According to the IAIB statement on the purpose of Islamic Banking:
"The Islamic bank takes into prime consideration the social implications that may be brought about by any decision or action taken by the bank."
"Profitability - despite its importance and priority - is not therefore the sole criterion or the prime element in evaluating the performance of Islamic banks. They have to match both between the material and the social objectives that would serve the interests of the community as a whole and help achieve their role in the sphere of social mutual guarantee. Social goals are understood to form an inseparable element of the Islamic banking system that cannot be dispensed with or neglected."
When you look at the 'Finance' part of the Islamic Finance market today, the success and further growth potential is well acknowledged. There are currently an estimated are 270+ Islamic banks worldwide with assets estimated at more than US$265 billion and industry growth projected to be around 15-20%. The global bond market has taken notice of the $30 billion in Islamic Bond (Sukuk) activity and now multi-nationals such as Deutche Bank and global financial centres such as London, Dubai, and Singapore are all vying for their place in this financial sector.
However, when you look at the 'social objective' premise underpinned by Islamic law (Shariah) for financing, there is little or no data as to the social aspect of an Islamic bank's performance. Certainly, it could be asserted that inherent features of Islamic finance contracts fulfil social objectives. However, not all contracts are created equal and we don't hear about the extent of the societal impact achieved, or the Bank's / institutions other contributions to society's many in-equalities such as poverty etc.
The global picture
If many so called 'Islamic financial innovations' today, they focus on deriving the most sophisticated Shariah compliant versions of conventional financial instruments for the corporate elite. Then why haven't we seen that same level of innovation to finance small-businesses, entrepreneurs, the poor, etc.
There is a lot of creative Islamic financing taking place which goes back to the issue of - is it something that brings value to society? Many institutions have based their products as pure marketing opportunities while losing the essence of Islamic finance, which is to help improve the overall society, and establish an economic system that can appeal to everybody.
One of the most important things is the flexible nature of the transaction where it is fair to the both parties. The transactions build or add value to society and do not cause burden or hardship to either the individuals or the businesses they are dealing with. Going forward this is what will help Islamic Finance differentiate itself from conventional finance. Unfortunately, many companies have missed the mark of providing a value proposition that makes it a fair playing ground.
Perhaps, that is the reason why there is a certain level of cynicism by many practitioners, scholars and general consumers about the virtues of present day Islamic Finance - a reason which may be holding Islamic finance back from achieving its true potential both socially and financially.
Even the most liberal estimates suggest that only a fraction of the Islamic finance market has been realized today globally, add to that the fact of 'corporate social responsibility' sensitivities of many non-Muslims, and the potential market is even larger. The social essence of Islamic Banking and Finance is and will continue to emerge; as the global players realise that success of what we do is determined solely as to how we act and behave with those around us.