Getting back to basics, one of the many things which the Qur’an lays emphasis on regarding the concept of wealth is to avoid its concentration amongst a particular stratum of the society, the rich categorically. In other words, everyone must be included in the benefits associated with the wealth of the society. To that effect, the Qur’an sets a fundamental rule regarding wealth circulation; Allāh states:
“And what Allah restored to His Messenger from the people of the towns – it is for Allah and for the Messenger and for [his] near relatives and orphans and the [stranded] traveller – so that it will not be a perpetual distribution among the rich from among you…” – Q:59vs7.
Although the rule is mentioned in connection with a specific occurrence, its application transcends the happenings in which it was related by the Qur’an. Consequently, concentration of wealth among the wealthy at the detriment of those with little or no financial inclusion in the society is in tangent to the dictates of the Qur’an.
Cascading this to the Islamic financial system, creation, management and distribution of wealth, need to adhere to the fundamental rule. This, among others, form the fundamental divergences that exist between the conventional financial system and its counterpart, Islamic financial system (IFS). Whilst talking about economy and finance from an Islamic perspective, activities of financial institutions are expected to be in tandem with the principles set out in the Islamic financial system. One of those principles is wealth circulation within every economic stratum of the society.
Talking about the role of Islamic financial institutions (IFIs), financing the small and medium-sized enterprises (SMEs) should be part of the fundamental goals of IFIs (if not the main). Incontestably, it can be stated that the IFIs take money in the form of deposits (in the case of banks) and contributions (in the instance of Takāful firms) from a significant population of the medium and lower strata of the society. Consequently, the wealth being taken from these strata of the society needs to be circulated in the form of effective financing of their businesses to achieve an improved economic situation and lifestyle.
Going forward, the success of financial institutions, especially the banks should not be measured by the growth of their assets only but rather using the level of impact they made on the above-mentioned strata. For example, how many SMEs were financed? How many socially impactful financings were made by a financial institution? How far are the financings consistent with the sustainable development goals SDGs? These are the variables which the regulators need to start adopting in measuring the successes of IFIs and not the usual asset growth that mainly satisfies the appetites of the shareholders and not of the stakeholders as the case should be.