Islamic Finance as a Catalyst for Inclusive Growth in the Era of Industry 5.0

Abstract

Islamic finance is increasingly recognised as an indispensable player in engendering inclusive growth and sustainable development, particularly within the context of Industry 5.0, which prioritizes advanced technologies and human-centric approaches. This paper explores how Islamic finance principles conform to the broader objectives of Industry 5.0, essentialising its remarkable roles in the promotion of financial inclusion, innovation, and sustainability. Leveraging ethical investment mechanisms and green finance initiatives, particularly green ṣukūk, Islamic finance provides a framework supporting economic development and environmental sustainability. The integration of Islamic finance into Industry 5.0 presents opportunities and challenges. On the one hand, Islamic financial institutions could drive technological advancements and develop innovative products that cater to diverse financial needs while adhering to Sharī’ah compliance. On the other hand, the sector faces enormous challenges related to regulatory frameworks, technological adaptation, and cybersecurity. Addressing these challenges requires a strategic approach to policy development and cross-sector collaboration. Case studies underscore the successful implementation of Islamic finance initiatives that contribute to sustainable development. For example, green ṣukūk issued by various countries demonstrates how Islamic finance could facilitate large-scale environmental projects while conforming to both financial and ethical standards. These initiatives not only enhance the role of Islamic finance in global markets but also promote inclusive growth by providing funding for projects that benefit underserved, marginalised, and vulnerable communities. The paper concludes with policy recommendations to bolster the effectiveness and efficiency of Islamic finance in the Industry 5.0 era. Future research and collaborative efforts are essential to fully optimise and realise the potential of Islamic finance in driving inclusive and sustainable growth, ensuring that it remains a robust and relevant component of the global financial system.

Keywords: Islamic Finance, Industry 5.0, Inclusive Growth, Sustainable Development