Development financiers review new partnership opportunities to tap the true potential of Islamic finance to implement the SDGs

Sep 20, 2016 New York, USA — “Islamic finance instruments can be a transformative force for unlocking resources to finance the Sustainable Development Goals given the immense needs for financing the implementation of this ambitious agenda”— voiced the panelists at Islamic Finance and Impact Investing for the Sustainable Development Goals: The Way Forward, a side event jointly organized by the Islamic Development Bank and UNDP’s Istanbul International Center for Private Sector in Development (IICPSD)—a partnership with the Turkish Government. The event was organized coinciding with the 71st UN General Assembly, to highlight the contributions of Islamic finance to the SDGs; stimulate policy action informed by evidence; identify challenges, emerging issues and innovative approaches in the Islamic finance industry; as well as reviewing possible areas of cooperation between relevant partners. “Luckily, we see that the development financing landscape has become much more diversified and sophisticated in recent years. New financing instruments have emerged both from within, and in addition to official development assistance. These include blended finance, green bonds which combine public and private resources, guarantees, local currency financing, diaspora financing, debt swaps/buy-backs and many others” stated Sophie De Caen, UNDP Acting Director of the Regional Bureau for the Arab States. “Today’s panel is about two forms of investment structures – Islamic Financing and Impact Investing – where investors associate themselves with a moral purpose of advancing societal well-being,” she further added. The Global Islamic Finance and Impact Investing Platform (GIFIIP), established by the Islamic Development Bank and UNDP’s IICPSD is an example of an innovative financial partnership for the SDGs. This global platform is expected to mobilize and blend the resources of Islamic finance and private sector to drive forward business solutions to sustainable development challenges in a fair, transparent, quantifiable and verifiable manner.

Discussing the opportunities and challenges in positioning Islamic finance as a major enabler in achieving the Sustainable Development Goals, the panelists explored possibilities to better operationalize Islamic Finance and Impact Investing as enablers for implementing the 2030 Agenda, alongside the alternative Islamic finance instruments and services that are commercially viable and generate social benefits at a scale for catering to long term investment needs for achieving the SDGs. “Islamic finance instruments have the attributes of inclusivity, equality and many more as enshrined in the UN Charter” stated Sayed Aqa, Vice President of the Islamic Development Bank, at the opening of the event. “One main tenet of Islamic finance is social inclusion of the poorest class to economic development,” stated Kabir Hasan, 2016 Islamic Banking and Finance Prize Laureate, University of New Orleans. Mahmoud Mohieldin, World Bank’s Senior Vice President for the 2030 Development Agenda, United Nations Relations and Partnerships, presented the pro-development financial system comprised of risk sharing, corporate governance and leadership, financial inclusion and economic development. He shared examples of World Bank Group implementation of Islamic Finance.

The panel discussion was moderated by Prof. Dr. Savas Alpay, Chief Economist, Islamic Development Bank. Among other speakers were Dr. Alfiya Salikhova, Senior Manager, Islamic Finance Department, AIFC, Mr. Tarek Mansour, Egypt, Chairman of PricewaterhouseCoopers (PWC) and Mr. Ahmed Fayed Al-Gebali, Director, Islamic Financial Services Department, Islamic Development Bank. It has been a year since 193 Member States of the United Nations unanimously adopted the Sustainable Development Goals (SDGs) to better address a broad set of interlinked challenges that transcend time zones and political boundaries. The SDGs promise to continue where the Millennium Development Goals left and venture into new areas to leave no one behind – including functional and open institutions, energy, climate change and the interlink between peace and development. There is a broad agreement that financing this comprehensive agenda requires more than the existing government instruments alone. The Addis Ababa Action Agenda (AAAA) adopted last year by UN Member States recognizes the importance of innovative financing for development combining public and private resources such as green bonds, vaccine bonds, triangular loans and pull mechanisms, and carbon pricing mechanisms. AAAA also encourages private sector to invest in development through impact investing, which combines a return on investment with non-financial impacts for the achievement of the SDGs.

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 Fall 2015, UNDP and IDBG have been discussing how to strengthen their cooperation and capitalize 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.