Empowering social enterprises through the waqf institution: The case of SDG 3 (good health and well-being)

The problems our planet is faced with are complex and all-spanning. Global environmental degradation and climate change are coupled with increasingly alarming social fracture and economic disparities. Governments alone have failed to provide solutions to those wicked and highly interconnected problems.

In the past fifteen years, a new generation of entrepreneurs have attempted to address the social and environmental complexities at local and regional levels through the so-called social innovation. However, these social entrepreneurs face major hurdles including financing and scaling their products and services. On the other hand, the Waqf institution, considered in the past centuries in Islamic civilization as a major enabler of social and economic welfare, has remained relatively disconnected from modern capital markets and their various forms to achieve growth.

In a paper published in the proceedings of the Waqf and Sustainable development symposium held at Istanbul Sabahattin Zaim University last summer, Dr. Fadwa Chaker and Dr. Wail Aaminou demonstrate how the Waqf institution can be placed at the heart of sustainable economic development by bridging the demand and supply sides of social innovation through structured and efficient mechanisms. The authors firstly describe the theoretical grounding behind social innovation and its role in driving large-scale social impact and sustainable growth. Then, they discuss the Waqf institution as an unconventional instrument for wealth redistribution and eventual economic prosperity. Drawing on the preceding literature discussion, they present a conceptual framework that describes the mechanism through which the Waqf institution can boost inclusive growth by bringing together multiple for-profit and non-profit stakeholders. The authors illustrate the presented framework with the case of good health and well-being as one of the important UN sustainable development goals. In doing so, they show how Waqf helps social innovators address the structural challenges of financing and scalability and how this innovative instrument can thus be considered as a paramount lever for achieving sustainable development.

To download the full paper, please click here

Leveraging Income sharing arrangements to finance education

Source : Koç University, Turkey

Providing quality education is a critical goal in the sustainable development agenda. Indeed, when people are able to get quality education they can break from the cycle of poverty and enjoy healthier and more sustainable lives. Education is also crucial to fostering tolerance between people for more peaceful societies.

OIC countries are far from Ensuring inclusive and quality education for all and for promoting lifelong learning. According to the 2018 report “Education Quality in the OIC Member Countries “, these countries have struggled with a lack of progress in improving education quality in the last two decades as shown in international assessments. Furthermore, the gap between OIC and non-OIC countries seem to have widened over time. Mobilizing financings for education is one of the challenges not only in OIC countries but also globally with  education fees on the rise and students struggling with large debt balances. To illustrate, in the United States student debt reached a new height in 2018 — a $1.5 trillion. A typical student borrower will have $22,000 in debt by graduation.

Income sharing arrangements (ISA) seeks to address this issue by providing alternative financing schemes. Students financed through ISA do not pay tuition nor fees upfront. Instead, the financier (the university or any third party) gets a fraction of their salaries after graduation if certain conditions are met (typically, when the salary exceeds a certain threshold).

On paper, interest of all stakeholders in the ISA scheme seem aligned:

Students have incentives to join ISA, especially those from low and middle-income families;

  • Universities using ISA financing are keen on attracting brilliant students who can make it to the job market. In addition, the university will make sure enrolled students are better prepared for the job market;
  • Recruiters hire well-trained students with skills matching their expectations.

ISAs have gained prominence as an alternative to traditional debt schemes, especially in the US where they are provided by academic institutions (eg. Purdue, App Academy…) or financing start-ups (eg. GS2, Align…).

Given the shortcomings in education achievements in developing and developed economies, this product is worth developing by financial institutions along with the nonprofit sector. It will allow a better alignment of finance and SDG #4 (Ensuring inclusive and equitable quality education and promoting lifelong learning opportunities for all) and will provide financial institutions with the opportunity to diversify out of debt-like instruments.

Espresso– SDG #2 : “Alternative” meat to Feed the World

Résultat de recherche d'images pour "zero hunger cultured meat"

– What is it about? Achieving Sustainable Development Goal number 2 – #Zero hunger – is unlikely to happen by 2030 if we continue with the existing unsustainable economic growth models. Alternatives are urgently needed.

– Proposed Solutions: Some hard-nosed food companies are embarking onto new technologies for artificially cultured meat production based on cells in laboratories. Meat without livestock means greater accessibility and lower environmental footprint. Others propose insect-based protein production.

– Scope: This science seems to be compelling even to governments like China which agreed in 2017 to import a $300 million worth of cultured meat from Israel, a well-advanced player in the field. Some major US and EU food giants are investing in this nascent and presumably promising industry.

– So What? According to experts, opportunities can be tremendous both for meeting the hunger gap globally, and for substantially reducing negative environmental impact accrued from meat and dairy production – livestock contribute about 15% of all carbon dioxide emissions worldwide. 

 – My Take: Ethical considerations need to be closely observed as to the side-effects and externalities of such “unnatural” way of producing meat. At the end of the day, a more natural, meat-free or low-meat, diet could prove healthier and more sustainable. Learn more >>

Espresso: Artificial intelligence beats US lawyers!

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Image : LawGeex

– What is the context? We are seeing disruption across multiple industries by increasingly sophisticated uses of Artificial Intelligence. The field of law is no exception!

– What is the study about? 20 top US corporate lawyers with decades of experience in corporate law and contract review competed against an artificial intelligence program (LawGeex AI). Their task was to spot issues in five Non-Disclosure Agreements (NDAs)

– What are study results? LawGeex AI achieved an average 94% accuracy rate, higher than the lawyers who achieved an average rate of 85%. It took the lawyers an average of 92 minutes to complete the NDA issue spotting, compared to 26 seconds for the LawGeex AI

– So what? In the near future, AI has the potential to deal efficiently with high-volume and low-risk contracts, which will help clients get better pricing and allow lawyers to focus on more complex projects.

– Want to learn more?  The original study by LawGeex

Espresso: Biodiversity at stake

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Image: WWF

– What is the issue? Human activity impact on the planet goes beyond carbon dioxide emissions. According to WWF, the population abundance of mammals, birds, reptiles, amphibians and fish has decreased by more than 60% in less than 50 year

– Why? Overexploitation of species, agriculture and land conversion

– So what? Our health, food and security depend on biodiversity

– What needs to be done?  Bold initiatives are needed to not simply halt loss but to reverse the trend of biodiversity decline

– Want to learn more? The original report by WWF

Industry 4.0: Are we ready yet?

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The 4th industrial revolution is on everyone’s lips. After three long and scrambling revolutions, we are in the wake of a fourth one, more disruptive, more intelligent, and above all, scarier.

The story began with the first industrial revolution which started with the invention of the steam machine and steam power by James Watt. The first face of industrial activity took place with advanced mechanization and increased human, commercial and capital transfer. Less than a century later, the era of mass production accelerated with the discovery of the combustion engine and the moving assembly line. Continue reading “Industry 4.0: Are we ready yet?”

Impact investing : A wonderful opportunity for Islamic finance !

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Image : abras.com.br

Last August, I had the honor of facilitating a training on impact investing at the Institute of Business Administration in Karachi (Pakistan) along with experts from the United Nations Development Program, the Islamic Development Bank and IDA Capital (Turkey). The main takeaways from the training and the interaction with the participants are as follows: Continue reading “Impact investing : A wonderful opportunity for Islamic finance !”