The Islamic Development Bank (IsDB) announced that it will increase its funding of SDG related activities through its ten year strategy framework, from $80 billion recorded during the MDGs, to $150 billion over the next 15 years (2016-2030).
IsDB made the announcement on the sidelines of the United Nations’ Third International Conference on Financing for Development, in Addis Ababa 13-16 July. Islamic finance can serve as a strong and non-traditional source of financing the Sustainable Development Goals (SDGs) according to global experts speaking during a seminar organised by the IsDB.
The seminar, entitled ‘Mobilising Non-traditional Sources of Finance to Achieve Sustainable Development Goals (SDGs): The Role of Islamic Finance,’ featured panelists Dr Savas Alpay, Chief Economist, IsDB, who represented the IsDB President, Dr Ahmad Mohamed Ali; Dr Mahmoud Mohieldin, Corporate Secretary & President’s Special Envoy, World Bank Group, Dr Sami AlSuwailem Manager, Islamic Financial Products Development Centre, IsDB; Dr Ayo Ajayi, Director, Africa Team, Bill & Melinda Gates Foundation and Mr Johannes Majewski, Program Coordinator, GIZ.
Dr Savas Alpay stated that the SDGs, which contain 17 goals and 169 targets, and are expected to replace the Millennium Development Goals (MDGs), could address major global challenges and promote financial inclusion especially to the under-privileged segment of the society. He called on world leaders to move faster, take strong and decisive actions in order to fulfil the commitments made by governments and international agencies for the implementation of the SDGs.
“Islamic finance has footprint in Asia and Middle East, is ripe for growth in South America and Europe and has future markets in North America, Central Asia and Australia. Its global assets have grown considerably and are estimated to have reached $1.8 trillion by 2014 with compounded annual growth rate of about 15-20 per cent,” Dr Alpay said.
He added that Islamic financial instruments like Sukuk, Islamic bonds, could be utilised as an effective non-traditional means of mobilising resources for the implementation of the SDGs. Dr Alpay told delegates at the conference that IsDB has used such instruments in funding a number of short-term and long-term development activities. Dr Sami Alsuwailim of the IsDB explained the concept of Islamic finance as a participatory system of financing whose core principles are accepted globally irrespective of faith or nationality.
In his intervention during the panel discussion, Dr Mahmoud Mohieldin of the World Bank said that there are several advantages provided by Islamic financial services, and that the World Bank is paying significant attention to them. He stated that during the financial crisis, the World Bank noticed that Islamic financial institutions developed some resilience, and because of the provisions of Islamic law that prohibit certain types of transactions like gambling and speculation, Islamic finance is linked with the real economy and prevents institutions from accumulating debt beyond reason.
Dr Ayo Ajayi of the Gates Foundation dwelt on the innovative financing mechanisms introduced between IsDB and his institution: these mechanisms will enable low income countries to access financing through the $2.5 billion Lives & Livelihoods Fund, established by IsDB and the Gates Foundation. He noted this shows the enormous potential of Islamic finance which can be harnessed in mobilising resources for the actualization of the SDGs.
Johannes Majewski, Program Coordinator, GIZ, the German Corporation extolled the strength of Islamic finance through its emphasis on asset based financing and its focus on common welfare.
“There are 650 million Muslims living on less than $2 a day and having no access to formal finance” he stated. But the contribution of Islamic finance to the SDGs according to Majewski, is that it has the ability to reach the unbanked segment of the population.
Originally published on www.cpifinancial.net