JEDDAH — The Islamic Development Bank (IDB) Group and the United Nations Development Program (UNDP) on Monday launched a new report that spells out the potentials of Islamic finance in impact investment for the achievement of the Sustainable Development Goals (SDGs).
The report, titled “I for Impact: Blending Islamic Finance and Impact Investing for the Global Goals”, was launched by IDB President Dr Bandar Hajjar and UNDP Assistant Secretary General Magdy Martínez-Solimán, during the 42nd Annual Meeting of the IDB Group in Jeddah, Kingdom of Saudi Arabia.
It reviews recent developments and key factors for growth of Islamic finance and impact investing, and makes policy recommendations for development actors to leverage Islamic finance for impact investing as a way of fostering inclusive finance, curbing poverty, and achieving the SDGs.
The report was produced by a joint team of experts from the Islamic Research and Training Institute (IRTI) of the IDB Group and UNDP’s Istanbul International Center for Private Sector in Development.
Speaking during the launching, IRTI Director General Prof. Mohamed Azmi Omar said “IDB Group and UNDP collaborated to produced this report in order to raise awareness of the compatibility between Islamic finance and impact investing. Islamic finance and impact investing are both based on ethical and social criteria, and emphasize inclusiveness. One of the key aims of the report is identifying areas of convergence of the two sectors and to develop collaborative strategies for achieving the global development agenda.”
The report said the scale and ambition of the SDGs call for substantial financial and technical resources, which are well beyond the scope of individual governments and the multilateral funding agencies.
Islamic finance, which witnessed a remarkable growth trajectory over the past decade, represents a strong potential source of financing for the SDGs, thereby fostering development and helping to end poverty especially in IDB member countries, which account for 40 percent of the world’s poor.
Given that impact investment is growing rapidly and has become an important source of funding the SDGs, a blending with Islamic finance provides a formable partnership that could play a significant role in achieving the SDGs.
The report therefore recommends:
Creating an enabling environment to promote Islamic finance impact investing as part of the larger dialogue on inclusive financial systems and responsible investing principles.
Supporting the creation and functioning of an effective capital market system for Islamic finance impact investing, including supporting existing and new intermediaries.
Formulating well thought out, comprehensive regulatory, accountability, tax and legal frameworks, and raising awareness of the current and potential levels of convergence of Islamic and impact investing.
Establishing standards for impact measurement and reporting so that the sector’s metrics are aligned with the common practices of the global impact investing community.
Bringing together key stakeholders from governments, the private sector, and support organizations in both the Islamic and conventional impact investing spaces to discuss critical bottlenecks, learn from best practices, establish relationships and benefit from cross-pollination of ideas and shared beliefs.
To further these recommendations, IDB Group and UNDP have established the Global Islamic Finance and Impact Investing Platform (GIFIIP) to position Islamic finance impact investing as one of the leading enablers of SDGs implementation worldwide through private sector engagement.
The Islamic Research and Training Institute (IRTI) is a member of the Islamic Development Bank (IDB) Group responsible for leading the development and sustenance of a dynamic and comprehensive Islamic financial services industry that supports socio-economic development in member countries. — SG