Sustainable Islamic Social Finance and Consumer Preferences

How to Cite

Sustainable Islamic Social Finance and Consumer Preferences. (2024). International Collaboration Conference on Islamic Economics, 2(1). https://conference.apseii.id/index.php/ICCEIS/article/view/70

Abstract

The Islamic faith has very strong pro-social and pro-sustainability principles and directives implemented in various forms of social finance such as zakāh and waqf. However as discussed in Arbi & Bhatti (2023), these principles and directives are often seen as being conflict with mainstream economics despite the laetter demonstrating that it is possible for the two to exist in synergistic harmony. I demonstrate in this paper how the consumer theory of mainstream economics can be used to analyze a typical Islamic social finance problem, namely how to best distribute a limited amount of collected funds amongst a potentially unlimited amount of needs. I do this by (i) demonstrating how several key principles of the Islamic worldview may be represented in the conceptual framework of consumer theory (ii) applying constrained optimization to explore the consumption implications of an Islamic economic agent (iii) exploring the role externalities play in the agent’s decision-making and finally (iv) using comparative statics to explore the social welfare and policy implications of an Islamic economic agent’s behavior, including how it can be affected by receiving funds from Islamic social finance. I close the paper by summarizing the main ideas of the paper and then discuss possibilities ways to extend this line of research.

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