Book of the month: The age of knowledge by Idriss Aberkane

Idriss Aberkane, a French essayist, is known for his writings and lectures on the knowledge economy and neuroscience. His lasted book “L’age de la connaissance / the age of knowledge “is worth reading. The book seeks to dismiss two contemporary paradigms: “Produce or flourish” and “Nature or employment”.

The key takeaways from his last essay are the following:

  • Knowledge is more valuable than natural resources. This statement is clear when looking at the evolution of global companies ranking in the last two decades.
  • Fostering a knowledge economy should be the priority of any government: To support his argument, the author frequently uses the example of South Korea who own little natural resources yet is one of major global exporters globally thanks to Korean technological powerhouses. However paradoxical it may appear, South Korea exported 45 Billion USD worth of Processed petroleum oils in 2018 even though the country does not have oil reserves !
  • All revolutions / radical innovations go through three stages:  They are firstly considered ridiculous, secondly as dangerous and finally obvious. Think of slavery abolition and labor rights for instance.  
  • Knowledge dynamics follows three principles :
  1. The exchange of knowledge is positive sum : “When we share a material good we divide it, when we share an intangible good we multiply it”
  2. The exchange of knowledge is not instantaneous : Unlike physical good, the transfer of knowledge requires more time and energy
  3. The combination of knowledge is not linear : “The Whole is Greater than the Sum of its Parts”
  • Nature as a source of inspiration and one of knowledge economy applications : Nature is the largest deposit of knowledge on earth. The author is a strong supporter of Biomimetics, which is the imitation of the models, systems, and elements of nature for the purpose of solving complex human problems in locomotion, construction and architecture, structural materials, optics and agriculture to name a few.

The first ever Global Muslim Philanthropy Fund for Children

On 26 September 2019, UNICEF and the Islamic Development Bank (IsDB) launched an innovative fund that aims at reaching millions of children currently in need of humanitarian support in OIC countries. The idea of the fund was first announced last April during IsDB’s 44th Annual Meeting of Board of Governors in Marrakesh (Morocco).

Today, global humanitarian needs are at critical levels and children are especially vulnerable as they face the highest risk of violence, exploitation, disease and neglect. To address this need, the Global Muslim Philanthropy Fund for Children (GMPFC) will mobilize Islamic giving, including philanthropic and Zakat resources, towards humanitarian and resilience development programs that ensure the well-being of children. Projects include support for children in education, health and nutrition, water and sanitation, early childhood development, protection and youth empowerment. The fund will benefit from UNICEF’s on-the-ground presence and experience in all OIC countries.

This move from IsDB did not come as a surprise. It confirms IsDB’s President past commitments to position the bank as a catalyst in the achievement of SDG in OIC countries. The launch of GMPFC is a good news for the Islamic finance industry for two reasons. First, it sends a strong signal about the importance of Islamic finance active involvement in social issues. There no doubt that Islamic social finance has developed during the current decade, however, the industry achievements in the social sphere so far are not enough to address current social issues. Second, the GMPFC initiative confirms the Interest of large international organization such as UNICEF in Islamic finance and demonstrates that synergies with Islamic finance can play an important role in the achievement of SDGs. In the past, UNHCR (United Nations High Commissioner for Refugees) established a Zakat fund to alleviate the suffering of forcibly displaced people in OIC countries.

The fund, that will be administered by IsDB, seeks to raise US$250 million from private and public foundations, Zakat agencies and individuals. Although the fund purpose is clear, operational details have not been disclosed so far. In the coming weeks, the Islamic Finance industry and will be waiting for clarifications on the following questions:

  • What marketing approach will IsDB use to convince individuals to donate to the fund knowing that historically, IsDB has been dealing more with governments and businesses?
  • Which Fintech technologies will IsDB leverage to ensure transparency and efficiency?
  • What would be the fund priorities in the first years and what are the fund commitments in terms of impact (SDGs targets)?
  • What synergies will be built with the impact investing ecosystem in order to make the philanthropic funds more sustainable and more focused on income generating activities for beneficiaries rather than on simple cash transfers?

This article was first published in Islamic Finance news Volume 16 Issue 41 dated the 16th October 2019.

ESG, SRI, Impact investing…: Lost in terminology?

Source :

Despite all the dire consequence of the 2008 financial crisis, it did help to question the paradigms of modern days’ finance especially its role in addressing economic, social and environmental issues. As a result, multi-lateral development institutions, think tanks, academic institutions, regulators and financial players have undertaken various initiatives aiming at integrating sustainability and finance into a unified business model. The central focus has been to move beyond the “do well and then do good” approach as in corporate social responsibility to a “do well while doing good” approach that views sustainability as a strategic competitive advantage. Nowadays, concepts like ESG (environment, social and environment) investing; Socially Responsible Investing (SRI), Impact investing, mission-driven investing and responsible finance are gaining traction both in developed and developing countries and are even promoted by “traditional / orthodox” large financial players !  However, the finance and sustainability hype brought also confusion to investors looking for “double bottom line returns”. Are these concepts similar? If not, what are the differences between them? These questions are critical because the proliferation of terms related to financing and sustainability creates fuzziness that ultimately leads to inertia among investors and other market players. Therefore, clarifying the different concepts is key to the development of the impact finance industry.

In this post, I will focus on explaining the difference between ESG, SRI and Impact investing terms. Although, there are many others similar concepts used in the financial markets, the chosen terms are the most common.

ESG refers to the environmental, social, and governance practices of an investment that may have a material impact on the performance of that investment. The integration of ESG factors is used to enhance traditional financial analysis by identifying potential risks and opportunities beyond technical valuations. However, the main objective of ESG valuation remains maximizing financial performance.

Socially responsible investing goes one-step further than ESG by actively eliminating or selecting investments according to specific ethical guidelines. The underlying motive could be sharia compliance, personal values, or political beliefs. Unlike ESG analysis, which is valuation-centered, SRI usually uses ESG factors when applying negative screens on the investment universe. For example, an investor may wish to avoid companies engaged in firearms production, child labor or gambling.

Similar to SRI, impact investing also considers social and environmental effects. However, the difference is that impact investments are only made in companies, organizations or funds where the main purpose is to achieve positive impacts, alongside a financial return. In general, SRI is more concerned with negative screening whereas impact investing is more concerned with positive screening.

As part of the current initiatives to bring finance to its natural orientation, stakeholders (especially regulators) should not omit to take active steps to clarify the different concepts under the impact finance umbrella. Although, this effort looks pretty basic but it is much needed to transform the enthusiasm on impact finance into a more meaningful transformation.

This article was first published in Islamic Finance news Volume 16 Issue 39 dated the 2nd October 2019

Lessons learned from UNHCR Zakat fund

UNHCR (United Nations High Commissioner for Refugees) issued two months ago a landmark report on the potential of Zakat funds to alleviate the suffering of forcibly displaced people in OIC countries. The report aims at establishing the importance of giving Zakat to displaced people and at raising awareness of UNHCR’s role and aspirations in directing Zakat to its populations of concern.

In 2017, there were 68.5 million forcibly displaced persons globally, of which an estimated 40.8 million are Muslim. Unfortunately, conflicts and resulting displacements have led to a surge in poverty levels (SDG1), to a spike in malnutrition (SDG 2) and to the deterioration in the health and well-being of displaced populations (SDG3). Moreover, displaced refugees face educational barriers (SDG4) and are confronted with a lack of job opportunities in hosting countries (SDG8).

The UN has estimated the current Zakat given worldwide at $76 billion, which is modest in context of $1.7 trillion in wealth held by high net worth individuals in the Middle East, and separately, $2.5 trillion in assets held globally by the Islamic finance Industry. According to the UN, the global Zakat potential is around $356 billion.

75% of Zakat donations are commonly transferred directly from donor to recipient without the involvement of any Zakat collecting organizations. Hence, Zakat is an important source of philanthropic funds and Zakat industry has tremendous potential in addressing the funding requirements needed to achieve SDGs and humanitarian assistance programs, especially that refugees fall under at least four of the eight stipulations required by recipients of Zakat funds.

There are many lessons learned from the UNHCR zakat fund:

  • Adopting digital innovation: The UNHCR Zakat Fund recipients are registered and their iris scans are taken and used for cash distribution. Moreover, text messages are sent to beneficiary confirming that cash is available
  • Broadening the scope of collaboration across stakeholders: The Zakat fund is providing an important avenue for stakeholders (financial institutions, individuals, philanthropic organizations…) to direct their funds to address acute humanitarian needs
  • Improving the link between Zakat and humanitarian needs: The UNHCR zakat fund clarifies the link between Zakat and the most pressing humanitarian funding needs by relying on a transparent reporting and tracking system of Zakat funds destination
  • Leveraging effective distribution channels: If Zakat industry is to reach its full potential, partnerships with trustworthy organizations are a necessity. The involvement of leading organizations such as UNHCR in distributing funds enhances the impact of contributions, minimizes overhead allocations and improves efficiency

UNHCR zakat fund experience can be leveraged in addressing other social issues like education, economic empowerment and healthcare through specific zakat funds. More importantly, such initiatives can build synergies with impact investing funds in order to make zakat funds more sustainable and more focused on income generating activities for beneficiaries rather than on simple cash transfers.

NB: This article was published on page 17 of IFN Volume 16 Issue 24 dated the 19th June 2019.

J’ai lu : Vers une économie à trois zéros (Zéro pauvreté, Zéro chômage & Zéro émission carbone) du Pr. Muhammad Yunus

L’économiste Muhammad Yunus, prix Nobel de la paix en 2006, commence son livre par la critique du système capitaliste qui en dépit de ses apports est la source de plusieurs externalités négatives notamment l’amplification des inégalités sociales et économiques ainsi que le dérèglement climatique. De ce fait, pour Muhammad Yunus, il est nécessaire de repenser le modèle capitaliste afin de réconcilier les intérêts personnels et collectifs.

Le véhicule mis en avant dans le livre pour repenser le modèle capitaliste est l’entreprise sociale. L’entreprise sociale est définie comme une étant une entreprise qui fonctionne exactement comme une entreprise normale mais qui se distingue par deux caractéristiques :

  • Le but premier de l’entreprise sociale est de résoudre un problème social ou environnemental
  • Contrairement aux organisations caritatives, une entreprise sociale génère des bénéfices et vise à être financièrement autonome. S’affranchir du besoin constant de lever des fonds (comme dans le cadre des organisations philanthropiques) permet aux entreprises sociales de réinvestir leurs bénéfices pour générer un impact durable.

Ainsi, ce type d’organisation, à cheval entre le business et la philanthropie, ne vise pas à enrichir les investisseurs mais à améliorer durablement la vie des gens et à rendre le monde meilleur.

Dans le livre, Muhammad Yunus présente plusieurs exemples d’entreprises sociales opérant par exemple dans les énergies renouvelables, le recyclage, l’eau et plus généralement la capacitation économique. Il insiste par ailleurs sur trois moteurs pour permettre à l’entreprise sociale de transformer le monde : Les jeunes, la technologie et la bonne gouvernance & les droits de l’Homme.

Au-delà des concepts très intéressants évoqués dans ce livre en relation avec l’entreprise sociale, je retiens personnellement trois conclusions :

  • Quel intérêt du savoir si nous ne l’appliquons pas pour améliorer la vie des gens ? Avant de fonder Grameen Bank (littéralement la banque du village) Pr. Yunus était un professeur d’économie à l’université de Chittagong au Bengladesh. Le déclic s’est produit quand il a remis en cause l’intérêt d’enseigner à ses étudiants des théories économiques alors que des villages avoisinants souffraient d’une extrême pauvreté et n’avaient aucun accès aux services financiers
  • Les défis économiques, sociaux et environnementaux que nous affrontons sont complexes, interdépendants et transfrontaliers. Puisque l’intervention des gouvernements n’est pas et ne sera jamais suffisante, il est plus que jamais nécessaire de mobiliser l’ensemble des parties prenantes pour relever les défis y compris les sociétés civiles et les entreprises (sociales et conventionnelles)
  • Comme le dit Muhammad Yunus dans son livre, si nous imaginons un monde idéal, il y a une chance qu’une partie de cet idéal soit réalisée.  Si nous n’imaginons rien, il y a très peu de chance que les choses changent !  Aussi évident cela puisse paraitre, l’espoir est non seulement une cure psychologique mais aussi une condition sine qua non pour espérer de nous en sortir un jour

فعلاً، لا نحتاج إلى “صناعة” كرة القدم

تابعت كالعديد من التونسيين والمغاربة الخلاف الناشئ حول نهائي دوري ابطال أفريقيا وقرار الكونفدرالية الافريقية لكرة القدم إعادة إجراء المباراة في ملعب محايد .شخصياً لا تهمني ملابسات هاته القضية ومن هو على حق، لكن ما أثار حزني من خلال تتبع النقاش في الإعلام وخصوصاً في شبكات التواصل الاجتماعي هو طبيعة الخطاب الذي يتسم بالعنف والإقصاء والكراهية والحقد من شعبين شقيقين يتقاسمان الدين واللغة والتاريخ وحتى طبق الكسكس ويعانيان اليوم من نفس المشاكل الاجتماعية والاقتصادية. ما أثار حزني كذلك حجم المتابعة الهائلة لهذا الخلاف.

ما يجري الأن بين الترجي والوداد ليس حالة منعزلة بل نلمسها دائماً في اللقاءات الكروية داخل البلد الواحد وبين البلدان العربية مثلاً: نزاع كأس العالم بين مصر والجزائر سنة 2009.

هنا تطرح مجموعة من الأسئلة: ألا تكرس صناعة كرة القدم انقساماتنا ونبذ الآخر داخل المجتمع الواحد وبين الأقطار في الوقت الذي نحتاج فيه إلى تقارب؟ ألا تستحوذ صناعة كرة القدم على موارد مالية ضخمة نحن في أمس الحاجة إليها لرفع تحديات مستعجلة؟ ألا تشغلنا صناعة كرة القدم عن الإشكالات الحقيقية التي لا ينطبق عليها المثل “كم حاجةً قضيناها بتركها”؟ ألم تصر العديد من مباريات كرة القدم معارك حقيقية تأتي على الأخضر واليابس وتكرس السلوك الهمجي والعدواني؟

في تقديري، مفاسد كرة القدم في الوطن العربي اليوم أكثر بكثير من مصالحها. شخصياً أحب كرة القدم، أحب كرة القدم التي لعبناها في الأحياء التي لا تتطلب شيء والتي تتسم بالندية والمرح خصوصاً خلال شهر رمضان. أحب كرة القدم “الرياضة” التي تعلمنا قيم العمل الجماعي والمنافسة واحترام الآخر وليس “الصناعة” التي لا يهمها إلا المال والتي تجعلنا أكثر تخلفاً وتعصباً وانقساما.

Impact finance: IsDB setting the tone for the Islamic finance Industry

Since 1975, the Islamic Development Bank (IsDB), through it is five entities, has made several remarkable achievements in fostering the development of its 57 member nations (nearly one fifth of the world’s population). However, IsDB Countries face currently an unprecedented range of dynamic challenges as they pursue sustainable development. The global development landscape is changing rapidly due to technological advancements, geopolitical circumstances and growing protectionism. The world is struggling with systemic challenges including slow economic growth, lack of infrastructure, inadequate technological development and a growing youth population. IsDB member countries face, moreover, low development of human capital and high levels of unemployment. These issues, along with increased fragility, social disorder and the negative impacts of climate change, further exacerbate these countries vulnerability.

The economic impacts of these developments require targeted responses if countries are to meet their Sustainable Development Goals (SDG) commitments. In fact, the huge financing requirement to implement the SDG has increased from billions to trillions of US$, exceeding the capacity of any single institution or state.

The IsDB new business model is based on strengthening the competitiveness of member countries in the strategic industries in which they have a comparative advantage. More specifically, IsDB seeks to mobilize US$ 1 trillion through five major industries to lead development in its member countries, generating 10 million new jobs annually by 2030. The selected industries are food and agribusiness; textiles, clothing, leather and footwear; petroleum and chemicals; construction; and Islamic finance.

This bold strategic move from IsDB sends a strong signal to the Islamic Finance industry regarding the integration of sustainability in its core business model. Despite the abundant literature on the fit between sustainable development and Islamic finance as well as some successful impact finance initiatives especially in South East Asia, it is clear the market has not yet seen the potential of Islamic Finance industry to drive sustainable development with positive environmental, social and governance outcomes.

In my opinion, the IsDB new business model provides very interesting insights for Islamic finance institutions seeking to adopt a similar approach on impact finance:

  • Focus: It is virtually impossible for a single institution to address all sustainable development goals. Choosing specific challenges where the financial institution has a strong competitive advantage is paramount
  • Goal setting and impact measurement: Target performance indicators are clearly highlighted in new IsDB business model. Performance measurement is key for any impact finance initiative
  • Agility: In order to implement the new business model, IsDB aims at moving towards a leaner organizational structure with simpler business processes. Islamic financial institutions are relatively young with a smaller size compared to their conventional counterparts. Therefore, Islamic financial institutions involved in sustainability should take advantage of this factor
  • Involving Stakeholders: Creating 10 million new jobs annually by 2030 requires the active contribution of a several external partners. Impact finance Institutions need to proactively collaborate with relevant stakeholders to further the objectives of any impact finance strategy

NB :   This article was initially published in page 20 of IFN Volume 16 Issue 19 dated the 15th May 2019