Sovereign Wealth Funds and Social Finance – The Case for Islamic Finance and Impact Investing

by Asim Ali, Shatha Al-Aswad

With the continuing political turmoil in the Middle East region and financial uncertainties in the global economy, governments in the MENA region are facing fiscal and budgetary constraints in trying to address the perennial issues of economic development, poverty alleviation, and jobs.

What should be the appropriate role of the government in the economy, especially when the global economy is facing slower growth. Between the blithe free-market solutions and impractical statist, interventionist, remedies, this paper argues that Islamic finance with its focus on moral and social objectives, and especially sovereign wealth funds, as long-term investors, are ideally positioned to pursue “Impact Investing” – making investments that generate social and environmental value as well as financial return – to foster social impact and economic development in the broader economy.

Sovereign Wealth Funds and Social Finance – The Case for Islamic Finance and Impact Investing