ISDB Discusses Importance of Islamic Finance at Sustainable Development Summit

ISDB Discusses Importance of Islamic Finance at Sustainable Development Summit

ISDB Discusses Importance of Islamic Finance at Sustainable Development Summit
Tuesday, 29 September 2015

Jeddah, September 28 – The Islamic Development Bank (IDB), along with the United Nations Development Program (UNDP) and other experts called for making Islamic finance part of conventional financing and mainstreaming the Sustainable Development Goals (SDGs) into national development plans at a side event organized in New York on the occasion of the Sustainable Development Summit. The Vice President of the Islamic Development Bank (IDB), Mr. Sayed Aqa who led the IDB delegation to the Summit
told world leaders that Islamic finance can play an important role in implementing the SDGs and that the IDB’s interest-free project financing and other programs are not exclusive to the Muslim world.

According to Mr. Aqa, the experience of IDB shows that non-Muslim countries and major international financing institutions around the world are already tapping into the potential of Islamic finance which offers several advantages, including its ethical nature, shared prosperity and ability to provide financial stability.

Several experts comprising the Deputy Prime Minister of Turkey Mr. Cevdet Yilmaz, UNDP Administrator Helen Clark, World Bank Corporate Secretary Dr. Mahmoud Mohieldin, UNDP Director of the Bureau for Policy and Programme Support Mr. Magdy Martínez-Solimán, Executive Secretary for the UN Economic and Social Commission for Asia and the Pacific (UNESCAP) Dr. Shamshad Akhtar, IDB Board of Executive Directors member Dr. Zul-Kifl Salami, and Mr. Ahmed Fayed Al-Gebali IDB Director of the Islamic
Financial Services Dept. spoke on the occasion.

In his intervention, Turkey’s Deputy Prime Minister said that the world is witnessing growing interest in Islamic finance especially after the global financial crisis, with rising interest rates and the introduction of new Islamic products in some countries such as the UK, Luxemburg and South Africa. He added that Islamic finance has been included in the agenda of the G20.

UNDP Administrator, Helen Clark told participants that Islamic finance has become an indispensable part of the pantheon of financing possibilities. Given the financing deficit, implementing the SDGs will require financing from traditional and non-traditional sources.

The UNESCAP Executive Secretary, Dr. Shamshad Akhtar was of the view that rather than seeing Islamic finance as a traditional source of financing, it should be viewed as part of mainstream financing. She added that the share and scope of Islamic finance is increasing, and it is projected to reach US$ 5 trillion by 2020 with further potential to increase in both size and scope.

Dr. Zul-Kifl Salami, sees the contribution of Islamic finance to the SDGs through community involvement. He told the audience that microfinance can be an important instrument for meeting the SDGS, and cited the example of US$50 million microfinance scheme successfully implemented in Benin Republic.

Dr. Mahmoud Mohieldin focused on the practical steps taken by the World Bank in introducing Islamic finance to implement some of their projects including the US$500 million Sukuk (Islamic bonds) to finance health projects. “The Islamic finance industry needs an enabling environment and programs towards building strong legal and regulatory frameworks to be able to contribute towards the SDGs,” Dr. Moheildin added.

Highlighting some of UNDP’s initiatives, Mr. Martínez Solimán described the MAPS (Mitigation Action Plans & Scenarios) framework which is aimed at strategically mainstreaming the SDGs and prioritizing the goals with respect to each country’s national development plans to accelerate these efforts. He acknowledged the significance of policy support for member countries to achieve the SDGs, adding that the UN System would encourage all its agencies and development partners to offer advice to member
countries. He also acknowledged the impressive way technology was absorbed by countries struggling with the Ebola crisis and how South-South partnerships have proven to be strategic for these countries.

Mr. Ahmed Fayed Al-Gebali explained that Islamic finance is an ethical form of business that is socially responsible, with core principles comprising prohibition of usury, uncertainty of contracts, speculation and the use of non-permissible products such as alcohol and gambling. He stated that Islamic finance can contribute to the SDGs, with its fair and equitable tools for risk appetite and allocation. It is an effective instrument to promote domestic resource mobilization and also enables
social welfare tools to leverage concessional finance. The Islamic finance industry according to him is growing 50% faster than conventional financing with an estimated total asset of US$2 trillion

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