Can the Integration of SRI Principles in Islamic Finance Help Bridge the Gap Between Aspirational Islamic Moral Economy and Realistic Islamic Finance?

Islamic finance is considered as an alternative moral and ethical based finance. Its principles, known as the “Islamic finance pillars” offer an alternative for investors seeking more ethical use of their funds. Since its early inception in 1970s, the industry developed significantly with an annual two-digit growth of 15 to 20% and an expansion beyond traditional markets. However, this growth has not benefited much to the social and environmental developments. Thus, Islamic financial institutions (IFIs) are usually criticized for their social and environmental failure and heavy reliance on debt-based transactions such as commodity murabaha.