By Ahmad Mohamed Ali, president, Islamic Development Bank Group
The Islamic Development Bank Group is working toward reduced poverty, enhanced economic cooperation and improved infrastructure for its 56 member countries
To download a low-resolution pdf, click here. (Be patient! It's 50 MB.)
The Islamic Development Bank Group (IDB Group) plays a key role in fostering socioeconomic development throughout the Islamic world. A South-South multilateral development institution, it supports the economic development and social progress of its 56 member countries, as well as Muslim communities in non-member countries. Since its inception in 1975, the IDB Group has pioneered a unique alternative system of banking and finance based on the principles of Shari’ah (Islamic law). It provides development assistance, which reached $63.9 billion at the end of 2009, focused on achieving sustainable and shared economic growth in its members. Project financing and technical assistance operations represented 45.6 per cent of that assistance, while trade financing constituted 54.5 per cent. Public utilities remained the largest sector at 33 per cent, followed by transport and communication, social services, industry and mining, agriculture and financial services.
In response to the recent global financial and economic crisis, the IDB Group scaled up its development assistance by doubling the number of approvals while accelerating its reform process and maintaining high credit ratings. To support economic recovery in its member countries, during 2009 the IDB Group’s overall development assistance increased by 29 per cent compared to its 2008 level. That increase was mainly due to a sharp increase in total project financing, which registered 58.4 per cent growth compared to the previous year. In particular, the IDB nearly doubled its infrastructure financing to help its member countries prepare for economic recovery in the post-crisis world.
The IDB 1440H Vision aims to alleviate poverty, eradicate illiteracy, provide better health facilities, strengthen ties with the private sector and non-government organisations, and empower women. To realise the vision and address the emerging challenges facing its member countries, the IDB Group has identified five strategic focus areas: comprehensive human development, poverty reduction, infrastructure development, economic cooperation and regional integration, and Islamic financial sector development. With regard to human development and poverty reduction in its member countries, particularly in sub-Saharan Africa, the IDB Group launched the Special Programme for the Development of Africa (SPDA) and the Islamic Solidarity Fund for Development (ISFD). The main objectives of SPDA are to contribute effectively to reducing poverty, promoting sustainable economic growth and supporting regional integration in member countries
in Africa. The ISFD helps reduce poverty by providing financing on concessional terms, primarily for the least developed members. It focuses mainly on building member countries’ productive capacity through targeted interventions that encourage sustainable economic growth and job creation, reduce illiteracy, and eradicate contagious diseases and epidemics such as malaria, tuberculosis and HIV/AIDS. These objectives are linked directly to the achievement of the Millennium Development Goals (MDGs), which form the centre of member countries’ national development plans and poverty reduction programmes and are also consistent with the IDB 1440H Vision. Moreover, in response to high food prices, the IDB Group adopted the Jeddah Declaration in 2008 to resuscitate agriculture sector productivity in member countries. It is also encouraging cross-border private investment in agriculture to accompany efforts made by its member countries, particularly Saudi Arabia and Kuwait. With regard to strengthening economic cooperation and regional integration, the IDB Group has established a special entity called the International Islamic Trade Finance Corporation, which provides trade financing and assists trade development activities in member countries.
Developing quality and adequate infrastructure is another challenge. As part of the medium-term strategy for infrastructure initiatives, the IDB Group has increased financing in the four core areas of transport, water, energy, information and communications technology and public-private partnerships (PPP). In particular, the IDB Group plans to enhance its efforts to assist members in creating an enabling environment for private sector participation in infrastructure through flexible and innovative PPP schemes and capacity development programmes. The IDB Group is already working closely with national, regional and international donors and financiers as well as specialised PPP and private sector initiatives such as the Public-Private Infrastructure Advisory Facility. Furthermore, the IDB Group is developing and deploying new products and risk mitigation instruments to attract and facilitate private sector participation in infrastructure.
In the area of Islamic financial sector development, the IDB Group is crucial to the development of this industry, by nurturing the development of standard-making bodies such as the Islamic Financial Services Board and the Accounting and Auditing Organization for Islamic Financial Institutions. It has also assisted in developing specialised institutions such as the General Council for Islamic Banks and Financial Institutions, the International Islamic Financial Market, the Islamic International Rating Agency and the International Islamic Centre for Reconciliation and Arbitration. In addition, its equity investments in various Islamic financial institutions around the world have catalysed other investors to join in providing equity capital to these institutions. In this regard, the IDB Group, along with some strategic partners, is also undertaking a proactive stance. It initiated the idea of establishing a mega Islamic investment bank for financing high-value transactions, developing and marketing high-quality liquid and tradable Islamic financial papers, and enhancing liquidity management for Islamic financial institutions. Furthermore, in line with its mandate to generate and disseminate knowledge in the area of Islamic banking and finance, the Islamic Research and Training Institute — a member of the IDB Group — is focusing on important thematic areas of financial stability, inclusive Islamic financial services, and sustainable and comprehensive human development. The IDB Group has been approached by many countries and international institutions to provide assistance in the development of the Islamic financial industry. It also supports the Islamic financial services industry through its strategic and technical partners, particularly the World Bank and the International Monetary Fund, in the fields of financial sector assessment and governance of financial institutions.
At the G20 summit in Seoul in November 2010, the G20 Development Working Group will articulate areas for action, with a focus on the prioritised needs of the low-income countries (LICs). The prioritised areas will be developed after full understanding of challenges and dialogue with LICs. The working group has identified a number of areas for consultation with LICs: infrastructure development, private investment and job creation, human resource development, trade promotion through ‘aid for trade’, financial inclusion through enhancing access of the poor, food security and improved governance. After consultation with LICs, prioritised areas will be identified and a multi-year action plan will be developed to address binding constraints that will likely unleash the potential for sustainable and inclusive economic growth in LICs. The IDB Group is confident that providing a voice to LICs will broaden the G20’s representation and make the group a truly global, agenda-setting and action-oriented policy forum.
[back to top][an error occurred while processing this directive]