Ethics in Islamic Finance: Sustainability and Labour Rights

Post : April 4, 2023

Islamic finance is an ethical and socially responsible way of investing and financing that adheres to the principles of Islamic law or Shariah. The principles of Islamic finance emphasise the importance of ethical considerations, such as fairness, transparency, and social responsibility. 

Therefore, Islamic finance is not only about making a profit but also about doing so in an ethical and socially responsible way. In this blog, we will discuss the ethical considerations in Islamic finance, with a focus on environmental sustainability and labour rights.

Ethical Considerations in Islamic Finance

The principles of Islamic finance are based on Islamic law or Shariah, which prohibits any transactions that involve interest (riba), gambling (maysir), speculation (gharar), and unethical or harmful activities (haram). 

The importance of ethical considerations in Islamic finance is reflected in the principles of risk-sharing, profit and loss-sharing, and asset-based financing.

However, despite the emphasis on ethical considerations in Islamic finance, there are still ethical issues that need to be addressed. These ethical issues include conflicts of interest, insider trading, lack of transparency, and lack of social responsibility. Therefore, it is important to have regulatory frameworks and ethical guidelines to ensure that Islamic finance adheres to ethical considerations.

Environmental Sustainability in Islamic Finance

Environmental sustainability is an important ethical consideration in Islamic finance. The concept of environmental sustainability is based on the idea that economic development should not come at the expense of the environment. Environmental sustainability is not only a moral obligation but also an economic necessity. Islamic finance promotes environmental sustainability through several mechanisms.

First, it promotes the use of sustainable and renewable resources. This includes financing renewable energy projects, such as solar and wind energy, and promoting the use of natural resources in a sustainable manner. 

Second, Islamic finance encourages the adoption of environmentally friendly practices in industries, such as agriculture, manufacturing, and construction. This includes financing for eco-friendly projects, such as green buildings, and promoting the use of environmentally friendly technologies. 

Third, Islamic finance promotes the development of sustainable infrastructure, such as public transportation, water management, and waste management systems.

Several case studies demonstrate the role of Islamic finance in promoting environmental sustainability.

For example, the Abu Dhabi Islamic Bank provided financing for a solar energy project in Morocco, which will provide clean energy to more than a million people. 

Labour Rights in Islamic Finance

The concept of labour rights is based on the idea that workers have certain fundamental rights, such as the right to fair wages, safe working conditions, and freedom from discrimination. Islamic finance promotes labour rights through several mechanisms.

First, Islamic finance encourages the adoption of fair labour practices in industries. This includes financing for companies that adhere to fair labour practices, such as providing fair wages, safe working conditions, and equal opportunities. 

Second, Islamic finance promotes the development of social welfare programs, such as healthcare and education, which benefit workers and their families. 

Third, Islamic finance supports the development of small and medium-sized enterprises, which create job opportunities and promote economic growth.


In addition, Islamic financial institutions like Afiyah are already taking steps towards promoting ethical considerations in their operations. By offering Islamic home loans, Afiyah Financial Services is not only helping Muslims achieve their dream of homeownership but also contributing towards a more equitable society.

This is a wonderful example of how Islamic finance can be used as a tool for positive social and environmental impact.

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