Experts urge the use of Islamic finance to fund Sustainable Development Goals (SDGs)

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 Islamic Development Bank (IsDB) on the sidelines of the Third International Conference on Financing for Development in Addis Ababa, Ethiopia. As part of its commitment to the SDGs, the IsDB announced that it will increase its funding of SDG related activities through its 10-year strategy framework, from the $80bn recorded during the MDGs, to $150bn over the next 15 years (2016-2030).
The seminar, entitled “Mobilizing Non-traditional Sources of Finance to Achieve Sustainable Development Goals (SDGs): The Role of Islamic Finance,” had as 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.
IsDB chief economist Savas Alpay said 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 percent,’ he said.
Alpay reassured the participants that IsDB is a pioneer in initiating innovative means of Islamic finance, and the instruments applied in this mode of financing have the potential to address key targets of the SDGs such as food security, provision of shelter, building infrastructure, providing sustainable energy and ensuring financial inclusion.
He added that Islamic financial instruments like Sukuk (Islamic capital market instruments), could be used as an effective non-traditional means of mobilising resources for the implementation of the SDGs. Alpay told delegates that IsDB has used such instruments in funding a number of short term and long term development activities.
Other speakers backed Alpay’s assertion. Mahmoud Mohieldin of the World Bank the advantages provided by Islamic financial services, are the reason why 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.
Ayo Ajayi of the Bill and Melinda 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 $2.5bn Lives & Livelihoods Fund, established by IsDB and the Foundation. He noted this shows the enormous potential of Islamic finance which can be harnessed in mobilizing resources for the realisation of the SDGs.

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