US$1.25 billion sukuk launched on Nasdaq Dubai

Nasdaq Dubai is hosting a US$1.25 billion sukuk by the Islamic Development Bank (IDB), whose activities include financing development projects for its 57 member countries.

The listing brings the number of sukuk listings by the IDB on the exchange to nine, with a total value of US$11.5 billion, making it one of the largest sukuk issuers on Nasdaq Dubai.

IDB participates in equity capital and grant loans for productive projects and enterprises as well as providing financial assistance to member countries in other forms. This includes financing infrastructure and agricultural projects such as roads, dams, schools, hospitals, housing, and rural development in the public and private sectors. IDB’s sukuk support the bank’s economic and social advancement goals in line with shari'ah principles.

IDB’s latest listing underlines Dubai’s role as the leading global centre for sukuk listings by value. The portfolio is currently worth US$57.7 billion.  

Public-private partnerships are the way to go in socioeconomic development

Source: Islamic Development Bank. Participants at the event.

The Islamic Development Bank’s first Public-Private Partnership Forum has called for more public-private partnerships (PPP) to handle the challenges of socioeconomic development in the bank’s member countries.

Dr Bandar Hajjar, President of the Islamic Development Bank Group, said that the group is putting every resource available at the disposal of its 57 member countries so they can gain experience in building successful partnerships between the public and private sectors in every field, especially with the gap between the two in the funding they provide for these partnerships.

“We all know that laws and regulations alone are no guarantee for a successful partnership,” said Dr Hajjar. “Both parties must work hard to create successful, ties that actually work. Each one of the two sectors have multifaceted administrative, economic, judicial, legal, and social aspects that need to intertwine and hook up at just the right points, and all stakeholders must share a common understanding of the principles of transparency, disclosure, accountability, and equal rights, as well
as a clear determination of responsibilities for the efficient use of resources, boosting competitiveness, finding new sources of funding, expanding projects, creating new job opportunities, and solidifying economic stability in our member countries.”

At the forum, water desalination and housing came up as the two sectors set to see the strongest interest from PPPs, particularly in KSA's Kingdom Vision 2030. Challenges for PPPs that were identified included inadequate funding. Participants also stressed that these partnerships need support at the highest levels of government to succeed, as well as teams of specialists in place that are dedicated only to this model. Also, universally recognised procedures and contracts need to be adopted, so as to encourage funding and attract the global talent which will ultimately build capabilities and expertise in the private sectors of respective member states.

More than 300 government figures and private-sector business leaders from the member countries participated in the forum, set to be the first of many that are scheduled to be held successively in member states.

The IsDB launched the forums after the major changes witnessed in the economies of many of the bank’s member states, mostly due to weak oil prices, at a time of immense pressure for infrastructure projects to continue in member countries especially now that the traditional model of the government-funded infrastructure projects has proven to be inadequate, with the huge disparities between national budgets and the funds actually needed to keep projects on track.

MARC discusses Islamic Development Bank ratings

MARC has assigned long-term and short-term financial institution (FI) ratings of AAA and MARC-1 respectively to the Islamic Development Bank (IsDB). The ratings are on the Malaysian national scale. Concurrently, the rating agency has assigned a preliminary rating of AAA_IS to the proposed sukuk wakalah (sukuk) issuance of up to RM400 million by Tadamun Services (Tadamun), a trust established by IsDB for the purpose of issuing the sukuk. IsDB will provide an undertaking to acquire the sukuk upon maturity, early redemption or in the event of a default by Tadamun as well as to cover any shortfall in profit payments on the sukuk. The outlook on the ratings is stable.

Established by the Organisation of Islamic Cooperation (OIC) in 1975 and headquartered in Jeddah, Saudi Arabia, IsDB is a multilateral development bank (MDB) with a membership of 57 countries, most of which are from the Middle East and North Africa (MENA) and Sub-Sahara Africa (SSA) regions. IsDB undertakes financing and investment activities to support the economic development of member countries and Muslim communities across the world.

MARC’s ratings on IsDB primarily reflect the bank’s solid capital position and strong liquidity levels, which are underpinned by high shareholder support. The ratings also incorporate IsDB’s prudent financing policy that includes limits on geographical and sectoral exposures and the bank’s preferred creditor status. These strengths significantly mitigate the credit risk in the bank’s financing and investment portfolio.

IsDB’s capital adequacy levels provide significant coverage over any unexpected losses stemming from its financing and investment activities. For the Islamic year ended 1436 (FY1436H), which corresponds to October 13, 2015, the bank’s total members’ equity of ID7.8 billion (Islamic dinar*), comprising paid-in capital of ID4.9 billion and reserves of ID2.9 billion, accounted for 48.8% of total assets. As a proportion of total financing and investments, members’ equity amounted to 60.7%. The coverage ratios are comparatively higher than its peer MDBs such as the African Development Bank and the Asian Development Bank. MARC notes IsDB’s capital position is further enhanced by the bank’s callable capital of ID40.5 billion as at end-FY1436H; the bank’s callable capital constitutes contractual support that can be called upon on member countries to cover the bank’s obligations.

MARC views positively the strong financial commitment of IsDB’s key shareholders, in particular Saudi Arabia, Kuwait, Qatar and UAE (with a combined stake of 45%), to support the bank. The rating agency draws comfort from the fact that among the member countries, 47% or ID19.1 billion of total callable capital is committed by member countries rated in the A and above category on a global rating scale.

In line with its financing policy, IsDB maintains a single country exposure limit of 15% on its financing and investments to address concentration risk; its three largest country exposures Turkey (8.78%), Morocco (8.74%) and Pakistan (8.43%) are well within the limit. In terms of sectoral distribution, the bank’s inclination is towards infrastructure-related activities, namely public utilities (40.0%) and transport & telecoms (26.8%).

The bank continues to have significant exposure to sovereigns with weak credit ratings, although this has declined from 80% in 1432H to about 70% of the bank’s financing and investments. The bank makes full provisions against installment payments overdue by six months. As at FY1436H, installments overdue stood at 0.97% of total financing and investments. IsDB mitigates the credit risk by requiring explicit guarantees on all sovereign entities; financing for non-sovereigns is limited to strategic entities and projects in which the governments of member countries are major stakeholders and are guarantors of suppliers/offtakers. Given that IsDB has been granted preferred creditor status by its shareholders, the bank has priority claim over other creditors in the event of default.

MARC observes that IsDB has historically maintained a conservative leverage position, relying mainly on equity capital to fund its operations. However, in recent years the bank shifted to capital markets for funding through several sukuk issuances. This led to an increase in the bank’s gearing ratio from 79.1% in 1432H to 93.2% in 1436H; nonetheless, the bank’s gearing remains conservative, both by its own internal measures of 1.25 times members’ equity (paid-in capital plus reserves), as well as compared to its peer MDBs. IsDB is also one of the most liquid institutions among its peer MDBs, with liquid assets constituting 23.5% of total assets.

The stable rating outlook reflects MARC’s expectations that IsDB will maintain its strong capitalisation and liquidity profile, and that the bank’s member countries will continue to extend strong support.

Interested?

View the definitions of MARC's ratings

Read the Suroor Asia blog post about IsDB's work in Bangladesh

*The Islamic dinar is a unit of account used by the IsDB, that is currently equivalent to one Special Drawing Right (SDR) of the International Monetary Fund (IMF). The composition of currencies in SDR basket for the Islamic Dinar are 41.9% for US dollars, 37.4% for the Euro, 11.3% in British pounds and 9.4% in Japanese yen. The IMF declares changes in the composition of currencies in the SDR basket every five years. The last change was declared by IMF on January 1, 2011.

Bangladesh receives schools designed as cyclone shelters from IDB

Islamic Development Bank representative Dr Mohammad Hassan Salem has formally handed over 34 schools which also double as cyclone shelters as part of the third phase of the Fael Khair Program in Bangladesh. The programme is funded by a grant from the late King Abdullah Bin Abdul Aziz of KSA.

A total of 95 out of 174 planned school-cum-cyclone shelters have been handed over so far. Each building will serve as a modern educational institution for 240 students and can also provide shelter to 2,000 people and 500 cattle during the country’s frequent cyclones.

The late King Abdullah’s grant of US$130 million for relief and assistance to the victims of cyclone Sidr, which hit in 2007, has been utilised as follows:

• US$110 million to construct 174 School-cum-Cyclone Shelters in the coastal belt of Bangladesh
• US$20 million waqf (Editor's note: a endowment made by a Muslim for a cause) as partial support to maintain the buildings and to provide urgent relief and rehabilitation through agricultural and other inputs to the affected population

The buildings are designed to withstand top wind speeds of up to 260 km/h. The green facilities are equipped with solar power and durable school furniture. They also have potable water systems, including rain water harvesting, to supply safe drinking water.

OIC, IsDB launch Islamic microfinance initiative in Indonesia

The Organisation of Islamic Cooperation (OIC) and IsDB Group have launched the Islamic Microfinance for Poverty Alleviation and Capacity Transfer (IMPACT) Program in Bogor, Indonesia, in mid-May 2016.

The programme provides a platform for experts to share and deepen their understanding of the Islamic microfinance models and to create tools and infrastructure to disseminate best practices.
The programme was launched during the Seminar on Islamic Microfinance for Poverty Alleviation in OIC Member Countries hosted by Bogor Agricultural University.

Islamic microfinance institutions (IMIs) differ from conventional microfinance institutions as they do not charge interest and work on a profit- and risk-sharing basis. Their relationship with the client is thus not based on a traditional creditor-debtor relationship. The central premise of IMIs is that social networks among partners have value. The social capital resources inherent in social relations help facilitate collective action for a common purpose.

IMIs engage and treat their clients as business partners. As a business partner, they add value in the relationship and provide ‘smart finance’. This allows IMIs to create sustainable jobs even in difficult and fragile situations. “Islamic microfinance is about economic empowerment of the poor,” said Anas El Hasnaoui, CEO of IBF International Consulting, a Brussels-based organisation that works on development aid projects financed by international organisations. Hasnaoui explained how the Bank of Khartoum in Sudan invested US$4 million in venture capital in the Abu Halima Greenhouses Project. The initiative provided low-income graduates and their families, 600 people in all, with smart finance products to enable them to work in the modern agricultural sector.

“IMIs treat their clients as business partners, not as debtors,” said Nasser Faqih, Team Leader of the Deprived Families Economic Empowerment Program (DEEP) in Palestine. He compared how two women with similar small sewing businesses were treated after they were hospitalised. One had borrowed under the Islamic microfinance window while the other borrowed from the conventional window of the same monetary financial institution (MFI).

When the woman who borrowed from the Islamic microfinance window was hospitalised, the MFI hired a replacement and ensured her business continued to run while she recuperated. Her payment schedule to the bank was frozen until she returned to work. The woman who borrowed from the conventional window was required to continue making her payments, and interest compounded as the payments were delayed. After some time, when it was clear that she would not be able to make her payments, the MFI took her to court.

The innovations in Islamic microfinance and its ability to generate employment and alleviate poverty through trading and investing with their clients makes it possible for microfinance institution to do business with poor people. However, such good practices are not well known and expertise and experience gained from innovative pilots are scattered in various countries.

The IMPACT Program was created in response to a call from the President of IsDB for experts in Islamic finance to take advantage of existing technologies and business approaches and develop smart Islamic microfinance. The programme will promote Islamic microfinance in a way that puts poor clients' needs at the centre, providing an enabling environment and tools for microfinance institutions to do business with and help them thrive. Financing provided will therefore help poor clients find their way out of poverty, instead of perpetuating the cycle of poverty through debt.

The five pillars of the IMPACT Program are:

Technology: To develop a one-stop portal on Islamic microfinance that provides all the necessary knowledge and tools needed for a microfinance institution to understand and implement Islamic microfinance. Knowledge generated from various pillars will be disseminated through the portal. The information portal will also include key applications that will be useful for IMIs.

Operations: To develop an operational toolkit that includes standard operating procedures, policies, contractual document templates, feasibility study templates and other operational documents. The toolkit will be developed for MFIs that are already operating but are interested in implementing Islamic microfinance, highlighting what they need to do to be shari'ah-compliant as well as lay out an incremental approach that will develop their capacity to engage in the value chain through practical
methods.
Monitoring and evaluation: To develop a monitoring and evaluation framework, including a rating system combining areas of financial sustainability, governance, social performance. In addition, the framework will highlight approaches on how to determine the impact of the MFI on its beneficiaries through measuring its value-add to its client through its engagement in the value-chain. The framework will be summarised in a logical framework with key indicators for each project stakeholder.

Policies and standards: To identify and promote key policies and standards (including accounting and governance standards) that facilitate the growth of Islamic microfinance. This will include a framework for Islamic microfinance law highlighting key policy requirements needed to facilitate the industry, simplified accounting standards for MFIs as well as governance structures for various organisation structures such as cooperatives, companies, funds and NGOs.

Advocacy: To develop and promote Islamic microfinance in IsDB member countries and beyond by building awareness, exchanging experiences and reverse linkages through collaboration among different stakeholders, including governments, regulators, private sector, practitioners, networks, developmental organisations and financial institutions.

Implementation arrangements: The programme will be implemented by stakeholder teams identified under each pillar. OIC General Secretariat and IsDB Group will identify key experts to participate in each team. Additional experts may be engaged when required. Experts/stakeholders may be engaged through partnership or consultancy agreements. All five pillar teams will constitute the Program Management Team (PMT) that will be led by Senior Specialists from IsDB Group and OIC General Secretariat who will report to the Leadership Committee on the progress of the IMPACT Program.

IDB-funded UINSA buildings inaugurated

Source: Ministry of Finance, Indonesia. The Assistant Minister for Financial Services and Capital Market Policy and Regulation of Ministry of Finance, Indonesia, Isa Rachmatarwata, spoke at the Islamic Development Bank (IDB) Group 41st Annual Meeting Roadshow in Surabaya, Indonesia on 26 April. The President of IDB, Ahmad Mohamed Ali Al Madani, Minister of Religious Affairs Lukman Hakim Saifuddin, the Mayor of Surabaya Tri Rismaharini, Rector of UINSA Abd A’la and as well as Isa Rachmatarwata were present at the ceremony.

The Universitas Islam Negeri Sunan Ampel (UINSA) Twin Tower Buildings, funded with a soft loan from the Islamic Development Bank (IDB), was inaugurated during the IDB Group 41st Annual Meeting Roadshow was also held at UINSA, in Surabaya, Indonesia. 

The Rector of UINSA Abd A’la expects that with the Twin Towers and other seven buildings and fixed buildings, academicians in UINSA will be more motivated to be creative, innovative, and expert in their respective fields.

Indonesian Assistant Minister for Financial Services and Capital Market Policy and Regulation of the Ministry of Finance Isa Rachmatarwata said, "This aid from IDB (shows) how IDB supports infrastructure development in Indonesia.” According to Isa, Indonesia still needs basic infrastructure development, such as infrastructure for education and connectivity in all over Indonesia.

“Therefore, we would like to use this upcoming 41st annual meeting of IDB for not only Finance Ministers’ meeting but also an opportunity for Indonesia to show the (that) development happens here, establish networking and have new as well as better opportunities to build Indonesia.”

Winners of the 14th IDB Prizes for Science and Technology are from Kuwait, Turkey and Bangladesh

Three scientific institutions have won this year’s 14th IDB Prizes for Science and Technology.

The 2016 winners, chosen by an independent committee are:

• Kuwait Institute for Scientific Research (KSIR): Overall Outstanding Contribution to Social and Economic Development
KSIR was selected for its scientific and technological contributions and accomplishments, which have had a positive impact on the socioeconomic development of Kuwait and other IDB member countries. Its research and scientific achievements are centred on enhanced oil exploration, innovative desalination, waste water treatment and zero liquid discharge. KISR’s technologies in these fields are being used in the region and around the world. KISR has a longstanding tradition of fostering young talent and promoting innovative scientific research.

• NanoManyetik Bilimsel Cihazlar Sanayi ve Ticaret, Turkey: Most Outstanding Contribution in a Given Scientific Field

NanoManyetik Bilimsel Cihazlar Sanayi ve Ticaret was selected for its high quality of research and its commercial application in applied nanomagnetics. The company specialises in the development of sensing, measurements, characterisation and manipulation of nanosystems.

• Bangladesh Institute of Nuclear Agriculture: Most Noted Scientific Institution from a Least Developed Member Country The Bangladesh Institute of Nuclear Agriculture was selected for its outstanding contribution to the field of nuclear technologies in agriculture. The institute was established in 1961 to develop friendly nuclear technologies to enhance the performance of the agriculture sector, one of the major economic drivers in Bangladesh. It has a team of 170 scientists and researchers who focus on biotechnology and crop management. The team has published nearly 300 scientific research papers. The institute has successfully commercialised some of its technologies, with nearly 40 products on the market, and has close collaborations with many scientific institutions globally. 

"IDB is proud of their inspiring feats in the field of scientific and technological research. I hope other universities and scientific centres in member countries benefit from these admirable examples,” said
Dr Ahmad Mohamed Ali, President of the Islamic Development Bank (IDB) Group.

The prize was established in 2002 (1422) to promote science and technology excellence and capacity building in IDB member countries. Each year, three institutions are selected by an independent panel of eminent scientists outside the bank to receive the prizes, which consist of US$100,000 and a trophy.

The award ceremony will be held at the 41st Annual Meeting of IDB’s Board of Governors, which will take place in Jakarta, Indonesia from 15 to 19 May.

Projects in Indonesia, Malaysia and Oman to benefit from IDB funding

The Board of Executive Directors of the Islamic Development Bank (IDB) has announced that it will contribute US$1.1 billion towards new development projects in IDB member countries and Muslim communities in non-member countries.

Chaired by IDB President Dr Ahmad Mohamed Ali, the Board approved funding for the following projects in Asia Pacific and Middle East:

• US$176.5 million for the Development of Four Higher Education Institutions Project in Indonesia
• US$330 million for the Power Grid Enhancement Project in Indonesia
• US$350 million for the Sohar to Ibri Water Supply Project in Oman
• US$99.2 million (RM$400 million) of sukuk in the Malaysian market from April through May, 2016

IDB announces winners of the Award for Best Application of Agent-Based Simulation in Islamic Finance

Source: IDB.

The Islamic Development Bank (IDB) has revealed the winners of the Award for Best Application of Agent-Based Simulation (ABS) in Islamic Finance. ABS is a modelling approach that uses computer simulations to assess the effects of the actions and interactions of individuals or groups on a particular system. The objective of the ABS award is to encourage students worldwide to learn and apply agent-based simulation to contribute to the advancement of Islamic economics and finance.

The award, a collaboration of IDB, the Saudi Arabia Basic Industries Corporation (SABIC) Chair for Islamic Financial Markets (Riyadh, Saudi Arabia) and the Islamic Financial Engineering Lab (Rabat, Morocco), was first launched in February 2015. Winners receive US$8,000, US$6,000 and US$4,000 for first, second and third place respectively.

The Award Committee received eight completed projects, which were anonymously screened to select the best five. The screened projects then were sent to two external referees for evaluation, after which the Committee chose three winners.

The 2015 first-place winner is Mohamed Wail Aaminou for his project Leveraging ethics to expand Islamic banks’ customer base: A fuzzy agent-based modeling approach.

The second prize is awarded to Safae Badraoui, Khalid Bensaid, and Ahmed Mouad El Haloui for their team project The impact of qualitative characteristics on market equilibrium: Application to Shariaa compliance simulation with agent-based modeling.

The third prize recipient is Sara Bourhime for her contribution to the project Agent-based simulation in Islamic microfinance: Qard Hassan peer-lending.

The award ceremony will be held in Rabat, Morocco, on 18 February 2016.

IDB approves financing for projects in four member countries

The Board of Executive Directors of the Islamic Development Bank (IDB) has approved financing for new and ongoing projects during its 309th meeting in Jeddah, KSA.

Four member countries – Kazakhstan, Lebanon, Pakistan and Turkey – will receive US$466.4 million for development projects: 

• US$273 million to reconstruct the Aktobe-Makat Road project in Kazakhstan
• US$90 million to assist the polio eradication programme (2016 to 2018) in Pakistan
• US$82 million to support the Konya PPP Hospital project in Turkey
• US$20.7 million to construct the Bir-Al Hith Qartaba Road (phase III) in Lebanon

The agenda for the 41st Annual Meeting of the Board of Governors slated for 18 to 19 May 2016 in Jakarta, Indonesia, was also approved.

IDB joins other development banks in committing to mitigate transport emissions

Eight multilateral development banks (MDBs) today issued a joint statement committing to accelerate their efforts to mitigate transport emissions and recognising the need for more action on the resilience of transport to climate change. The sector accounts for about 60% of global oil consumption, 27% of all energy use, and 23% of world energy-related CO² emissions.

In their statement, the African Development Bank, Asian Development Bank (ADB), CAF-Development Bank of Latin America, European Bank for Reconstruction and Development, European Investment Bank, Inter-American Development Bank, Islamic Development Bank (IDB), and the World Bank (WB) pledged to speed up action on:

- MDBs have recently committed to substantially increase financing for climate change mitigation and adaptation over the next few years. Transport is expected to play a key role in that commitment.

- The MDBs will increase their focus on low-carbon transport solutions and will continue to harmonise tools and metrics to assess transport-related greenhouse gas (GHG) emissions.

- Adaptation: The MDBs will jointly develop a systematic approach to mainstream climate resilience in transport policies, plans and investments.

“We, the multilateral development banks, believe that climate change is a defining challenge of our time. Actions to reduce greenhouse gas emissions and stabilise warming at two degrees Celsius will fall short if they do not include the transport sector. We commit to support countries in the implementation of sustainable transport solutions by providing critically needed financial and technical support to assist them in responding to rising aspirations for greater mobility and connectivity, in a sustainable and resilient way,” said Luis Alberto Moreno, President of the Inter-American Development Bank.

Moreno presented the statement on behalf of the eight MDBs during the Transport segment of the Lima Paris Action Agenda. Among the Intended Nationally Determined Contributions submitted as of November 12, 2015, about three quarters explicitly identify the transport sector as a mitigation source, and more than two thirds propose transport sector-specific mitigation measures. In 2012, the MDBs pledged US$175 billion by 2022 in financial resources for more sustainable transport.

"Supporting our member countries to develop efficient transport systems that are climate smart and resilient is a major goal for us. We will work together with other MDBs to ensure that we come up with innovative solutions that will help reduce carbon emissions,” said Dr Ahmad Mohamed Ali, President of IDB.

"Transport must be a significant piece of the climate solution. We have the opportunity to transform transportation services so they are low-carbon and resilient to climate impacts. Now is the time to turn our commitments into action and we stand ready to work with countries as they develop low carbon and climate-resilient transport activities,” said Laura Tuck, World Bank Vice President for Sustainable Development.

IDB goals towards 2025 shared

The President of the Islamic Development Bank (IDB) Group, Dr Ahmad Mohamed Ali, has shared that the IDB Group plans to reach 44 million people with improved basic social services, create 1 million jobs, and increase the share of Islamic finance globally. By 2025, organisational and operational effectiveness within the IDB Group should be enhanced further, he said.

Dr Ahmad was speaking at the inauguration of the IDB Group’s Evaluation Symposium, aimed at further promoting the culture of bonding knowledge and practices within the IDB Group to advocate and promote focus on results.

The keynote speaker at the Symposium, Dr Ahmet Tiktik, IDB Vice President for Corporate Services, stated that one of the main challenges to development is the mismatch between investments and services provided to meet the expectations of the citizens who are the main clients. He also underlined the importance of building strong partnerships with the implementing agencies in delivering IDB Group’s 10-year strategic goals.

posted from Bloggeroid

Bangladesh gets IDB office

The People’s Republic of Bangladesh and the Islamic Development Bank (IDB) Group have signed a Host Country Agreement (HCA) for the launch of the IDB Group’s Country Gateway Office (CGO) in the capital city of Dhaka. CGOs have also been recently established in Turkey and Indonesia.

IDB Group President Dr Ahmad Mohamed Ali praised 41 years of solid relations between IDB Group and Bangladesh as a founding and supportive member of the Bank. “Currently, the volume of approved IDB Group financings with Bangladesh stands at US$18.6 billion, the highest amount of financing ever approved by the 56 IDB member countries,” stated Dr Ahmad.

So far the approvals include major funding covering power, agriculture, irrigation, water supply, mining, roads, education and rural development as well as foreign trade operations aimed at enhancing intra-trade amongst member countries.

The IDB Group President further underlined that the decision to launch a CGO in Bangladesh is the culmination of several factors including the country’s outstanding and solid cooperation with the IDB Group, the high economic growth rate in recent years as well as the recent World Bank’s ranking of Bangladesh as a medium income country.

He further expressed hope that the CGO will increase the continued cooperation between Bangladesh and the IDB Group.

posted from Bloggeroid

IDB proposes Turkey-related partnerships

The President of Islamic Development Bank (IDB), Dr Ahmad Mohamed Ali has made several proposals that will enhance partnerships between IDB, the Republic of Turkey and any member country that wishes to benefit from the successes of Turkey.

The proposals were in Istanbul, Turkey, at the opening ceremony of the Standing Committee for Economic and Commercial Cooperation (COMCEC) of the Organization of the Islamic Cooperation's (OIC's) 31st ministerial session.

Besides a tripartite agreement between IDB Group, Turkey and any IDB member country, Dr Ahmad suggested the establishment of a programme for the effective implementation and operationalisation of trade related agreements similar to the Trade Preferential System among the Member States of the OIC (TPS-OIC). Thirdly, he called for the enhancement of transcontinental regional corridors such as the Trans-Sahara Corridor (Trans-Africa Corridor). Fourthly, he suggested the need to study the effect of major regional blocs on intra-OIC trade and regional integration.

The Secretary General of the OIC Iyad Madani commended OIC member countries for an increase in intra-OIC trade. He said the volume of trade has increased from 18.64% in 2013 as a percentage of total global trade transactions to 19.33% in 2014.

posted from Bloggeroid

IDB calls for groundwork on Islamic microfinance

The President of the Islamic Development Bank (IDB) Group, Dr Ahmad Mohamed Ali, has called on experts in Islamic finance to take advantage of existing technologies and business approaches like mobile banking to develop smart Islamic microfinance. Such efforts, he said, can help the Islamic finance industry to be a leader in the global economy and stay ahead of the competition.

Dr Ali made the remarks while addressing the opening session of the Islamic Finance: Meeting Global Aspirations conference held in Kuwait City, Kuwait. The conference aims to prepare the ground for increasing financial inclusion and growth. Co-hosted by the Central Bank of Kuwait and the IMF Middle East Center for Economics & Finance, the conference provided an opportunity for global policy dialogue among high-level policymakers, regulators, conventional and Islamic standard setters, leading private and public sector financial institutions’ executives, and academics.

Dr Ahmad emphasised that Islamic finance encourages a fair socioeconomic system and can address financial inclusion via a two-pronged approach, namely using risk-sharing financing instruments as viable microfinance, and micro-takaful tools for individuals, micro-enterprises and SMEs; in addition to using Islamic redistributive instruments like zakah, waqf, sadaqah and qard-al-hasana to provide basic social safety nets such as food and shelter, to the very poor, helping them transition to economically active individuals.

Dr Ahmad further cautioned that “providing microfinance to individuals lacking entrepreneurial skills may lead to less than the desired outcomes”. “What is needed is an integrated finance-plus approach i.e. provision of financial services along with provision of related technical skills, regulatory support, assistance for product development and marketing, and increasing market access to SMEs’ products,” he said.

 

He further underlined the need to develop unique models for increasing access to finance for the SMEs, like creating dedicated SME-financing business units in Islamic banks, and developing the capital markets, Islamic equity and venture capital funds for SMEs. 

IDB approves new financing for projects around the world

The 308th meeting of the Members of the Board of Executive Directors (BED) of the Islamic Development Bank (IDB) has resulted in approvals for US$593.5 million of new financing for development projects in countries such as Kazakhstan and Turkey. 

US$478,000 was also approved in grants from the IDB Waqf Fund for three educational and vocational projects to benefit Muslim communities in three non-member countries, including Singapore.

The approved financing includes US$249.5 million towards the rehabilitation of irrigation and drainage in Kazakhstan aimed at enhancing agriculture and reducing the import of foodstuffs. Other financing approved include US$59 million as extra funding for an electric locomotive project (2TU-0148) project in Turkey, which brings the total financing for this project to a total of US$278.9 million. 

IDB calls for working group to help develop Islamic finance for SMEs

The President of the Islamic Development Bank (IDB), Dr Ahmad Mohamed Ali, has called on OIC member countries and the World Islamic Economic Forum (WIEF) to establish a working group that will study and exchange expertise in utilising Islamic finance for the development of small and medium sized enterprises (SMEs). President Ahmad was speaking in Kuala Lumpur, Malaysia to delegates of the 11th WIEF, which took place from 3 to 5 November 2015. 

“I suggest the immediate establishment of a working group, among OIC institutions and specialised business forums like WIEF, to study the ways and means of leveraging support by Islamic finance to SMEs, through research and exchange of expertise,” said the IDB President. 

“Likewise, the partnership financing, the core element of Islamic finance, is an important source of funding for SMEs that can provide opportunities for entrepreneurship, jobs creation and income generation.

“The growing sukuk industry at the global level gives a tangible evidence that Islamic finance will play a major role in development financing especially for large-scale infrastructure.” 

He stressed that the IDB Group is committed to providing solutions in the development of the requisite legal, regulatory, supervisory and shari’ah frameworks for the development of SMEs. He also called on all multilateral development banks and government institutions to work towards mainstreaming Islamic finance, especially in mobilising resources for the implementation of the sustainable development goals. 

Islamic finance key to helping SMEs grow

In his opening remarks at the International SMEs Conference, held within the framework of the G20 meetings taking place in Istanbul under the Turkish Presidency, the President of the Republic of Turkey HE Recep Tayyip Erdogan praised the Islamic Development Bank (IDB) Group for supporting the Islamic banking industry in Turkey, noting that the Group contributed US$570 million this year to finance the construction of the country’s Vakifbank, and to provide a credit line to the Export Credit Bank of Turkey to promote SMEs in Turkey and support their competitiveness in global markets.

Said IDB Group President, Dr Ahmad Mohamed Ali: "SMEs create jobs and foster growth, contribute to political stability and make a significant dent
on poverty in every country. Statistics show that SMEs contribute to an estimated 43.5% of the total job opportunities created at international level, a figure that can increase to 57.8% worldwide.”

The IDB Group President also commended the Islamic Research and Training Institute (IRTI) and the World Bank’s Global Islamic Finance Development Center for their joint work that contributed to a flagship report, Leveraging Islamic Finance for SMEs. "I also envisage that this report will bring significant benefits to G20 constituencies, as well as other developing countries, who are interested in leveraging the Islamic financial services industry for stimulating SMEs,” Dr Ahmad said.

“The major challenge faced by SMEs is access to financing. The need to deal with this challenge better highlights the significance of recognising the potentials of Islamic finance which can greatly contribute to development of SMEs as it helps in promotion of collective cooperation for the sake of production and investment.”

In his conclusion, Dr Ahmad called for the establishment of a working group to exchange expertise and develop innovative Islamic financial instruments.

The event was organised by the World Bank, the IDB Group, the Turkish Prime Ministry’s Under-secretariat for Treasury, as well as the country’s industrialists and businessmen's association (TUMSIAD). 

Islamic Development Bank Group and the World Bank to step up efforts in common member countries

The Islamic Development Bank (IDB) Group and the World Bank Group have announced a strategic partnership to significantly scale up joint work and investment across the 56 IDB Group member countries in Asia, Africa, Europe and South America that are also members of the World Bank.

The two leading development finance institutions expect co-financing work to reach US$9 billion over the next three years. Joint work will support infrastructure services, regional integration and cross-border trade facilitation, water and food security, education and employment, and Islamic finance.

The IDB Group and the World Bank Group also agreed to join forces to support private sector development and entrepreneurship in common member countries, as well as support to the growing number of fragile and conflict-affected countries.

This historic agreement comes on the heels of a joint initiative launched by the World Bank Group President, the United Nations Secretary General and the IDB Group President at an international gathering of donors held on 10 October 2015 in Lima, Peru, where a number of donor countries agreed to scale-up financial support to Arab countries going through transition and unrest.

The partnership agreement was signed by IDB Group President, Dr. Ahmad Mohamed Ali and World Bank Group President, Jim Yong Kim. "Our new partnership is a natural evolution in our long-standing relationship with the World Bank Group and is most timely given the growing challenges facing our member countries", said Dr. Ali.

The partnership agreement stems from a shared commitment by both institutions to reducing poverty, boosting shared prosperity, fostering economic development, and promoting social progress across their common membership and beyond, and to supporting the recently adopted United Nations 2030 Sustainable Development Goals.

"We have definitely set for ourselves an ambitious partnership agenda because business-as-usual is not really an option. I am highly confident that both institutions will work diligently to deliver on development promises building on each other's comparative advantages and strengths to unleashing the synergy that this strategic partnership can bring to our member countries," observed IDB Group President Dr Ahmad Mohamed Ali during the signing ceremony at the World Bank Group headquarters in Washington DC, US.

Past co-financing between the IDB Group and the World Bank Group totalled over US$7 billion and targeted 72 projects, primarily in the infrastructure sector, in 26 common member countries in Africa and Asia.

The IDB and the World Bank earlier announced their joint Education for Competitiveness (E4C) initiative. Comprised of learning, employment, and transformation as key pillars, E4C supports countries in a drive to improve their education and training policies with a view to enhancing economic growth, productivity, and social cohesion and inclusion.

“Under the E4C initiative, member countries will mobilise and pool global financial and human resources, sharing experiences and best practices to work together to build world-class education systems,” Dr Hafez Ghanem, Vice President for the Middle East and North Africa Region (MENA) explained.

The E4C initiative spans early childhood to university; emphasises cognitive, non-cognitive and technical skills; focuses on the development of the person holistically in order to not only meet specific short-term needs of the labour market, but also the greater economic and social development of the country.

Islamic Development Bank signs US$70 million development agreement for Tajikistan

The Islamic Development Bank (IDB) has signed a US$70 million development financing agreement with Tajikistan on the sidelines of the World Bank and International Monetary Fund (IMF) annual meetings in Lima, Peru.

The agreement contributes towards financing a power grid network project connecting the Central and South Asian nations. The project aims to provide sustainable electricity flow between Kyrgyzstan, Tajikistan, Afghanistan and Pakistan in line with their regional economic integration framework.

It is based on the sale of surplus hydropower generated in Tajikistan and Kyrgyzstan, and is expected to impact the foreign currency income of both countries.