The Role of Islamic Finance in Fostering Circular Business Investments in the Case of Qatar’s Tire Industry

Abstract

The natural capital manifested in nature’s many activities drives human well-being and the foundations of modern society. Natural capital sustainability is threatened with an increasing regeneration deficit due to the growing human population and appetite for high consumption. The linear economy principles if remain the norm of business practices and consumption patterns, the outcome is likely to be shortages of certain materials, growing price volatility, and continued environmental degradation. Tackling this challenge requires a new economic paradigm of the Circular Economy (CE) where material use is decoupled from economic growth. The Islamic finance industry has a role to play in the transition toward the CE. This chapter explores the role of Islamic finance in fostering investments toward the CE to optimize resource use and avoid material waste in the course of economic growth. A focus on how Islamic finance can contribute to building a circular business financing ecosystem is explored. Ways to leverage Islamic finance's unique value proposition and contracts to attract investments for CE with a specific case study of the tire industry in Qatar is presented. The study concludes that Islamic finance profit and loss sharing financing mode can be used to support circular businesses motivated by Shariah objectives. There is also the need for financial regulatory authorities and Islamic financial institutions to consider risks associated with climate change and linear economic activities in asset valuation and pricing. Blended Islamic finance is an essential tool that can foster investments and attract funding for circular businesses. The circular business financing ecosystem can be built in Qatar by combining the profitable and charitable sectors within the context of Impact investing and Shariah objectives. This will mean that Qatar Development Bank, Qatar Charity, Islamic Banks, and Qatar Fund for Development can work together to attract the needed funding for circular businesses within Qatar and also attract entrepreneurial talents to Qatar to support the Circular Economic transition. Circular businesses like the tire industry, plastics recycling, and others need attention from policymakers within the scope of sustainability and achieving Qatar National Vision 2030. The study makes some recommendations, and among them are to invest in research and development in the area of Circular Economic growth and to pass a specific Qatar legislation related to CE.