Islamic finance and sustainable development goals: an analytical review of financial instruments

Islamic finance represents one of the most rapidly expanding domains within the global financial sector. An increasing research interest in the intersection of Islamic finance and sustainable development opens new horizons in search for economically viable and socially responsible solutions to achieve the United Nations Sustainable Development Goals (SDGs). With the introduction of SDGs in 2015, Islamic finance has re-emerged as an alternative mode of financing sustainable development with its principles of supporting the real economy by backing every transaction with underlying assets and ensuring social impact. Despite a growing body of literature on the correlation of Islamic finance and SDGs as well as on Sustainable Islamic finance, there is a significant knowledge gap concerning Islamic financial instruments. The purpose of this study is to analyze the alignment between Islamic finance and its working instruments in enhancing the achievement of the SDGs. The study employs a comprehensive literature review and thematic analysis to assess this alignment, as well as statistical data analysis. This study makes a novel contribution by systematically mapping a broad range of Islamic financial instruments – including zakat, waqf, sadaqa/infaq, qard al-hasan, sukuk, musharakah and mudarabah and Islamic microfinance – against specific Sustainable Development Goals (SDGs). These instruments hold great potential as viable tools in achieving the SDGs across various sectors, particularly in developing countries, where financial inclusion and ethical investment practices can significantly contribute to social welfare and economic stability. The scientific significance of the article is in its contribution to expanding knowledge on the role of Islamic finance instruments in advancing the SDGs. The originality of the work lies in combining conceptual analysis with contextual application, thus providing both a theoretical framework and actionable pathways for leveraging Islamic finance to advance global development agendas.

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