sharia standard) and accounting and auditing standards for Islamic financial institutions and industry 
(Jouaber-Snoussi, 2012). 

Therefore, one of the most significant elements of Islamic finance, especially in the eyes of the Western observer, is the 
leading role played by legal doctrine. Since this area, too, like any human action, must be sharia-compliant, and considering 
the not-always-easy need to interpret religious precepts to conform to a given initiative, the opinion of experts becomes an 
essential element. This is also to guarantee that the given investment complies with Sharia, thus attracting the public of Muslim 
investors. Fatāwā, i.e., legal opinions issued by a committee of experts (sharia advisory board), are significant. This committee 
can operate both as an internal but independent body of a bank or financial institution and as an external body (Alvaro, 2014). 
The effort of these experts in reaching a consensus on the legality of the structures used in Islamic finance and investment 



 
 

European Journal of Islamic Finance - ISSN: 2421-2172 
DOI: 10.13135/2421-2172/11175 Published by University of Turin https://www.ojs.unito.it/index.php/EJIF/index 
EJIF content is licensed under a Creative Commons Attribution 4.0 International License   

32 

activities has enabled the development of sophisticated and highly complex operations that incorporate both elements of 
conventional finance and Sharia-compliant institutions. 

In consideration of the remarks above, it was highlighted that Islamic Finance Law constitutes - due to its peculiarities, due 
to its transversal character to the various state systems, due to the heterogeneity of the sources, the role of tradition, and, at the 
same time, that of standards set forth by authoritative international institutions - a legal system in itself, of particular interest 
for the comparatist (Foster, 2007; Ercanbrack, 2015; Ferreri and Di Matteo, 2019). 

Specifically, the precepts that characterise Islamic finance are: (i) the prohibition of ribà or 'growth' (commonly understood 
as a prohibition of interest); (ii) the prohibition of introducing elements of uncertainty (gharar); (iii) the prohibition of 
speculation (maysir); (iv) the prohibition on investing in prohibited activities (haram), positively, (v) the principle of sharing 
profits and losses (so-called profit-loss sharing or PLS); (vi) the duty to work for the satisfaction of needs, justice, efficiency, 
growth and freedom (Siddiqi, 1988). Accordingly, the following contracts are prohibited: the conventional loan contract, given 
the obligation for the borrower to pay interest; the sale of a future thing declined in the guise of emptio spei, as an aleatory 
contract; the sale of someone else’s property, since it is characterised by an element of uncertainty, as well as conditional sales; 
the sale at an undetermined price even if determinable; the sale at a future and uncertain date; aleatory contracts tout court, 
including insurance contracts; gambling and betting; the bond loan because it falls within the prohibition of ribà (Vogel, 2006). 
The loan contract is therefore allowed only if free of charge: in particular, this type of contract, called quard-al-hasanah, is 
used for small sums and charitable purposes (Nienhaus, 1994). Furthermore, investments in the sectors of production, 
processing, trade of pork, alcoholic beverages, the tobacco industry, weapons production, pornography, casinos, and other 
activities related to gambling and betting are prohibited, as they are considered haram. However, while the ban is absolute for 
some activities, for others, there is no unanimity of consensus (for example, for the film industry, the recording industry, and 
the production, processing, and marketing of tobacco and its derivatives). In this case, the admissibility of the activity is assessed 
either on a case-by-case basis or by allowing some tolerance thresholds (Forte et al., 2011). It has been pointed out that Sharia 
tracing, through the precepts of the Koran and the Sunnah, the right and perfect path to obtain every benefit on earth, directs 
the path of each believer to justice by outlining the objectives (maqāşid al- Sharī'ah) that every Muslim must pursue to achieve 
Maşlahah (Papa, 2023).  

An indication of the current opinion regarding ribà is provided by the Sharia Standard on Debit, Charge and Credit Cards 
published by the AAOIFI in 1998, under which debit and recharge cards were deemed permissible, while credit cards, based 
on a contract giving rise to interest, are prohibited (Sharia Standard (2) Debit Card, Charge Card and Credit Card, AAOIFI; 
Abozaid and Khateeb, 2022). 

It has been observed that deeming the ban on ribà referred only to the case of excessive interest is common among those 
jurists who defend the Arab civil and commercial codes, most of which allow interest. Conversely, the more rigorous 
interpretation, according to which the ban on ribà would prohibit interest tout-court, is typical of the proponents of Islamic 
finance intended as ‘interest-free finance’, opposed to the conventional one, typical of the Western tradition and capitalist 
economies (Bälz,2020). The absence of interest is therefore understood, at the same time, as the ethical and commercial basis 
of Islamic finance. 

Furthermore, derivative contracts, being typical instruments of conventional finance, conflict with both the prohibition of 
gharar and maysir because they give rise to a speculative transaction characterised by elements of uncertainty, moreover not 
anchored to tangible assets, which, lastly, would attribute an enrichment in the form of interest (thus also violating the 
prohibition of ribà) for pure causality and without any merit: the ban has therefore traditionally included the creation or 
subscription of futures, options, credit default swaps, as well as short sales. The prohibition on the use of these tools was 
sanctioned by the International Islamic Fiqh Academy of the Organisation of Islamic Cooperation (OIC) (Usmani, 1999). 
However, in light of the developments in global financial markets and to keep in line with them, Islamic jurists distinguish 
between financial contracts aimed at mitigating pre-existing risks in economics and finance (lawful) and contracts aimed at 
creating new risks and new uncertainties (prohibited) (Jobst, 2007). A further contract raising critical issues concerning the 
precepts of Sharia is that of insurance, due to its aleatory nature: within the Islamic context, a form of Sharia-compliant 
insurance, takaful, has therefore been developed based on the principle of profit-loss sharing. 

A typical characteristic of the indications coming from fiqh, in the event of an activity that is not strictly compliant with the 
sharia or admissible within tolerance thresholds, although abstractly prohibited, is requesting ‘purification’ as compensation. 
This allows the cancellation of the negative effect of the prohibited activity: a common form of purification is to donate part of 
the proceeds originating from the investment as zakat (McMillen, 2011). The zakat, or Koranic tax, requires every Muslim to 
have the fiscal ability to allocate part of their income to public assistance. It is the third of Islam's so-called “five pillars” 



 
 

European Journal of Islamic Finance - ISSN: 2421-2172 
DOI: 10.13135/2421-2172/11175 Published by University of Turin https://www.ojs.unito.it/index.php/EJIF/index 
EJIF content is licensed under a Creative Commons Attribution 4.0 International License   

33 

(Fiorita, 2002). Zakat, therefore, has a dual function: on the one hand, social, of redistribution of wealth for public assistance; 
on the other, purely religious, as a necessary act of purification of the wealth possessed. In the latter sense, it demonstrates the 
disfavour towards money as an end, which refers to the other principles governing Islamic finance (Giustiniani, 2006). 

A further consequence of the above-mentioned fundamental principles of Islamic finance is the preference for exchange 
contracts with immediate effect and with the exchange of instantaneous performance, looking with disfavour at sales in 
instalments or deferred prices because the time could benefit one party (in this case, the debtor of the financial performance) to 
the detriment of the other. More generally, the principle's rationale is to prevent any increase or decrease in the asset's value 
from altering the originally established commutative relationship between performances by conferring on a party an unforeseen 
or unjustified advantage (Khoulidi, 1994). This also explains the caution and rigour with which Islamic law looks at the 
assumption of debts, imposing on the debtor the moral and legal obligation to properly fulfil his contractual obligations (Quran, 
II, 282). The propensity of the Islamic world is to resort to debt only as an extrema ratio since contracting debt is not considered 
natural. As an alternative to debt, profit sharing is encouraged: for this reason, profit-loss sharing constitutes a characteristic 
and fundamental feature of Islamic finance. The aim is to counteract the disinterest and indifference of the creditor concerning 
the use that the debtor will make of the capital: such an approach, indeed, clashes with the Islamic conception of money, 
understood as an instrumental good and not an end in itself, to be used according to ethical criteria and for socially and morally 
appreciable purposes (Hamaui and Mauri, 2009). Accordingly, the prohibition of ribà aims to promote fairness, equality, and 
solidarity between the contracting parties.  

In particular, since the scope of the maqāşid al- Sharī’ah encompasses the protection and promotion of values such as 
equality, the fair distribution of wealth, economic and technological progress, and the fight against poverty and the waste of 
natural resources, as well as the protection of the environment and the pursuit of sustainable and conscious consumption, many 
commentators have placed particular emphasis on the absolute compatibility (if not complete interpenetration) between finance 
Islamic and sustainable development objectives: the former is therefore considered a paradigmatic tool for the achievement of 
the latter (Benarafa, 2022). Indeed, the concept of Maqashid al-Sharia originates from the word Maqsad or Maqsid, which 
comes from the Arabic word that means “purpose, wisdom, and intent”, and the term Sharia (Shinkafi et al., 2017). Muslim 
scholars have agreed that the ultimate goal of Maqashid al-Sharia is to serve all human beings' interests and save them from 
any danger in life (Dusuki and Bouheraoua, 2011). Maqashid al-Sharia is a valuable instrument for developing society and 
humanity to achieve human perfection throughout life in this world and the hereafter (Arsad et al., 2015). In Maqashid al-
Sharia, the protection of public interest (Al-Maslahahi) includes three subsections: necessities (Al-Daruriyat), complements 
(Al-hajjiyat), and jewellery (Al-Tahsiniyat). The necessity section (Al-Daruriyat) consists of five elements: protection of faith 
(Al-Din), protection of self or soul (An-Nafs), protection of intellect (Al-Aql), protection of posterity (An-Nafs), and protection 
of property (Al-Mal). Protection of property is related to the characteristics of something that is desired and obtained by the 
owner with effort (muktasab), can be hoarded (iddikhar), can be measured (miqdar), and must undergo transfer exchanges 
(tadawul) (Esen, 2015; Harahap et al., 2023). Therefore, property protection includes the protection of wealth and ownership, 
acquisition and development, preservation of wealth and damage, preservation of the circulation of wealth, and protection of 
wealth values (Dusuki and Bouheraoua, 2011). It broadly means guaranteeing the property rights of citizens by the state, 
ensuring the welfare of citizens, such as eradicating poverty, equitable distribution of the community’s economy and regional 
development, providing a sense of security and honour, technological developments, and others related to the progress of the 
state and citizens (Esen, 2015). Accordingly, the values contained in the objectives of Islamic law prove that Islamic law 
supports the sustainability of a better and just human life (Harahap et al., 2023). 

Like Maqasid al-Shariah, the SDGs set by the UN are also aimed at achieving and preserving human development. Both 
encourage the ultimate goal of creating wealth as a means for comprehensive human development, not just for oneself. Islamic 
scholars have therefore discussed the paradigm of Islamic finance as a tool for sustainable development, as stated in the UN 
SDGs in the form of Islamic finance as a circular economy (Khan, 2019). The shift from a linear economy to a circular economy 
to attain sustainability occurs when human products can be internalised into the financial system (Ayub, 2020) as a financial 
market connected to the real economy (Khan, 2019). 

 
2. Literature review 

Many countries with large Muslim populations exhibit high rates of poverty and rank low in SDG achievement, indicating 
the need for more significant investment in key productive sectors, including the financial industry: this goes hand in hand with 
the suitability, according to most commentators, of Islamic finance to pursue sustainable development objectives, hoping for 
its wider use (Harahap et al., 2023; Ahmed, 2017; Paltrinieri et al., 2020).  



 
 

European Journal of Islamic Finance - ISSN: 2421-2172 
DOI: 10.13135/2421-2172/11175 Published by University of Turin https://www.ojs.unito.it/index.php/EJIF/index 
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34 

Islamic finance is continuously growing: according to one projection, it should reach 4,940 billion dollars in 2025 (Hararap 
et al., 2023). The activities composing Islamic finance are: (1) Islamic banking, by far the most developed sector, which grew 
by 17% in 2021, especially in countries that do not represent the hub of Islamic finance, such as Ethiopia and Burkina Faso; 
(2) Sukuk, the second most important sector, which grew by 14% in 2021, reaching $713 billion: notably, new issues increased 
by 9%, reaching the record figure of $202.1 billion; in particular, long-term sukuk with the tenor of five years or more has 
increased, indicating a shift in investment towards a longer post-pandemic horizon; sovereigns and quasi-sovereigns bonds 
continued to dominate new issuance; (3) the Islamic funds' sector, less developed than the first two and concentrated almost 
entirely in three specific countries, namely Iran, Saudi Arabia, and Malaysia. In this context, the so-called ESG funds (i.e., 
Environmental, Social, and Governance Funds) stand out since they grew significantly in 2021: the most relevant event was 
the announcement by the Employee Provident Fund of Malaysia. This entity invests almost entirely in Islamic funds and intends 
to become a sustainable investor with a 100% ESG-compliant and climate-neutral portfolio by 2050. Following in the ranking 
of sectors falling within Islamic finance are the activities of the so-called (4) other Islamic financial institutions, for example, 
financial technology companies (Calandra et al., 2022), investment companies, finance companies, leasing and microfinance 
companies, brokers and traders: the most considerable growth in these activities occurred in Kazakhstan (44%), Egypt (38%) 
and Maldives (31%). The paradigmatic sector of this category is undoubtedly that of FinTech, mainly concentrated in Saudi 
Arabia, which plans to triple the number of FinTech companies, going from the initial 82 to 230 in 2025. The last sector, the 
smallest in Islamic finance, is (5) takaful, with a growth rate of 17%, consolidating especially in the area of the Gulf Cooperation 
Council (“GCC”) countries and willing to expand into new markets, for example, the Philippines (Report Refinitiv, 2022).  

In particular, it is believed that the most used instrument in sustainable Islamic finance is the sukuk. Hence, the widespread 
denomination of ‘green sukuk’ (or ESG-sukuk): the issuance of ESG-sukuk in 2021 reached a new high of $5.3 billion. Saudi 
Arabia, Indonesia, and Malaysia are the undisputed leaders in this segment, and they are expected to continue to grow, given 
the strong demand from GCC countries, specifically to help finance green and sustainable transition projects. (Report Refinitiv, 
2022). Issued green sukuk were labelled green following the International Capital Market Association’s (ICMA) Green Bond 
Principles (GBP). In addition to the International Capital Market Association’s GBP, several green sukuk are labelled following 
the ASEAN Capital Market Forum’s ASEAN Green Bonds Standards. Green sukuk issued in Malaysia and Indonesia follow 
not only international green bond standards, GBP and ASEAN Green Bonds Standards, but also their own national, i.e., 
Malaysia’s Sustainable and Responsible Investment (SRI) Sukuk Framework and Indonesia’s Green Bond and Green Sukuk 
Framework (World Bank 2020). 

The Sukuk is one of the typical financial instruments of Islamic finance and is commonly referred to as an “Islamic bond.” 
Traditionally, it is considered the same as a conventional bond, although these instruments differ in various aspects (Safari, 
2011). In particular, the differences between the traditional bond and the sukuk mainly concern the nature of the underlying, 
which, in the first case, tends to be purely financial. In contrast, the second coincides with one or more tangible assets of which 
the investor purchases a share, the AAOIFI Sharia Standard No. (17) - Investment Sukuk, at §2, provides for the following 
definition of Sukuk: “Investment Sukuk are certificates of equal value representing undivided shares in ownership of tangible 
assets, usufruct, and services or (in the ownership of) the assets of particular projects or special investment activity. However, 
this is true after receipt of the value of the Sukuk, the closing of subscription and the employment of funds received for the 
purpose for which the Sukuk were issued” (AAOIFI). Since the sharia prohibits the sale of debt, sukuk are not representative of 
third-party capital but of the share of co-ownership of the underlying assets, which therefore fall into communion between the 
various sukuk-holders, for example, the AAOIFI Sharia Standard No. (10) - Salam and Parallel Salam, at §7 “Salam Sukuk 
Issues”, rules that: “It is not permitted to issue tradable Sukuk based on the debt from a Salam contract” and “The basis for the 
impermissibility of tradeable Salam Sukuk is because trading with such Sukuk is a form of sale of debt which is 
prohibited”(AAOIFI). Accordingly, further differences between the two financial instruments are highlighted: the coupon 
payment in the conventional bond coincides with a predetermined and fixed percentage, while in the sukuk it is linked to the 
market-value trend of the underlying assets. The relationship between the issuing company and the investor is also different 
because it is not a credit-debt relationship deriving from the traditional financing scheme but depends on the type of contract 
used, which must, in any case, be Sharia-compliant (the most common forms are those of ījāra, musharāka or mudāraba) 
(Miglietta, 2012). More specifically, it was observed that sukuk should be defined as “Islamic investment certificates” as they 
are participation certificates representing undivided ownership shares in an asset consisting of tangible goods (Moghul and 
Safar-Ali, 2014). It has been observed that, in practice, the Sukuk is similar to a securitisation transaction due to the creation of 
a corporate vehicle (i.e., special purpose vehicle, SPV) to which the originator of the operation (i.e., the subject that needs the 
financing) sells certain assets, against which the SPV issues certificates (sukuk notes) which will be subscribed by investors 



 
 

European Journal of Islamic Finance - ISSN: 2421-2172 
DOI: 10.13135/2421-2172/11175 Published by University of Turin https://www.ojs.unito.it/index.php/EJIF/index 
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35 

(Alvaro, 2014). The funds thus collected will be used as consideration for the assets sold by the originator, and these funds 
must be used to finance Sharia-compliant activities. The investors will, therefore, become co-owners of the assets transferred 
to the SPV, and the latter, on their behalf, will stipulate a Sharia-compliant agreement with the originator to regulate their use.  

Furthermore, the Sharī’ah Board of the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) 
has concluded its 87th meeting in September 2023. During this time, the Board announced the resolution to release the draft 
standard on Sukuk (Standard no. 62), marking a significant milestone in Islamic financial regulation. Sukuk are defined as: 
“[Certificates of] Sukuks are investment securities of equal value for common share that establish ownership of assets (tangible 
assets, usufructs, rights, debts, cash, or a mix of [all of] them or some of them) that are already in existence or that will be 
acquired or created, and it will implicate rights for the certificate holder arising from its interest in ownership of those 
underlying assets and obligations on [the certificate-holder] to the extent of its share in them”. (AAOIFI, 2023). 

In particular, the AAOIFI Standard no. 62 highlights that Sukuk have characteristics that distinguish them from conventional 
bonds, the most important of which are: (i) Sukuk are not based on lending against interest; (ii) the principal amount and the 
profit amount of Sukuk will not be recognised automatically as an obligation owed by the originator once the subscription to 
the certificates of Sukuk and the payment of the principal amount was carried out; (iii) Sukuk are an investment instrument 
wherein their owners share the reward (ghunm), as well as the liability (ghurm) of the underlying assets of the Sukuk that are 
owned jointly by the certificate-holder with the other certificate-holders of Sukuk of the same issuance. Also, it is usually a 
financial instrument for the originator; (iv) Sukuk are issued based on one or more Sharia contracts by Sharia rules that regulate 
issuance, trading, and maturity of Sukuk; (v) risks of Sukuk are not confined to credit risks of the originator; and its credit 
rating is not limited to the financial worthiness of this entity (AAOIFI, 2023; Cupri, 2022).  

As of September 2020, a $10 billion value of green sukuk has been issued by 11 entities from four countries, namely 
Indonesia, Saudi Arabia, the United Arab Emirates, and Malaysia (in descending order), and from one multilateral development 
bank (Azhgaliyeva, 2020). Green sukuk is issued by the top four sukuk-issuing countries. More than half of sukuk (65%) and 
more than half of green sukuk (64%) are issued in the Asia and Pacific region (Indonesia and Malaysia). Indonesia is the largest 
issuer of green sukuk (54%). The large amount of green sukuk ($5.5 billion) is due to the issuance by the Government of 
Indonesia. Although Malaysia is the smallest issuer of green sukuk ($1 billion), it has the most significant number of private 
issuers supported by green bond grants and tax incentives. Both Malaysia and Indonesia introduced national green sukuk 
standards: Sustainable and Responsible Investment (SRI) Sukuk Framework (Malaysia) and Green Bond and Green Sukuk 
Framework (Indonesia) (Azhgaliyeva, 2020). 

The development of the sukuk market was characterised by a very heated doctrinal debate, especially in the Islamic context: 
a significant part of the interpreters believed that the sukuk issued (especially in an early period) were utterly similar to 
traditional bonds, raising critical severe issues from a sharia-compliant perspective (Usmani, 2007; Miller et al., 2007; Wilson, 
2008; Rahim and Ahmad, 2014); vice versa, another part of the doctrine has emphasised the structural differences between the 
two instruments, remarking the undoubted compliance of Sukuk with the principles of Islamic finance and, according to some 
scholars, their lower levels of risk (Cakir and Raei, 2007; Alam et al., 2013) also thanks to the guidelines developed by the 
AAOIFI. Hence, the precise choice of this institution is to name sukuk “investment sukuk” to differentiate it from conventional 
shares or bonds. 

However, there is no doubt that green sukuk are now universally recognised as suitable tools for pursuing sustainable 
development objectives, in a sharia-compliant context (Suriani et al., 2024; Dey et al., 2020).  

In particular, in a recent study, the authors analysed the effects of green sukuk - in particular, those issued from 2018 to 2022 
- concerning the negative consequences of climate change, going so far as to argue that, both in the short and long term, green 
sukuk can contribute to reducing these adverse effects in the issuing countries (Suriani et al., 2024). 

Technology development has caused innovations in Islamic financial technology, including combining fintech with products 
from Islamic finance (Calandra et al., 2022), such as Sukuk and waqf. The combination of blockchain and Sukuk can increase 
the transparency of cash flows, and the underlying assets of Sukuk can improve investment decision-making with an ample 
supply of information, which is also beneficial for the realisation of the SDG program in the economic field (Harahap et al., 
2023). However, caution is still needed when combining innovative technology in Sukuk, as is the case with other Islamic 
financial products, such as protecting these products from legal, regulatory, Shariah, and other risks. Although the Sukuk 
blockchain innovation has many benefits, there will still be risks that must be overcome in running the Sukuk blockchain 
(Kunhibava et al, 2021). 

 
 



 
 

European Journal of Islamic Finance - ISSN: 2421-2172 
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3. Methodology 
 

The present article applies the comparative law methodology. Namely, it considers how culture determines the parameters 
of the judicial legal reasoning, the systems of law that jurists would borrow from, and even the extent to which they would 
borrow, as well as how such approach determines the standing of each individual within the culture; also arguing how the nature 
of this culture varies from one society to another, and concluding that unless one has an awareness of the importance of this 
rootedness in a particular legal culture, one can never understand the parameters of legal debate (Watson, 1995). Furthermore, 
it contemplates that comparative law's primary purpose is acquiring knowledge and that the connected “legal formants” must 
be considered to understand a legal system properly. In particular, legal formants are elements that characterise a specific legal 
system. Paradigmatic examples include legislative provisions, court rulings, academic writing, and professional and 
administrative practices developed in a particular context. 

Furthermore, hidden factors (“crittotipi”) affecting the interpretation and application of the rule of law shall be considered, 
too (Sacco, 1991). Concerning this aspect, the Article also applies the concepts expressed in Trento’s Theses – i.e., the cultural 
manifesto of comparatists – according to which one of the aims of comparatists is to highlight the dissociations between 
theoretical statements and operational rules (Gambaro et al., 1989). Under the First thesis, “The task of legal comparison, 
without which it would not be a science, is the acquisition of a better knowledge of the law, just as the task of all comparative 
sciences, in general, is the acquisition of a better knowledge of the data belonging to the area to which it applies. Further 
research and promotion of the best legal or interpretative model are very considerable results of comparison, but the latter 
remains a science even if these results are lacking”; the Second thesis stresses the importance of facts and legal phenomena 
realised in the past or the present; according to the Third thesis: “Comparison does not produce useful results until the 
differences that exist between the legal systems considered are measured. Comparison is not made until one limits oneself to 
cultural exchanges or the parallel exposition of the solutions explained in the different areas; under the Fourth thesis: 
“Knowledge of legal systems in comparative form has the specific merit of checking the coherence of the various elements 
present in each system after having identified and reconstructed these same elements. In particular, it checks whether the 
operational rules present in the system are compatible with the theoretical propositions elaborated to make the operational rules 
knowable”. Finally, the Fifth thesis states: “Knowledge of a legal system is not a monopoly of the jurist belonging to the given 
system; if, on the one hand, he is favored by the abundance of information, however, he will be more hindered than anyone 
else by the assumption that the theoretical statements present in the system are fully coherent with the operational rules of the 
system considered” (Sacco, 1991).  

Finally, it considers that comparative law methodology operates in a rapidly evolving social, economic, and political context, 
where cultural and legal uniformity, dictated by the global model, clashes with the different cultural contexts in which it spreads 
and that challenge its effectiveness. Nowadays, the relationship between legal rules and their effectiveness is transforming, 
influenced not only by their juridical content but also by the complex web of social relationships and cultural influences 
originating in the space in which norms are supposed to be applied. While globalisation tends to impose a single legal rule valid 
worldwide, the social complexity forces the law to dialogue in transnational, intercultural, and multilingual contexts, requiring 
continuous and complex adjustments that often prove borderline (Ioriatti and Pradi, 2023). 

 

4. Results 

The choice to focus attention on Malaysia and Indonesia, on the one hand, and the countries of sub-Saharan Africa, on the 
other, is because both models, for different reasons, are particularly interested in the objectives of the SDGs and the problems 
related to these. Furthermore, both contexts are characterised by the influence of Islamic law: dominant in the former and highly 
significant in the latter. The sub-Saharan area, on the other hand, constitutes a very heterogeneous context, characterised by the 
fact that a large part of the population is Muslim, and which, alongside some countries with a more structured economy and 
social development (for example South Africa, which however has recently been suffering from a crisis in access to energy 
resources, so much so that interruptions in the supply of electricity and sudden blackouts are frequent in the country), there are 
many others characterised by a high rate of poverty and illiteracy, by the scarcity of infrastructure and limited access to energy 
sources. All key themes of the United Nations 2030 Agenda.  

In this regard, the case of Nigeria is emblematic because, although the country is the leading producer of oil and gas on the 
African continent, these resources, in any case, are not compatible with the sustainable development objectives, are in the hands 



 
 

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of a few private corporations, and the population has limited access to them. According to data updated to 2024 from the World 
Poverty Clock, 31% of the Nigerian population lives in conditions of extreme poverty (World Poverty Clock, 2024). 
Furthermore, while Malaysia is in the group of OIC member countries with the best score in terms of initiatives and SDGs’ 
achievement (the other countries are: UAE, Turkey, Qatar, Tunisia, Kazakhstan, Jordan, Morocco, Azerbaijan, Egypt, 
Kyrgyzstan), many sub-Saharan African countries not only fall within the group of OIC countries with the lower score (i.e., 
Mozambique, Mali, Gambia, Sierra Leone, Nigeria, Guinea, Burkina Faso, Chad, Niger) but even among the countries with the 
worst score at all (i.e., Nigeria, Guinea, Burkina Faso, Chad, Niger, Democratic Republic of Congo, Liberia, Central African 
Republic (Ahmed, 2017; World Bank Group, 2018). 

The selected models, therefore, fall respectively at opposite ends of the spectrum about the initiatives and results in terms of 
SDGs, as well as the level of development of Islamic finance (more advanced in Southeast Asia, still limited in sub-Saharan 
African countries), represent, for these reasons, an exciting model for examination and comparison. 

Furthermore, Malaysia and Indonesia constitute for the comparatist a model of investigation worthy of attention, especially 
for recent developments in the fields of Islamic finance, transnational trade, and international arbitration; Sub-Saharan Africa, 
due to its historical, cultural, and legal peculiarities, has long been the subject of comparative studies (Sacco, 2012; 
Vanderlinden, 1987). 

Establishing Zakat and proper collection and distribution processes ensures social security and equality (Rehman & Pickup, 
2018). Many countries, such as Malaysia and Indonesia, have adopted policies relying on the Zakat for sustainable development. 
Moreover, Malaysia, Indonesia, the UAE, and Qatar have established government-linked organisations that collect and 
distribute Zakat funds. Recently, a few countries, including Malaysia and Indonesia, have started donating Islamic Social 
Finance funds from local needs to international priorities (Tok et al., 2022). In the case of poverty alleviation, particularly in 
Malaysia, Zakat distribution has always been a vital and significant factor in reducing income inequalities among the various 
strata of the community: this, in connection with the development of Fintech and the use of mobile phone services has resulted 
in a significant improvement of financial inclusion in Malaysia (Yahaya and Ahmad, 2018). These countries spend part of their 
Zakat funds to support needy people living outside their territories through their national Zakat agencies, through international 
organisation platforms that collect Zakat, or through non-profit organisations. (OECD, 2020). Indonesia has established a 
National Sharia Finance Committee and an Islamic Economy Masterplan for 2019-24, with the central goal of boosting the role 
of Islamic finance in driving economic growth (OECD, 2020). For example, the Indonesian National Amil Zakat Agency 
delivers scholarships, humanitarian aid, refugee support, food aid, and cooperation related to peace and security to other 
countries using Zakat funds. In addition, international organisations have been showing a high interest in collecting Zakat 
through their transparent and accessible platforms aimed at using their funds in global aid activities. Different UN entities have 
already introduced platforms, mainly in the region of Zakat trust funds and international equity philanthropy funds 
(UNESCWA, 2021). 

The UNHCR has been seeking fatawa from religious institutions, including from the OIC Fiqh Academy, to collect Zakat 
and to raise funds using other Islamic social finance tools to support refugees residing in Egypt, Iraq, Jordan, Bangladesh, 
Yemen, Lebanon, Mauritania, and Myanmar (UNESCWA, 2021). Religious organisations in some countries, such as Malaysia, 
issued fatawa to use Zakat funds to provide humanitarian aid to those who need it, regardless of their religion (IFRC, 2024). 
The Malaysian National Zakat Council and the Kenya Red Cross undertook support for people living in the Keitu region in 
Kenya. The Malaysian Zakat organisation donated nearly 1.2 million USD through the International Federation of Red Cross 
and Red Crescent Societies to support poor social groups in Kenya affected by the 2016 drought. They use cash-based 
interventions to help communities cope with drought. The IFRC, together with the Zakat Council of Malaysia, uses Zakat 
funding from Malaysia to make use of untapped contributions that Islamic social financing can bring in the area of global 
priorities and development cooperation. The justification for delivering the Zakat fund to a non-Muslim society is to support 
or save humanity (IFRC, 2024). 

Furthermore, the IFRC, in collaboration with the Islamic Development Bank, launched a new fund using Islamic social 
finance instruments. The fund, known as The One WASH (Water, Sanitation and Hygiene) Fund, aims to fight cholera and 
other diarrheal diseases in 29 OIC member countries. By the end of 2030, the project is expected to cut cholera deaths by 90 
percent and to improve the lives of 5 million people in 29 OIC member countries. The project is financed using partnership 
modalities: philanthropic donor financing (Zakat and Sadaqat funds) and proceeds from the issuance of impact Sukuk. The 
IFRC’s global One WASH program supports UN Sustainable Development Goals 3, 5, 6, and 17 (Tok et al., 2022). 

In addition, providing access to banking and other financial services has been deemed a powerful tool to foster financial 
inclusion and reduce poverty: according to a recent study (Okudowa et al., 2023), the banking sector development contributed 



 
 

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significantly to poverty reduction in Nigeria, while stock market development and financial inclusion had an insignificant effect 
in that country. The study concluded that the relationship between financial development and poverty reduction depends on 
how financial development is measured. Hence, the study recommends that the banking sector increase the volume of loans to 
people experiencing poverty and ease constraints on credit accessibility for people with low incomes. Moreover, in the opinion 
of the authors of the study, special financial instruments such as SME Bonds will help to raise funds for SMEs and other small 
business units (Okudowa et al., 2023).  

Furthermore, the relationship between financial inclusion, institutional quality, and bank stability in sub-Saharan Africa has 
been recently examined. Using a sample of 48 countries from 2002 to 2021, a study suggests that financial inclusion, measured 
by account ownership, ATMs, borrowers, depositors, and bank branches, positively impacts bank stability, indicating its 
importance in reducing transaction costs and addressing asymmetric information. The study also explores the moderating role 
of institutional quality, revealing that the presence of institutions enhances the positive effects of ATMs, borrowers, and 
depositors on bank stability while negatively impacting the relationship between bank branches and stability (Ofoeda et al., 
2024). 

Moreover, it is interesting to highlight that financial inclusion fosters gender empowerment as well, contributing to achieving 
the UN SDG number 5 (Senghore, 2023). In this regard, it is interesting to consider the development of so-called “gender 
bonds” within the Asian context. Aside from documented outperformance, academic literature points to gender diversity on 
boards lessening the frequency of securities fraud (Cumming et al., 2015), enhancing a firm’s corporate social responsibility 
(Shaukat et al., 2016) and a positive relationship between board gender diversity and renewable energy consumption (Atif et 
al., 2020). With these significant benefits associated with investing in gender equality, gender bonds provide a precise 
mechanism to match investors with investment opportunities in these firms that have shown heightened levels of success (IISD, 
2021). Currently, the number of investors in gender bonds has been quite limited. Gender bonds have typically been offered to 
a limited number of large institutional investors and allow customisation to meet the financial and impact-related needs of both 
the issuer and investor. Prominent examples of these private placements include the Asian Development Bank’s (ADB) ¥10 
billion gender bond, issued in 2017 and purchased in its entirety by Dai-ichi Life Insurance Company, Limited of Japan; the 
International Finance Corporation’s (IFC) and Deutsche Investitions- und Entwicklungsgesellschaft’s (DEG) USD 220 million 
subscription of Bank of Ayudhya’s Gender Bond issuance in 2019, and the IFC’s 2020 commitment to fully support Indonesia 
bank OCBC NISP’s gender bond (IISD, 2021). As highlighted by the International Institute for Sustainable Development, 
despite the modest size of the gender bond market in the ASEAN region and globally, there is reason for optimism regarding 
its expansion, given the example of the trajectory of the green bond market. As investors have become more sensitive to 
sustainability issues, demand for green bonds seems to outstrip supply, issuer premiums have increased, and issuers enjoy lower 
capital costs. Even as the green bond market matures and the issuances increase, plenty of capital remains ready to invest. 
Gender bonds will likely follow a similar path as a greater acknowledgement by investors, which will induce demand for more 
bonds and capital from more diverse investors. A key catalyst to this acknowledgement will be a deeper understanding of the 
impact that gender bonds can deliver alongside the financial returns they can generate (IISD, 2021). 
 

5. Discussion  

5.1 Critical elements of Islamic finance Law 

Despite the undoubted activism and attention to achieving sustainable development objectives, it has been observed that the 
emerging picture needs to be more cohesive and consistent, as well as characterised by the absence of a consistent legal 
framework (Richardson, 2020). Though this is a common feature when dealing with financially sustainable instruments at a 
transnational level, the context at stake is particularly enhanced due to the peculiar features of the Islamic Finance Law, which 
is in continuous tension between positive law and Sharia’s respect. The legal framework of countries involved in developing 
Islamic Finance Law, especially in the MENA area (i.e., Middle East/North Africa), is not yet consolidated. Critical elements 
remain: for example, the lack of transparency, the problematic interaction between Sharia principles and positive law, the 
absence of mechanisms for practical enforceability of contractual obligations assumed, and the unpredictability of judicial 
decisions. As pointed out by a scholar, “Several systemic legal issues or ‘legal gaps’ undermine investor confidence and impede 
the sustainable development of the Islamic finance industry. Legal gaps include but are not limited to undeveloped securities 
laws, enforceability issues, and a lack of clarity concerning the role and effect of Sharia in the municipal legal systems of many 



 
 

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39 

MENA states. More generally, these highly complex legal environments are associated with a reduced flow of information 
(lack of transparency), which results in diminished legal certainty and foreseeability” (Ercanbrack, 2019).  

 
5.1.1 The case of Dana Gas Sukuk 
 
A paradigmatic example of the above remarks is a Sukuk issued in the UAE.  
In 2017, Dana Gas, a company incorporated in the UAE and operating in the energy field, officially declared to its investors 

that it would not be able to pay for certificates issued under a US$700 million sukuk created in 2013 because, according to the 
company, the structure underlying the sukuk was no longer Sharia-compliant. Dana Gas, therefore, submitted a request to the 
UAE courts to ascertain the mudarabah sukuk's conflict concerning that country's law. It also obtained judicial injunctions 
prohibiting investors from suing against the Mudarabah agreement until the UAE courts had finally ruled on the merits of the 
action taken (Dana Gas, 2017). The purpose of Dana Gas was to restructure the sukuk issued in such a way as to halve the 
distribution of profits due in 2017, justifying it in light of the alleged unlawfulness of the Sukuk due to the evolution of Islamic 
financial instruments and their interpretation (Howard, 2017). This kind of episode, being the expression of opportunistic 
behaviour by the company involved, does not contribute to strengthening the confidence of both the market and investors in 
these forms of investment and represents a dangerous precedent because other companies could try to release from their 
contractual obligations, invoking the supervening non-compliance with sharia of the financial instrument issued (Ercanbrack, 
2019).  

 
5.2 The sub-Saharan Africa context 
 
As already highlighted, the countries of sub-Saharan Africa represent an extremely heterogeneous context characterised by 

widespread poverty and illiteracy, exposure to the adverse effects of climate change (for example, desertification), water 
scarcity, and infrastructures that are still underdeveloped. All themes coincide with the SDGs identified by the United Nations 
2030 Agenda. In addition, these countries are characterised by the presence, whether in the majority or not, of a large segment 
of the Muslim population; accordingly, many of them belong to the OIC. 

As emphasised in para. 4 above, one of the most perceived problems is the need to promote forms of financial inclusion to 
guarantee access to this type of service to a large population segment, which is instead excluded from it. From this perspective, 
many commentators have highlighted the suitability of Islamic finance in contributing to the pursuit of the SDGs in a Sharia-
compliant form (Kabir-Hassan et al., 2022). Islamic banks' financing activities are making significant contributions to real 
economic activities in the short and long runs, with the long-run contribution being more substantial. This finding suggests that 
the Islamic banks in Malaysia are effectively carrying out the financial intermediation role of pooling and channelling funds to 
productive investment activities. The above contributions of Islamic finance to real economic activities are made possible by 
the equity participation principle. The investor–investee relation between the depositors and the Islamic banks based on the 
concept of risk sharing should lead to better monitoring of investments, hence higher productivity, a more stable financial sector 
due to the absence of interest rate risk, among others, and therefore, more sustainable economic growth (Kassim, 2016). 

Various innovations in the context of realising the SDG program were carried out in Malaysia, including developing green 
programs correlated with efforts to protect the environment sustainably. One application of this green economy is green 
banking. The green, inclusive behaviour of Islamic bankers significantly affects the growth of green banking. The five types of 
green behaviour, namely, conservation, sustainable work, avoiding harm, influencing others, and taking the initiative, have 
significant positive impacts on the growth of green banking (Ali et al., 2020). Global mobilisation to improve financial stability, 
achieve the SDGs, and mitigate climate change requires innovative structures and frameworks to develop new financing 
instruments and improve the efficiency of existing ones. The ethical principles and legal contracts inherent in Islamic finance 
offer a different avenue for financial innovation that incorporates the principles of Maqashid al-Shariah. The unleveraged green 
investment trust represents a case of financial innovation because it allows the pooling and allocation of investment funds for 
development projects and facilitates liquidity management for Islamic Finance and open market operations for central banks 
(Harahap et al., 2023). 

It has been observed that the global financial crisis of 2008 has established the credentials of the Islamic financial system 
as a sustainable financial system that can save the long-term interests of the average citizens worldwide while adding value to 
the real economy. The fundamental ethical tenets available in the Islamic financial system make it more suited and ready to 
fight the economic aftershocks of a pandemic like COVID-19. The basic principles of ethical Islamic finance have solid 
connections to financial stability and corporate social responsibility within the wide-reaching business context (Raza Rabbani 
et al., 2021; Moosa, 2023). 

Islamic social financing (ISF) is an untapped source of funds to finance humanitarian aid globally. ISF institutions play a 
facilitative role in society, ensuring economic development and social justice. They have a vital role in instrumentalising 



 
 

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religious development aid. Among others, Zakat and Waqf instruments are essential in reducing income inequality in society 
and channelling funds to meet humanitarian needs. Debt and high interest rates cause financial, social, and moral problems. 
Shariah-based ISF can be an alternative source of financial support for marginalised people in Muslim countries (Tok et al., 
2022). 

ISF has various hybrid instruments that link philanthropic and commercial activities, such as microfinance, Micro-Takaful 
and SRI Sukuk, and are used to support development activities. Islamic social finance's redistributive and social equality 
elements are essential in helping refugees residing in various countries and realising SDGs (Kassim, 2016; Tok et al., 2022). 
They address financial constraints, funding shortfalls, and financing inequalities. Therefore, through innovative hybrid 
approaches, it is possible to utilise the potential of Islamic social financing to stimulate economic activities, promote social 
welfare, enhance financial inclusion, and boost shared prosperity (Tok et al., 2022). 

Namely, among the five categories into which Islamic finance is divided, the most important are, on the one hand, Islamic 
banking and Fintech (Corapi & Lener, 2019), especially to meet the needs of individual users; on the other hand, Sukuk, 
especially to attract investments in the business sector and for the development of infrastructure (Amuda, 2023). 

From the first point of view, the so-called digital finance can open up new opportunities for low-income users and micro-
businesses, currently without access to financial services. According to the World Bank Global Findex Report, in 2017, only 
33% of the adult population held a bank account in sub-Saharan Africa (Demirgüç-Kunt et al., 2020). In recent years, the 
banking institutions operating in this context have expanded the range of the digital services offered to attract new customers 
and increase their competitiveness: the most significant forms of financial inclusion are those relating to home-based 
applications, mobile banking and other forms of payment, based on the use of mobile devices (Chinoda and Kapingura, 2023). 

In particular, it is believed that to ensure greater financial inclusion of people in conditions of economic poverty, it is 
necessary to expand the offer of so-called ‘user-friendly products,’ especially low-cost financial services. From this perspective, 
it is thought that FinTech can open up new opportunities for low-income users and micro-enterprises without access to financial 
services (Amuda, 2023).  

In recent years, banking institutions operating in this context have distinguished themselves by expanding the digital 
services offered to attract new customers and increase their competitiveness. The most significant forms of financial inclusion 
are home banking applications for mobile phones and other payment methods based on mobile banking functions that are easy 
to use, economical, accessible anytime and anywhere, especially at low cost: for example, financing at sustainable economic 
conditions, reasonable profits on investments and also on savings, availability of automated services and simplified forms of 
internet banking (Chinoda and Kapingura, 2023; Nutassey et al., 2023). 

Specifically, two models have been identified in sub-Saharan Africa: the “additive model” and the “transformative model”. 
The additive model allows bank account holders to access their bank account via mobile phone and benefit from additional 
services, such as transferring funds, paying bills, etc. Instead, the transformative model offers financial access to those who do 
not have a bank account: this always happens from a mobile device and through services provided by MNO - Mobile network 
providers and microfinance institutions (Yahaia and Khalid, 2018). An example of the transformative model is M-PESA: it is 
an application created in Kenya in 2007 by Safaricom, a company owned inter alia by the Vodafone Group and the Kenyan 
government, which allows to transfer funds, even abroad, make payments via the Paypal circuit, make purchases on e-commerce 
platforms, withdraw money at affiliated points and request financing for both consumers and businesses (Yahaia and Khalid, 
2018). Another significant example is Ghana, where many people live below the international poverty line and do not have 
access to financial products or services. Furthermore, most of the population lives in rural areas, making it difficult to access 
banking or financial services in the main cities. Thanks to mobile banking, a large segment of the population now has access 
to these services, and it is estimated that financial inclusion has increased from 29% in 2011 to 58% in 2020 (Adabor et al., 
2023). 

In this context, it is believed that Islamic finance, combined with technological and digital innovations, can play a leading 
role in improving financial inclusion, especially for those who do not want to resort to conventional finance because it is not 
Sharia-compliant. Considering that the widespread use of interest characterises the products and services of traditional banks 
and that this constitutes an obstacle to the inclusion of Muslim customers, it is believed that the development of Islamic banking 
can overcome this inconvenience, allowing access to banking and financial services for a broader segment of the population. 
 

6. Conclusion  

The analysis carried out highlights the significance of Islamic Finance in promoting sustainable development and financial 
inclusion: the selected models of comparison give evidence of the achievements, even in terms of SDGs, fulfilled in countries 
– like Malaysia and Indonesia - where Islamic Finance is more developed, as well as of its potentialities in countries – like 
those of sub-Saharan Africa – more affected by the issues that the SDGs are aimed at overcome. As highlighted, financial 



 
 

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inclusion plays a vital role in reducing poverty and inequalities (SDG-01 and SDG-10), promoting gender equality (SDG-05), 
contributing to decent work and the economic growth of the society (SDG-09), and developing industry, innovation, and 
infrastructure (SDG-09) as well as sustainable cities and communities (SDG-11). Among the different products of Islamic 
Finance, Islamic banking, Islamic fintech, and Sukuk appear to be the most suitable tools to promote financial inclusion for 
consumers and SMEs. However, the scenario is constantly evolving, and verifying the developments in light of the parameters 
set forth by the SDGs will be interesting.  
The current topic appears particularly interesting from a comparative perspective, both for the developments that are 
transversally affecting the Islamic finance law sector - especially in some significant experiences, such as the South East Asia 
and the countries of sub-Saharan Africa - and because of some paradigmatic issues of comparative law that can be identified in 
it: indeed, the acquisitions of this science can offer a significant contribution.  
First, consider the leading role played by the doctrine, for example, the AAOIFI and other equivalent institutions, as well as 
the business community. Both of them have led to the consolidation in the market of shared rules, which, especially in a 
transnational context in which uniform rules of law are lacking, constitute forms of self-regulation par excellence, increasing 
the certainty and trust of market operators and the heterogeneous public of investors. The reference is, for example, to two 
regulations voluntarily, somewhat similar to each other: on the one hand, the Green Bond Principles (“GBPs”), published by 
the International Capital Markets Association (“ICMA”) and, on the other, the Climate Bond Standards (“CBDs”) published 
by the Climate Bond Initiative (“CBI”). Both emphasise compliance with the requirements of transparency, information, and 
independent verification of the green character of a new product or financial instrument. The guidelines also identify a non-
exhaustive list of suitable projects, which includes projects linked to renewable energy, eco-compatible transport, and 
infrastructure for water distribution. All objectives are consistent with the SDGs in the United Nations 2030 Agenda. 
In addition, the Security Commission of Malaysia published the first standards to regulate responsible finance sukuk in 2014 
to integrate the regulations already in force regarding sukuk. This regulation, however, applies only to sukuk issued in Malaysia. 
ICMA then released the “Social Bond Principles”. They are very similar in content to the GBPs but aim at regulating financial 
instruments for social purposes. Currently, the trend is to distinguish between “social bonds”, “sustainability bonds”, and “social 
impact bonds”, namely social bonds finance projects that seek to mitigate social problems or intend to achieve socially valuable 
objectives. In 2018, ICMA updated its Sustainability Bond Guidelines, providing that those instruments whose proceeds finance 
projects that have both a green and social purpose can be classified as sustainability bonds; social impact bonds are structured 
in such a way that the distribution of profits depends on the achievement of the objectives indicated in the financed project. 
The latter, however, are not yet subject to specific government regulations or guidelines developed on a customary basis 
(Richardson, 2020). 
As can be inferred, such self-regulation phenomena undoubtedly have positive aspects and merit in responding to new market 
needs; however, these are sectoral and fragmented interventions. Accordingly, policymakers need to develop a uniform 
framework to enhance a consistent regulatory scenario to help practitioners deal with these issues and promote cooperation 
among countries while decreasing transaction costs and uncertainties due to this piecemeal context. 
A further issue directly related to the above is the lack of a uniform and unambiguous terminology: currently, not only among 
practitioners and operators but also in scientific literature, terms such as “responsible finance”, “impact finance”, “sustainable 
finance,” and “social finance” are adopted as equivalents. As has been authoritatively highlighted, “language” and “law” are 
an inseparable pair, and legal norms are indeed conveyed through a language that is neither common nor literary but rather 
scientific, which implies and expresses technical concepts, the expression of cultural heritage, and legal traditions (Sacco and 
Rossi, 2019). The absence of precisely defined boundaries enhances the risk of opportunistic behaviour (for example, the well-
known phenomenon of greenwashing) and increases transaction costs (Ioriatti, 2023). Currently, the benchmark is the so-called 
Taxonomy Regulation (i.e., EU Regulation 2020/852) on establishing a framework to facilitate sustainable investment, which 
sets forth the criteria to assess whether a business activity can be deemed sustainable to determine the level of environmental 
sustainability of an investment. The EU Commission has amended such Regulation – Delegate Regulation 2021/2139, 
establishing the technical screening criteria for determining the conditions under which an economic activity qualifies as 
contributing substantially to climate change mitigation or climate change adaptation and for deciding whether that economic 
activity causes no significant harm to any of the other environmental objectives (Europa, EU). 
For the same reason, the World Bank published 2020 a general guideline addressing the need among financial market 
participants for clarity and transparency in what is understood and what qualifies as green (World Bank, 2020). However, the 
scenario is constantly evolving, and alongside these interventions, numerous others aim at regulating this varied and complex 
phenomenon. Consequently, this is an additional concern for policymakers and practitioners. 
A further aspect worthy of consideration is the perceived need for a suitable legal framework and jurists and operators equipped 
with the necessary transnational skills, i.e., what could be defined as an adequate “technostructure” (Gambaro and Sacco, 2018). 
The issues above point out interesting topics for future research: as highlighted, legal concerns, in a broad sense, tend to be 
neglected in current analysis while playing an essential role in the development of Islamic finance and the achievement of the 



 
 

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SDGs. Moreover, this peculiar context further enhances the opportunity for a comparative law approach. The present research, 
therefore, contributes to promoting the development of this kind of analysis and future regulatory interventions that should 
consider the essential features of both conventional finance and Islamic finance to enhance the cooperation of these different 
models in fostering financial inclusion. 
In light of the above remarks, it is worthwhile to recall the words of an Author, who observes: “The theme is that of change, 
innovation, the evolution of a legal system (Legal Change) over time due to the reception, transplantation, circulation, influence 
of models, institutions, rules originating in space from alien legal systems” (Guarneri, 2022). 

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