A New Framework for Sustainable Islamic Financial Engineering with Special Reference to GCC Countries

Gulf Cooperation Council (GCC) countries are on an ambitious path towards green economic transformation. In this paper we identified the target as high level of Human Development Index (HDI) within the planetary capacity of One Earth. All the GCC countries have already achieved high levels of HDI. Therefore, the challenge is to maintain the high levels of HDI and embark upon an unprecedented green economic transformation. Since GCC countries share the common cultural values and Islamic finance is already systemically significant in these countries, Islamic economics and finance become a pivotal stakeholder of the transformation. To be fit to take the challenge robustly, Islamic finance must adopt a financial engineering framework which pivots on the restoration and regeneration of the universally shared natural capital. The design of Islamic financial contracts must follow a sustainability pathway. We discussed system, contract, and institutions specific concerns and prospects. This discussion hopefully opens a new direction on research in Islamic economics and finance focused on the minimizing negative externalities and maximizing positive externalities of our business and consumption activities. That direction is indeed consistent with the original aspirations of the disciplines. Hence the research is of general relevance although it refers to GCC countries