The financial crisis 2008–2009 hit households in Sweden through a large fall in GDP, a rapid increase in unemployment and housing prices that fell by 10–20 per cent depending on which statistics you use (Figure 1). The euro crisis has recently entailed a new stress test. Swedish households and mortgage borrowers have also passed this test with flying colours. The Riksbank’s inquiry into the risks in the housing market also observed that resilience in the Swedish mortgage market was good. It estimated the effects on the economy of a fall in housing prices of 20 per cent and concluded that the effects would be relatively small, particularly if they are counteracted by a more expansionary monetary policy.19 One important indicator of sustainability and resilience is the household saving ratio. Swedish households’ saving ratio is now historically high, while it was very low prior to the 1990s crisis, minus 3 per cent at its lowest (Figure 2). A high saving ratio means that households are increasing their real and financial assets and that their consumption is not funded by loans. A low saving ratio and a loan-funded consumption boom, which was the case in Sweden prior to the 1990s crisis and in the United States prior to the most recent crisis, is on the other hand problematic and not sustainable.
It takes a long view to recognise returns beyond profits where social and environmental gains are also equally valued. This will represent a major paradigm shift in many institutions. For this, strong and visionary leadership that sets the tone from the top, starting from the board and senior management, is certainly crucial. Far-sighted leadership to transform culture, systems and people will be central to this paradigm shift. To facilitate the process, the recently issued Strategy Paper on VBI will be complemented with an implementation guidance that is currently being developed by the Bank in collaboration with the industry. Second, VBI will require greater stakeholder activism through increased transparency on its adoption. This is a new initiative and it is imperative that our efforts go hand in hand with creating greater awareness and understanding of key stakeholders. The public sector and advocacy groups play an important role. But customers and business ventures should also play their roles wisely and use the power of their wallets to make informed choices. To catalyse this change, a value-based scorecard will be introduced to realign behaviours and expectations towards the desire to impact the community and the environment in a positive way. The scorecard will capture important dimensions of qualitative performance that are geared towards creating sustainable outcomes by Islamic financial institutions. The third critical area is adopting a collaborative approach to implementing VBI which will be key to mobilising change.