ETHICAL CAPITAL IN THE ISLAMIC FINANCE REGIME FOR SUSTAINABLE ECONOMIC TRANSFORMATION: MAQASID SHARI’AH-BASED ASSESSMENT

Abstract

This paper investigates the concept of ethical capital through the lens of maqasid al-Shari’ah (objectives of Islamic law) as a normative and evaluative framework for assessing the impact of Islamic finance on sustainable economic transformation. Although Islamic finance has gained prominence as a moral and equity-based alternative to conventional finance, its actual contribution to inclusive and sustainable development remains insufficiently analysed, particularly in Muslim-majority and developing economies. Adopting an analytical approach of research methodology, the paper assesses the ethical capital in the Islamic finance regime for sustainable economic transformation through the lens of maqasid Shari’ah. The paper asserts that Islamic financial institutions (IFIs) in Nigeria fall short in realising the maqasid’s higher objectives of equity, empowerment, and socio-economic transformation. The paper states that the gap is attributed to a compliance-centered regulatory orientation that prioritises legal form over ethical substance. The paper asserts that integrating ethical capital as a measurable and operational dimension within Shari’ah governance frameworks can enhance the transformative capacity of Islamic finance by aligning institutional performance with the maqasid’s broader moral and developmental imperatives. The paper concludes that sustainable economic transformation in Islamic finance depends not merely on adherence to legal norms but on cultivating ethical capital as the foundational driver of trust, justice, and shared prosperity in Muslim and global financial ecosystems.