Islamic finance, a strong and scalable funding source for global development

New York, September 20 — Successful implementation of the 2030 Agenda requires a significant amount of financial resources, beyond traditional development financing. Innovative approaches are required to unlock new sources of capital.

The public and private stakeholders, and investors gathered in New York for the high level side event- ‘Realizing Agenda 2030: How Islamic Finance through Impact Investing can help achieve the SDGs,’ discussed how Islamic finance can be tapped as a strong and scalable funding source for global development. The event was co-organized by the Islamic Development Bank and UNDP, with support of the Organization of Islamic Cooperation (OIC) New York office, coinciding with the 72ndsession of the UN General Assembly.

The objective of the high level event was to increase awareness and generate interest about the potential of Islamic finance and impact investing instruments, particularly by addressing the long-term investment needs of the Sustainable Development Goals (SDGs). The event brought Islamic and other development financiers together, to explore new partnership opportunities towards the implementation of the Global Goals.

Magdy Martínez-Solimán, UN Assistant Secretary General and Director of UNDP’s Bureau for Policy and Programme Support stated, “With the global commitment to the SDGs, we have set the course of all our development efforts towards promoting prosperity, preserving and protecting our planet and improving the livelihoods of all people. At the same time, we acknowledge that the implementation of this ambitious agenda requires much more financial resources. The gap in financing for SDGs is currently estimated at US$ 2.5 trillion every year. Official Development Assistance alone is not an adequate source of financing.”

“Islamic Finance is one of the fastest growing sources of finance in the global financial industry. Global assets in Islamic finance are expected to reach US$3.5 trillion in 2021. Considering the scale, I would like to underline that Islamic finance could offer a strong, non-traditional source of financing to advance SDG implementation,” he further added.

In his opening remarks, Sayed Aqa, Vice President of the Islamic Development Bank said, “IDB Group is a committed partner in achieving Sustainable Development Goals.” He further added that creating environmental and social returns in addition to financial benefits form basic principles of Islamic Finance.

The launch of the joint report by Islamic Development Bank and IICPSD ‘I for Impact: Blending Islamic Finance and Impact Investing for the Global Goals,’ at the 12th IDB Global Forum on Islamic Finance, was a key achievement for Global Islamic Finance and Impact Investing Platform (GIFIIP) in consolidating the Islamic finance-based impact investing ecosystem. GIFIIP is expected increase its role in matchmaking between investors and other players, such as business incubators, development organizations, and most importantly, inclusive business ventures seeking capital.

Speaking on the occasion, Mahmoud Mohieldin, World Bank’s Senior Vice President for the 2030 Development Agenda, United Nations Relations and Partnerships said, “The growth of Islamic Finance is in large part due to its ability to promote inclusion and stability, as well as its potential to expand the footprint of socially responsible investments. It is also backed by real economic activity and is based on principles of risk and profit-sharing, which is an important feature that limits speculative risks. The World Bank Group is working with partners to leverage the potential of Islamic finance and has supported investment projects, operations, and knowledge work in the area of Islamic financing across the world.”

Other panelists discussed how Islamic finance could be leveraged towards global development through impact investing. They expressed joint emphasis on social criteria, inclusiveness and engagement with all stakeholders in investing that can create a solid base for bridging Islamic finance and impact investing instruments.

This is the third Islamic Finance focused event organized with IDBG during the General Assembly starting 2015.The UNDP and Islamic Development Bank Group have entered an MoU on collaboration in Islamic finance initiatives.

UNDP is currently identifying opportunities and demand for engagement, and scaling its capacity to engage, with various types of Islamic Financing instruments and partners. At the same time, the Global Islamic Finance and Impact Investing Platform (GIFIIP), co-founded in 2016 by the Islamic Development Bank and UNDP’s Istanbul International Centre for Private Sector Development (IICPSD), continues to act as an innovative collaboration platform to help achieve the 2030 Agenda.

Note to the Editor: UNDP and the Islamic Development Bank Group (IDBG) share 30 years of effective partnership and cooperation, following their first MoU in 1986. Since then, UNDP and the IDB have collaborated on a variety of efforts including: IDB funding more than US$240 million over the past 10 years for projects under UNDP’s Programme of Assistance to the Palestinian People related to agriculture, electricity and housing. The partnership has also spearheaded trade reforms, promoted pro-poor growth and reduced unemployment, as part of the Aid for Trade Initiative for Arab States.

Since 2015, UNDP and IDBG have been capitalizing  on opportunities to scale up their engagement, including joining forces to achieve the 2030 global development agenda. In this context, in May 2016, a new MoU and Action Plan (2016-2018), outlining concrete, measurable and time-bound initiatives to strengthen collaboration, launched by the UNDP Administrator and IDBG President at IDBG’s  41st Annual Meeting in Jakarta, Indonesia, on 18th May 2016. Since the launch of the MoU/Action Plan, collaboration between UNDP and IDGB has expanded from one to four regions, in addition to new joint global projects on innovation, fragility, impact investment (through GIFIIP) and poverty reduction.

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