How can the Islamic finance industry – and home finance providers such as Guidance Residential in particular – have an impact on the sustainability of our planet, both environmentally and economically? Although the main focus of Islamic home finance is to provide consumers with the ability to afford a home while honoring the principles of their faith, there are larger implications to the planet that are worth noting. Understanding that Islamic home finance has a larger place in the effort to achieve development goals can help consumers see home finance in a new light.
Sustainable development goals are a universal call to action by the United Nations to end poverty, protect the planet and ensure that all people enjoy peace and prosperity. Each goal has specific targets to be achieved over the next fifteen years. Goals such as “Affordable and Clean Energy”, “Clean Water and Sanitation”, and “Peace, Justice and Strong Institutions” are three of the seventeen goals created. A full list of the goals can be found at: http://www.un.org/sustainabledevelopment/sustainable-development-goals/
In an effort to support the goals set by the United Nations, Guidance Residential, as the top Islamic home finance provider in the United States, set out to create an initiative surrounding the concept of a “green” home. A green home is a type of house designed to be environmentally friendly and sustainable, while focusing on the efficient use of energy, water and building materials. Encouraging the Muslim American youth community to get involved in sustainable goals, Guidance launched a student video competition created around designing a green home.
The foundation of the “Guidance Goes Green” student competition created around sustainability is rooted in Islam. Islam teaches the importance of not wasting water. Clean water and sanitation affects two billion people around the world so searching for ways to conserve water is of the utmost importance to our planet. Water and other natural resources are a sacred trust and protecting them for future generations is a primary responsibility.
As responsible consumption is a principle in Islam, waste is wrong and requires the re-use of goods, waste products and recycling of materials as much as possible. Urging our youth as well as our community to use responsible consumption and to create dwellings that re-use materials in an efficient manner is one way that Guidance Residential supports sustainability initiatives. However, to achieve sustainable development goals we also need to address the root causes of poverty, hunger and inequality – interest, debt and the unequal concentration of wealth.
Islamic finance uses the concept of shared risk versus debt to promote sustained, inclusive and sustainable economic growth. Sharing risk – or risk management – is a method in which the cost of the consequences of a risk is distributed among several participants in an enterprise. This “sharing” and distribution allows for a more just outcome if something goes wrong – there is not an unfair burden on the borrower. Interest is a means by which wealth is concentrated in the hands of a few, and the debt that can be realized as a consequences of interest puts many individuals, families and even corporations in a more precarious financial position. Because of the dissatisfaction towards traditional financing, Islamic finance – as an industry that is founded on shared risk – is seeing tremendous growth around the world.
The understanding that any global debt increase means lower economic growth in the future, is leading many industries to begin utilizing Islamic finance principles as a way to contribute to the greater good. For example, Silicon Valley – the center of innovation with high economic growth rates – is almost completely financed with equity and uses an Islamic finance structure. Start-ups for high-tech innovation, scientific development companies and global technology companies understand that Islamic finance principles serve to insulate them from excessive leverage and uncertainty which in turn contributes toward promoting financial stability. Financial stability for companies leads to a more healthy economy.
Charles, Prince of Wales, said Islamic finance could provide answers where conventional banking could not, given Islam’s emphasis on “moral economy.” This “moral economy” is one of the founding principles of Guidance Residential and its Declining Balance Co-Ownership program – an ethical and participatory financial transaction where only real assets are purchased and the risks are shared between Guidance and its customers. With their partnership program, Guidance created a modern solution to home finance for Muslim Americans who did not want to compromise their faith or principles. Contributing to the “greater good” by finding solutions for consumers that don’t lead to societal imbalance is very much in line with the sustainable development goals of peace, justice and strong institutions.
Creating opportunities for families to make the dream of home ownership a reality – a dream that makes communities stronger and can improve stability for future generations – is the spirit intrinsic to Guidance Residential. For more information on Guidance Residential and the Declining Balance Co-Ownership Program, please visit us at: https://www.GuidanceResidential.com