Sustainable development is more than ever relevant
The Covid-19 challenges are not only sanitary but also economic. The crisis has already plunged the world’s economy into a recession with negatives consequences on jobs and social stability. Low-income countries, particularly, face tremendous pressure to deal with the externalities of this crisis. In such a context, sustainable development goals have become more than ever critical (as shown in the following table). Moreover, a prolonged crisis would adversely influence the implementation of the 2030 Agenda and might wipe out the progress made in recent years in many SDGs.
|SDG||Impact of the crisis|
|Poverty (SDG1)||Loss of income leading vulnerable segments of society and families to fall below poverty line|
|Health & wellbeing (SDG3)||Devastating effect on health outcomes|
|Education (SDG4)||Schools closed; remote learning less effective and not accessible for some|
|Decent work and economic growth (SDG8)||Economic activities suspended, lower income, less work time, unemployment for certain occupations|
|Sustainable cities and communities (SDG 11)||Population living in slums face higher risk of exposure to Covid-19 due to high population density and poor sanitation conditions|
With all this economic mess, is impact finance pertinent now?
Impact finance is far from being immune from the current systemic crisis aside from very few sectors like technology and biotech. However, times of uncertainty and hardship create new opportunities for financiers to make an impact. Indeed, the necessity of finding solutions in providing healthcare supplies, ensuring continuous access to food and supporting small and medium-sized businesses can be a catalyst involvement in impact finance. Furthermore, it is fair to say that public sensitivity to social issues, and to a lesser extent, environmental issues will be stronger when things normalize. Islamic financial institutions will be obliged to deal with this new reality, especially that they mostly operates in low and medium income countries. Relying on isolated and sporadic social responsibility initiatives (donations, interest free loans…) will not be effective nor sustainable in the medium and long terms.
The role of digital technology going forward
The crisis has forced us to review several paradigms including the integration of digital technology in our daily life. It is true that before this crisis we had already entered the era of the fourth industrial revolution, in which the fusion of technologies blurs the boundaries between the physical, digital and biological spheres. In the finance sector, technology has become a positive enabler to deal with the crisis’ impacts. Examples include mobile-first banking, digital currencies, crowd funding and blockchain-driven supply chain finance. For Islamic financial institutions, the crisis is, therefore, an opportunity to embrace technology at a larger scale and to roll out new tech-driven business models that address critical sustainability issues in countries where they operate. The digital transformation challenge lies in the organization’s ability to evolve its business model, to transform its processes and finally to conduct change.
This article was first published in IFN