KARACHI: State Bank of Pakistan (SBP) Islamic Finance Director Ghulam Muhammad Abbasi said on Tuesday environmental shocks have destabilised world economies as unchecked production and consumption backed by traditional finance have hurt the planet.

Speaking at a two-day International Conference on Islamic Banking and Finance at the Institute of Business Management, Mr Abbasi said asset-backed Islamic finance facilitates a transition to sustainable finance by minimising debt crises and ensuring that funds align with their intended purpose. “It prioritises social and ethical considerations, and risk-sharing… and avoids excessive uncertainty,” he said.

A recent S&P Global Report forecasts green, social and sustainability-linked bond issuances will hit $1 trillion, comprising 16 per cent of the total issuances in 2023. Amid climate crises, economic fluctuations, conflicts and pandemics, a recent UN Sustainable Development Goals report said progress on over half the targets is likely to fall below expectations, he added.

Addressing the conference, former SBP governor Dr Ishrat Husain said human dignity was the fundamental purpose of Islamic banking. At the same time, he said, Islamic banking also bridges the gap among social classes.“However, Islamic financial institutions should have a product differentiation from conventional banking to strengthen market penetration,” he added.

Published in Dawn, November 15th, 2023