REPUBLIKA.CO.ID, SURABAYA -- Islamic finance has a big potential for impact investment, as it aims to achieve good practices and avoid those proscribed by Islamic law (haram), Deputy Minister of Finance Mardiasmo said.
"This is aligned with impact-investing, where business goals can be achieved, at the same time giving benefits to other people, in the Sustainable Development Goals framework," Mardiasmo said at the 4th Annual Islamic Finance Conference in Surabaya, East Java, Wednesday.
Impact investment refers to investment that is intended to also have social or environmental benefits, outside of financial profits or returns. The current concept of impact investment in Islamic finance was set in motion by the government through the issuance of green sukuk (Islamic bonds), he said.
The bonds were then used to build a total of 727 kilometers of double-track railroad lines, waste management for 3.4 million households and 121 mini solar power plants. There are also social funds, managed with sharia law, that are utilized to finance activities such as sanitation and mother and child nutrition supply.
As of now, countries are focusing on the United Nations Sustainable Development Goals (SDGs) as their agenda that would benefit the people. The funds needed to achieve such goals are considerably substantial, he continued.
The 2014 World Investment Report has revealed that in order to reach 17 targets of the SDGs, developing countries would need additional investments of 2.5 trillion US dollar annually. Meanwhile, Resident Representative of the United Nations Development Programme in Indonesia Christophe Bahuet said that funding is one of the vital elements required to achieve the SDGs by 2030.
The mix of Islamic finance and impact investment can create opportunities to overcome the gap in the funding towards the achieving of the SDGs. "We hope this conference can promote the utilization of Islamic finances potentials to achieve SDGs in Indonesia," Bahuet said.