Full Data of Islamic Development Bank

8/3/2019 Full Data of Islamic Development Bank

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1ISLAMIC DEVELOPMENT BANK QUESTIONS AND ANSWERS21430H

200915QUESTION AND ANSWERS

GENERAL BACKGROUND

1. What is Islamic Development Bank (IDB)? How was it established? Whendid it start functioning? The Islamic Development Bank (IDB) was establishedby the first conference of Finance Ministers of member countries of theOrganization of the Islamic Conference (OIC), convened on 24 Dhul Qa'da 1393H(18 December 1973). Its purpose is to foster economic development and socialprogress in member countries and Muslim communities worldwide based on the

principles ofshari'ah (i.e. Islamic jurisprudence). The Bank commenced itsactivities officially on 15 Shawwal 1395H (20 October 1975).2. What are its main objectives? In line with its overall objectives of fosteringeconomic development and social progress, the Bank finances productive projectsand programs in both public and private sectors in member countries. It invests ineconomic and social infrastructure projects, provides technical assistance tomember countries and assists in the promotion of foreign trade, especially capitalgoods. The Bank also assists Muslim communities in non-member countries andundertakes shariah-based research studies in Islamic economics and bankingthrough special funds established for this purpose.IDB finances development projects in member countries through a number ofshariah-compatible modes such as Loan, Leasing, Instalment Sale,Istisna'a,Equity Participation, Lines of Financing, etc. Besides, its trade financing schemes,such as Import Trade Financing Operations (ITFO), Export Financing Scheme(EFS), and Islamic Banks Portfolio (IBP), Unit16Investment Fund (UIF), etc., promote trade among member countries.3. Which countries are entitled to become members of IDB? How many have

joined the Bank? All member countries of the Organization of the Islamic

Conference (OIC) are entitled to become members of IDB. The presentmembership of the Bank stands at fifty-six spreads over four continents, viz.,Africa, Asia, Europe and Latin America.4. What is the authorized capital of the Bank? What is its subscribed capital?As of Jumad Awwal 1427H (May 2006), the authorized capital of the Bank was

raised to Islamic Dinar (ID)30 billion and the subscribed capital to ID 15 billion.


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5. What must a country subscribe to the Banks share capital uponjoining? Upon joining the Bank, a country should subscribe a minimum of 250shares having a par value of 10,000 Islamic Dinars each.6. Which are the main shareholders of the Bank? At present, on the basis ofpaid-up capital, the following seven countries are the main shareholders of theBank: Saudi Arabia, Kuwait, Libya, Turkey, UAE, Iran, Egypt and Qatar.* The Islamic Dinar, which is the unit of account of the Bank, is equal to one SDR(Special Drawing Right) of the International Monetary Fund. The value of the SDRis based on a basket of currencies, which, in August 1999, comprised: US Dollar(45%), Euro (29%), Japanese Yen (18%), French Franc (15%) and Sterling Pound(11%).177. Does the Bank interfere in the affairs of member countries? The Bank is adevelopmental institution. It does not take any political stand nor does it interfere

in the political affairs of member countries.8. What is the Banks relationship with the Organization of the IslamicConference (OIC) and its various committees and affiliated organizations?The IDB is one of the specialized organs of the OIC. Specialized organs usuallyhave their own governing Boards independent of the OIC governing machinery.The Bank is a permanent observer in all meetings and committees of the OIC. Itcooperates closely with other subsidiary, specialized, and affiliated organs.However, being an economic organization, the Bank has a special relationship withthe Standing Committee for Economic and Commercial Cooperation (COMSEC).ORGANIZATION AND FUNCTIONS

9. How is the Board of Governors constituted? What is its role?Each member country is represented on the Board of the Bank by a Governor andan Alternate Governor. Each member has five hundred basic votes plus one votefor every share subscribed. Generally, decisions are taken by the Board ofGovernors based on a majority of the voting power represented at the meeting. TheBoard of Governors meets once every year to review the activities of the Bank forthe previous year and to decide future policies. In its annual meeting, the Boarddesignates a Chairman, who holds office until the election of another Chairman atthe next Board meeting. The Board of Governors is the highest policy-making

body. It can delegate powers to the Board of Executive Directors for the generaloperation of the Bank. However, only the Board of Governors18can deal with issues relating to membership, increase or decrease in the Banksauthorized capital, authorize cooperation agreements with international andregional organizations, election of the President and Executive Directors, and theirremuneration.


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10. How is the Board of Executive Directors constituted? What is its role? Atpresent, the Board of Executive Directors is composed offifteen members, eight ofwhom are appointed and seven elected. The eight member countries with thelargest shareholding appoint one Executive Director each. The other membercountry Governors elect the remaining seven Executive Directors. The President isthe Chairman of the Board of Executive Directors. The Directors hold office for aperiod of three years and may be re-elected. Each member of the Board is entitledto cast the number of votes that counted towards his election and these need not becast as one unit. Generally, decisions are taken by majority vote based on thevoting power present at the Board meeting. The Board of Executive Directors isresponsible for the general operation of the Bank and, in particular, to: - preparethe work of the Board of Governors - take decisions concerning the Banksbusiness and its operations in conformity with the general directions of the Boardof Governors - submit the annual accounts for approval of the Board of Governors

- approve the Banks budget.1911. What is the organizational structure of IDB? The Board of Governors is thehighest policy making body, which elects the Board of Executive Directors and thePresident. The Board of Executive Directors ensures that the Bank operates inaccordance with the policies laid out by the Board of Governors. The President, asthe Chief Executive, is responsible for the day to day operation of the Bank. TheBanks organizational structure is dynamic and subject to change like any other

organization. At present, there are four Vice Presidents reporting directly to thePresident. A chief economist has been recently appointed, he reports to thePresident. In addition, some departments/offices also report to the Presidentdirectly. The organization chart of the Bank is shown in the annexure.12. What are the major channels of communication with member countries?According to the Articles of Agreement of the Bank, each member country isrequired to appoint its own channels of communication for effective and timelyexchange of information. The Governors/Alternate Governors are at the highestlevel in the channels of communication. The Bank has also established focal pointsat various levels for implementation of its special programmes, such as TechnicalCooperation Programme (TCP), Export Financing Scheme (EFS), etc., and for

coordination with National Development Financing Institutions (NDFIs) andIslamic Banks.13. Does IDB have regional offices? What are their main functions?20Yes, the Bank has four regional offices in Rabat, Morocco, Kuala Lumpur,Malaysia, Almaty, Kazakhstan and Dakar, Senegal. It has a Biosaline AgricultureCenter in Dubai, UAE. The main functions of the regional offices are to:


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- act as the Banks liaison office for the member countries in that region- assist in project identification and follow-up- market the Banks financing modes and explain its policies and procedures- assist in recruitment of staff- assist in private sector development activities- assist in mission preparation and organization- prepare short-list of consultants- liaise with other regional and international organizations located in its region andrepresent the Bank in regional conferences and seminars.14. What are the official and working languages of the Bank? Arabic is theofficial language of the Bank. In addition, both English and French are used asworking languages.STAFFING

15. How does the Bank recruit its staff?

The Bank recruit staff in accordance with the established manpower needs byfilling vacant positions with the most suitable candidates. In the selection of suchcandidates, the Bank will be guided by the requirements of the job and thecandidates qualifications, taking into account certain factors such as education,training, work experience, skill and other21characteristics as determined by the Bank. The Bank advertises for its HR needs inmajor international publications and a limited number of publications in membercountries. Also the bank advertises through the Bank websitewww.isdbcareers.com or electronic advertisement in international recruitmentwebsites. The candidate can apply online in response to these advertisements. TheBank also has a scheme for recruiting Young Professionals.16. Is there a quota system for recruitment of staff? The Bank selects its staffon the basis of qualifications and experience. There is no quota system for staffrecruitment. However, like other multi-national development banks, IDB gives dueregard to the recruitment of personnel on as wide a geographical basis as possible,while maintaining institutional harmony, standards of efficiency, and staff morale.17. What is the current staff strength of the Bank? What categories of expertsand specialists does the Bank employ? The figures of staff in IDB as of 30-12-

1429H as follows: the total staff 1040, comprising 551 professionals, 129 specialcategory, 293 general category, and 67 manual workers. The Bank employsvarious types of specialists such as economists, financial analysts, engineers,agronomists, development banking specialists etc., for its operational activities.The Bank also hires experts as short-term consultants for specific projects,whenever necessary.SHARIAHAND ISLAMIC MODES OF FINANCING


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18. What is shariah? Which are the principles ofshariah that apply to

Islamic Banking ?22Shariah is the set of rules derived from both the Holy Quran and the authentictraditions (Sunnah) of the Prophet (peace be upon him) and the scholarly opinions(Ijtehad) based on Quran and Sunnah. The principles ofshariah that governIslamic banking and finance include:- Prohibition of interest (riba) in all financial transactions, such as: riba in debts;riba in sales, particularly in the forward currency exchange.- Prohibition of gharar (extreme uncertainty) is the sale of probable items whoseexistence or characteristics are not certain, due to the risky nature which makes thetrade similar to gambling. In contemporary financial transactions, the two areaswhere gharar most profoundly affects common practice are insurance and financialderivatives. The other set of relevant contracts which are rendered invalid because

of gharar are forwards, futures, options, and other derivative securities. Forwardsand futures involve gharar since the object of the sale may not exist at the time thetrade is to be executed.- Entitlement to return is due to liability of loss and vice versa.- Obligations of trust (amanah), covenants (uqud), interdiction against unlawful(haram) earnings and expenditures, fraud of giving less than due in measure andweight (tatfif), and unjust enrichment (akl mal al-ghair bi al-batil).19. How does the Bank ensure that its operations conform to shariah?23In order to ensure the compliance of its operations to Islamic Shari'ah, the Bankhas established a Shari'ah Committee comprised of eminent Shari'ah scholars whoensure the operations conformity to Shari'ah and provide opinion on variousShari'ah related matters. To assist it in performing its functions, the Bank has setup a Shari'ah Rapporteur and a Shari'ah Internal Supervisor to liaise with theShari'ah Committee. Furthermore, the Bank's financing agreements withgovernments of member States and the private sector are governed by andconstrued in accordance with Islamic Shari'ah as set out in Shari'ah Standardspublished by the Accounting and Auditing Organization of Islamic FinancialInstitutions (AAOIFI) and as interpreted by the Islamic Fiqh Academy of the

Organization of Islamic Conference or Islamic Development Bank Shari'ahCommittee.20. What are the different modes of financing currently followed by the Bank?The Bank finances projects from its ordinary capital resources through loan,leasing, instalment sale, technical assistance, equity participation, profit sharing,istisnaa, and lines of financing extended to NDFIs. A brief explanation of each isgiven below: LOAN: This mode of financing is used for projects expected to have


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a significant socio-economic impact, having a long implementation period, andwhich may not be revenue generating. Loans are given to governments or publicinstitutions mainly in Least Developed Member Countries (LDMCs) for theimplementation of infrastructure and industrial projects.Murabaha:24Murabaha (Cost-plus sales) is a purchase and resale contract in which a tangibleasset is purchased by a bank at the request of its customer from a supplier, with theresale price determined based on cost plus profit markup. It is mostly used in tradetransactions. The Bank provides this financing to its clients who need to acquiregoods from abroad. The customer approaches the Bank for assistance in importingcertain goods and provides the Bank with the specifications of the goods in termsof description, quantity, price etc. The Bank then imports the goods on its ownaccount in order to sell to the client at a price which covers the cost and an agreedprofit margin. LEASING (Ijara): This is a medium term mode of financing for

rental of capital equipment and other fixed assets such as plant, machinery, andequipment for industrial, agro-industrial, infrastructure, transport, etc., both for thepublic and private sectors. Lease financing is also provided for acquiring ships, oiltankers, fishing trawlers, etc. After the end of the rental period the Bank transfersthe ownership of equipment to the lessee as a gift. INSTALMENT SALE:Instalment Sale is similar to Leasing. The major difference is that in InstalmentSale the ownership of the asset is transferred to the beneficiary on delivery. Underthis mode of financing the Bank purchases equipment and machinery, and sells tothe beneficiary at a higher price. EQUITY PARTICIPATION: Under this modeof financing, the Bank participates in the equity capital of existing or newcompanies in the public and private sectors. The Bank's participation is limited toone-third of the equity capital of the company.25PROFIT SHARING: It is a form of partnership in which two or more parties poolfunds to finance a venture. The partners share the profit (or loss) in proportion totheir contribution to the capital. LINE OF FINANCING TO NDFIs: Under thiscategory the Bank extends financing through equity, leasing, and instalment sale tothe NDFIs in member countries to promote the growth of small and medium scaleindustries, mainly in the private sector.ISTISNA'A:Istisna'a (agreement of

manufacture/construct) is a mode of financing used by the Bank to finance mainlyinfrastructure projects. It could also be used to finance manufacturing of machinesand equipment. Istisna'a is a sale agreement between the seller and the buyer forthe sale of an asset (such as the construction of a road) described in the salecontract and transacted before it comes into existence, to be constructed based onthe specifications outlined by the buyer at an agreed predetermined selling priceand to be delivered on a specific future date. To fulfill its obligation, the buyer


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selects, with the approval of the seller, a contractor who will construct/manufacturethe project and deliver it to the buyer on the date described in the sale contract.In addition to the above, the Bank provides Technical Assistance in the form ofgrant and/or loan for project-related tasks such as feasibility study and design,supervision of implementation, and for tasks of an advisory nature such asdefinition of policies, sectoral plans, institution-building,26research, etc. Technical Assistance is mainly extended to LDMCs.21. What is service fee? How does it defer from interest charges? The Bankcharges service fee on Loan financing to cover actual administrative expensesrelated to the project. It differs from interest in that the service fee is the actualexpense incurred by the Bank, while interest is payment for the use of the funds.22. Are there upper limits to the amount of service fee charged on loans?Service fee is charged lump sum. It is payable in six-monthly instalments. It is

based on the actual amount disbursed and the implementation period starting fromthe date of first disbursement until the final repayment. The upper limit to theamount of service fees charged in any one year is 2.5% of the loan amount.23. What is mark-up? How is it different from interest? The mark-up is themargin added as a profit in addition to the real cost of the commodity sold. In IDB,the practice of mark-up is applied to murabaha and instalment sale. The mark-upin the case ofmurabaha, is the profit, which is agreed upon between the concernedparties. As for instalment sale, the mark-up is the amount to be included in the re-payment instalments to be paid by the beneficiary. The mark-up rate is used tocalculate the lease rental in the case of lease financing. Mark-up is different frominterest in that it is related to machinery, equipment, etc., in case of instalment saleor a commodity in case ofmurabaha, whereas interest is related to money.27PROJECT FINANCING AND OTHER OPERATIONAL ACTIVITIES 24.What are the main operational activities of the Bank? The main operationalactivities of the IDB Group are geared towards spurring comprehensive socio-economic development through poverty alleviation efforts; infrastructuredevelopment; capacity building; promotion of cooperation among membercountries (mainly through trade and joint ventures); development of the private

sector; and the promotion of the Islamic banking and financial industry.During the period of 1396-1429H (1976-2008), the Bank Groups total approvals,net of cancellations1, amounted to ID 40.9 billion (US$56.9 billion) for 6103operations. In 1429H (2008), the Bank approved ID 3.50 billion (US$5.70 billion)for 399 operations covering project financing, technical assistance, trade financingoperations, and special assistance projects for both member countries and non-member countries. Project financing and technical assistance operations are


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comprises the IDB along with the Arab Fund for Economic and SocialDevelopment, Saudi Fund for Development, Kuwait Fund for Arab EconomicDevelopment, OPEC Fund for International Development, Abu Dhabi Fund forDevelopment, Arab Bank for Economic Development in Africa and Arab GulfProgramme for United Nations Development Organizations - AGFUND). The IDBcollaborates actively with sister multilateral development banks (MDBs) such asthe World Bank; the African Development Bank; the Asian Development Bankand the European Bank for Reconstruction and Development. IDB also undertakes

joint activities with other financing institutions, bilateral agencies and the UNsystem. 26. In addition to project financing, what financing is offered to theprivate sector?The IDB Group currently offers a number ofoptions and schemes to the privatesector in member countries. These include trade financing, lines of financing formicro, small and medium enterprises, equity financing for Islamic banks, and

services provided by the Islamic Financial Services Industry Department (IFS),Islamic Corporation for the Development of the Private Sector (ICD) and the IDBInfrastructure Fund. Some of these30financing options and schemes are also open to the public sector. Informationalmaterials are available on the terms and conditions offered through these variouswindows and schemes. More recently, the Bank has initiated a resourcemobilization drive through Sukukfrom the international Islamic financial market.These resources are utilized to fund financially-viable operations in both theprivate and public sectors. 27. Does IDB cooperate with Non-GovernmentalOrganizations (NGOs)? The IDB has over 12 years of experience in cooperatingwith non-governmental organizations (NGOs) and women organizations inmember countries. Through the NGOs, Women and Development Unit, IDBconcentrates on activities geared for poverty alleviation as well as raising theeconomic and social standard of living of poor segments in society. It providessmall grant funding for projects designed and implemented by NGOs in order toaddress the basic needs of disadvantaged groups and to empower the grassrootscommunities in its member countries. It also finances capacity building programs(training, etc) to improve the NGOs efficiency and to allow them better serve their

target population. 28. Some member countries are able to get a higher level ofIDB financing as compared to others. Why?Like other development banks, the level of IDB financing in a member countrydepends on the Bank's available resources, the willingness of member countries toutilize IDB's financing facilities, the availability of viable projects, the speed ofimplementation of the projects already approved, the absorptive capacity of thecountry, as well as population and income per capita of the country. Major


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constraints in obtaining Banks financing are overdue, which may delaydisbursements for existing projects and approval of new ones. Countries initiallycommitted to implementation of Structural Adjustment31Programmes also had difficulties in accessing non-concessional financing fromexternal sources, including IDB. 29. What are the Least Developed MemberCountries (LDMCs) and what assistance does the Bank provide to them?In general, all member countries benefit from the IDB's financing. For instance, theBank provides technical assistance for capacity building for which all membercountries are eligible. However, the least developed member countries (LDMCs)receive utmost priority in the allocation of concessional (or loan2) financing. On ayearly basis, the IDB earmarks 80 percent of its concessional resources in theAnnual Operations Plan in favor of the LDMCs. There are 25 member countriesclassified by the Bank as LDMCs3. The non-LDMCs, on the other hand, benefit

mostly from ordinary financing4. 30. How does the Bank carry out post-evaluation (or assessment) of its projects? How does it learn from past

experiences?In 1411H (1990/91), the Bank established the Operations Evaluation Office (OEO)to assess the performance of completed projects. Each year, the OEO devises awork program that contains projects, sectors and countries to be evaluated /assessed. The thrust of operations evaluation is three-fold: (a)2 Loan financing, from the IDBs perspectives, has a different connotation fromother financiers, and is necessarily concessional. 3 The least developed membercountries (LDMCs) of the IDB are: Afghanistan, Bangladesh, Benin, BurkinaFaso, Chad, Comoros, Djibouti, Gambia, Guinea, Guinea-Bissau, Maldives, Mali,Mauritania, Mozambique, Niger, Senegal, Sierra Leone, Somalia, Sudan, Togo,Uganda, and Yemen. In addition, Kyrgyzstan and Tajikistancategorized aslandlocked developing countries by the UNare classified as least developedbythe IDB. Moreover, Palestine is also classified as such by IDB as a special case,) 4Ordinary financing, in IDBs nomenclature, is equivalent to non-concessionalfinancing in other circles32account for the utilization of resources against planned targets, processes and

procedures; (b) assess appropriateness (effectiveness) of project designs; and (c)ascertain the impact of a project to the intended beneficiaries. Where quantitativeanalysis is not possible, the degree of fulfillment of the initial project objectives(i.e. at the time of appraisal) is taken as the main yardstick. The outcome ofevaluation serves two principal purposes. The first is to derive lessons for futureoperations, that is, influencing the design of the Banks future projects/programs.These may be termed as operational lessons. Evaluation also gives


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recommendations intended to sustain project benefits (that is, developmentallessons). The OEO has built up a reference database and disseminates itsevaluation results yearly to improve future financing activities and ensure thequality of projects at entry. The majority ofevaluation exercises conducted by theOEO have highlighted the need for effective project monitoring and improving thequality and impact of the Banks operations. OPERATIONAL POLICIES AND

PROCEDURES 31. Who can apply for project financing? What are theprocedures to be followed? Any potential beneficiary /client from a membercountry, either from the public or private sector, can apply for project financing. Inthe case of a public-sector project, the request for financing should be channeledthrough the office of the respective IDB Governor for the member country, usuallythe Central Government departments (or Ministries) of Economic Planning,Finance, Economic Affairs, or the Central Banks. The official request should beaccompanied by a project feasibility study or other bankable project document,

which provides the salient features of the project with respect to its technical,financial, social, economic and environmental aspects.After careful in-house study, IDB sends its technical staff to member countries toappraise the project and assess its33developmental outcomes and potential impact. Technical, economic, financial,management and sustainability issues are painstakingly studied. Ifa project passesthe appraisal stage, it is submitted to the Board of Executive Directors forapproval. If approved, a financing agreement is signed between the Bank and theclient. With regard to financing requests from private sector entities, the Bankrequires only a no-objection memorandum from the IDB Governor, in caseswhere such financing is sought from the IDBproper. Otherwise, requests forfinancing from the Banks specialized private-sector entities follow slightlydifferent procedures, and do not require the vetting by the offices of the Governors.Goods and services financed by the Bank are normally procured throughinternational competitive bidding. Consultancy services are obtained through ashort-listing process. Preference is given to firms from member countries.Depending on the complexity and scope of the project, the Bank may limitprocurement to only contractors/consultants from member countries.

Disbursements are based on actual project execution. The borrower is expected toperiodically inform the Bank of the progress of the project implementation. TheBank may send special follow-up missions to assess and monitor theimplementation of projects. 32. What are the Banks criteria for selection ofprojects for financing? IDB selects those projects for financing, which:


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- Have a high priority in the development agenda of the concerned member countrysuch as those included in the poverty reduction strategy papers (PSRPs), publicinvestment programs (PIPs), medium-term development plans, etc.;34- Meet the priorities established in the Bank's 1440H Vision;- Are technically sound, socially desirable, environmentally safe and economicallyand/or financially viable; and- Have a high developmental impact.Regional projects, which promote cooperation among member countries, are givenspecial consideration. To prepare a medium-term operational plan, the Bank, inconsultation with the concerned member country, may prepare a CountryPartnership Strategy (CPS) or undertake Policy Dialogue and Programmingmissions to establish priority areas and projects for financing over a period of threeyears. 33. Does the Bank finance cost overrun on IDB-financed projects?

Generally, the Bank does not finance cost overruns and there is a condition in allits financing agreements that the beneficiary is responsible for covering suchoverruns. However, in very exceptional and well justified cases, particularly in thecase of leasing, istisna'a and installment sale financing, the Bank may considercovering such overruns within certain limits. 34. How does the Bank assist in thedevelopment of the private sector? The Bank assists the private sector throughvarious modes of financing, such as leasing, installment sale, Istisnaa and equityparticipation in companies where the majority of the operations are made inShari'ah-compatible modes. In addition, there are various trade promotionschemes.The Bank has established dedicated entities with the view to meet the diverse andexpanding needs of the private sector. These include the Islamic Corporation forthe Development of the Private Sector (ICD) and the IDB Infrastructure Fund. The35Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC)also provides the private sector with credit insurance and investment guarantee.The Bankalso provides direct technical assistance financing in the form of loanand/or grant for capacity-building programmes and for conducting feasibilitystudies. IDB makes use of National Development Financing Institutions (NDFIs)

to extend lines of financing to sub-projects promoted by the private sectorbusinesses, as well as lines of technical assistance to help small and medium scaleenterprises conduct feasibility studies for their projects. 35. Does the Bankfinance feasibility studies for private sector projects? Yes. The Bank providesdirect financing to the private sector (through technical assistance and lines offinancing) to undertake feasibility studies and capacity-building activities. This is

part of the Banks much wider Technical Assistance (TA) and capacity building


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Environmental assessment is one dimension of project sustainability. The Bankrecognizes that preservation of the environment is essential for sustainabledevelopment. In evaluating new projects, the Bank gives preference toenvironment-friendly projects and reviews the project design in order to ensure thatadequate mitigation measures against any major environmental hazards areincorporated. In case of large-scale projects where the IDB only co-finances asmall segment / share, the Bank relies on other donors assessment as a pre-requisite for its financing. 40. What is the role of the Bank in alleviatingpoverty? Poverty alleviation is IDBs overarching goal. The Bank makes allefforts to finance projects having a direct impact on poverty alleviation,particularly in the LDMCs. This aspect is strongly emphasized in the 1440HVision of the Bank. The Bank selects projects in areas such as primary health care,vocational training, agricultural development, micro-finance, water supply, ruralelectrification, small-scale irrigation, integrated rural development programmes

etc., which improve the living conditions of the poor, in addition to creatingemployment opportunities.Cognizant of the fact that tackling poverty starts at the project formulation anddesign stages; the IDB strives to ensure that its projects and programmes areguided by the countries poverty indicators; benefit a large segment of thepopulation classified as poor (as per the concerned country's poverty threshold);target basic investments for the poor; encourage the38active participation by the local communities; and improve the status of women(e.g. dedicated micro-financing schemes, rural water supply, forest woodlots etc.41. Does the Bank take into consideration the special needs of women indevelopment? Like any development institution in the world, the IDB fullyrealizes the crucial role that women play in economic and social development. Thisis evident in the Banks development objectives and strategic Vision 1440H. Astrategy for the integration of women activities in the regular operations of the IDBhas been articulated, adopted and mainstreamed. All programs and projects in theBank now integrate women's development needs, with the view to combat povertyand raise the economic and social well-being. In addition, the strategy aims atlending support to member countries development plans, by concentrating on the

importance of women in the development process. In this context, the IDB devoteda special prize titled "IDB Prize for Women's Contribution to Development". ThePrize is awarded annually at the rate of US$ 50,000 for a woman or a group ofwomen and US$100,000 for women organizations or a number of winning womenorganizations. 42. What is the extent of IDBs involvement in case ofnatural disasters or calamities? The Bank provides relief and emergencyassistance (services and commodities) to both member countries and Muslim


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communities if they are afflicted by natural disasters and calamities such asearthquakes, floods, drought and others. This relief is financed from the Banks

Waqf Fund. PROJECT IMPLEMENTATION 43. What type of guarantees isacceptable to IDB?39Government and/or a guarantee from a first class bank acceptable to IDB. TheBankalso accepts other alternatives like corporate guarantee, assignment ofreceivables, promissory notes and stand-by letters of credit. For projects financedunder a Public-Private Partnership, such as Build-Operate-Transfer (BOT), orBuild-Own-Operate-Transfer (BOOT) projects, the Bank accepts various forms ofsecurities emanating from the project itself, i.e. non- or limited-recourse financing.44. Does IDB maintain a list of approved guarantor banks? How does IDBevaluate a new guarantor bank? Yes, the Bank maintains a list of approvedguarantor banks. Whenever a non-listed bank is proposed as a guarantor, IDB

evaluates that bank from the managerial, financial, and technical points of view. Itinvestigates thoroughly the previous performance of the guarantor bank in theseareas to ensure that it would meet the IDBs requirements and all repayment

obligations. 45. Does the Bank give preference to procurement of goods andservices from member countries?The IDB has six bidding types: (i) open international competitive bidding (ICB);(ii) limited international competitive bidding - LIB (by direct invitation); (iii)national competitive bidding - NCB (limited to domestic firms only); (iv)international/national shopping (for readily available of-the-shelf-goods); (v) directcontracting (specific manufacturer, spares, emergency situations etc.); and (vi)force account (for scattered or small works and emergencies). While the generalpolicy of the Bank is to procure goods and services through internationalcompetitive bidding, in many cases it confines procurement of goods and servicesto member countries. Based on specific criteria, such preference can be up to 15%of the amount of the bid price in favor of member country firms, suppliers and40contractors5. However, when the procurement is limited to IDB member countryfirms, local firms may have up to 10% margin of preference. This preference issubject to two conditions: it must be agreed by the beneficiary country beforehand,

and it must also be mentioned in the tender invitations. With regard to ICB, thereare two options that the Bank follows depending on the category of projects to beimplemented. Normally, the implementation of category A projects - such asschools, hospitals, roads, irrigation canals etc. - is restricted to member countries.Category B projects are larger and complex (e.g. oil refineries, dams etc.), and

these are subject to open ICB. 46. How are prospective suppliers of goods andservices being kept informed of IDB financed projects?


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After each meeting of the Board of Executive Directors, the Bank posts summaryinformation about approved projects on its website (www.isdb.org) and issues apress release concerning the approved projects/operations, which is published inwidely circulated newspapers. It is also distributed to the Chambers of Commercein member countries and their diplomatic missions in Saudi Arabia. In addition, theBank publishes an Operation Bulletin every four months, giving the list of projectsapproved during the period, the status of implementation, and the address of thebeneficiary. The bulletin is distributed to the IDB Governors, Chambers ofCommerce, diplomatic missions of member countries, Islamic Federation ofContractors, Islamic Federation of Consultants, and others vested parties.5 A member country firm, supplier or contractor is defined as: (a) being registeredin a member country, (b) having a principal place of business in member country,(c) having more than 50% of the shareholding capacity in the hands of firm(s) orcitizen(s) in member country, and (d) having at least 80% of project personnel

from member country4147. Does the Bank give preference to member country experts and consulting

firms? The Bank, in consultation with the beneficiary, follows the short-listingapproach in selecting experts and consulting firms. A 10-percent preference marginis given to member country experts and firms when the shortlist includes non-member country firms. In some cases, depending on the availability of the requiredservices in the member countries, the Bank limits the choice to experts andconsulting firms from member countries, as per the highlights provided underQuestion 45. 48. Who is responsible for evaluating the bids and approvingcontracts? The beneficiary is responsible for the evaluation of bids of contractorsand suppliers. However, in order to ensure compliance with the Banks policiesand procedures, the beneficiary is required to obtain the Banks clearance beforefloating tenders (invitation to bids, bidding and contract documents) and beforecontract signature (bid evaluation reports and draft contracts). 49. Under whatcircumstances can the beneficiary award a contract to a higher-cost bidder?Normally, the highest technical standard and the lowest cost offers are selectedwhile evaluating bids. However, in certain cases, higher cost offers may beselected if the lowest offer is not technically acceptable or declined for any other

reason. In general terms, cost is not a decisive factor in consulting services. Theopposite is true in contracting. TECHNICAL COOPERATION PROGRAM4250. What is the IDB Technical Cooperation Program? The TechnicalCooperation Program (TCP) is a program of the Bank devoted to promotion ofhuman resources development in IDB member countries and institutions throughthe following vehicles:


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- Exchange of expertise among member countries and institutions. - Enhancing theskills of member country technical and professional staff in the mid-levelmanagement through providing training programs and study visits aimed atenhancing their functional performance. - Facilitation of exchange of knowledgeand ideas on technical issues related to socio-economic development throughseminars and workshops. 51. Why was the IDB Technical Cooperation Officeestablished? The Makkah Declaration observed the inadequate exploitation ofabundant resources in the Islamic Ummah due to an absence of well establishedcooperative instruments capable of enhancing exchange of expertise, skills andknowledge, and adoption of appropriate technologies suited to the resourcesendowment of member countries and institutions. To fulfill this requirement, theIDB initiated and launched in 1403H (1983) a program for technical cooperationentitled: "Technical Cooperation Program among IDB Member Countries andInstitutions (TCP). Initially, the TCP was established as a unit in the Country

Operations complex. However, an increasing awareness of the usefulness of TCOprograms in member countries and institutions led to an ever higher number ofrequests received per year and consequently the Unit was upgraded to anindependent office in 1416H (1986).4352. What is the role of the IDB in the Technical Cooperation Program? IDB isa multilateral development financing institution which aims to foster the socio-economic development of its stakeholders, which are its member countries andinstitutions. Some member countries and institutions cannot effectively utilize theproject financing, available both through the IDB and other donors, because ofhuman resources and institutional constraints which restrict their economic growthpotential. Through the above human resources promotion vehicles, the IDB canplay the role of a catalyst and co-financier to match the capacity needs of onemember country with those available in another country. 53. Who are theTechnical Cooperation Program Focal Points and Technical Providers? Thefocal point is an entity designated by the member country to act as the membercountry's counterpart to the IDB. The focal point may be a unit, a department, anagency or a specific ministry within the government. The technical providers aresuch IDB member countries which possess capacities and willingness to share

expertise and experience with other member countries in need. 54. What is theTripartite Cooperation? It is a concept of cooperation between the IDB and itsmember countries and institutions, where the IDB acts as a catalyst and facilitatescooperation in exchanging skills and technical know-how, between a beneficiarycountry or institution and a technical provider. The technical provider may be anIDB member country or institution and as such the tripartite cooperation may be abilateral or a multilateral basis.


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4455. What are the new priorities for Technical Cooperation Office? In order tostreamline IDB's poverty alleviation efforts, the TCP has been focused on specificdevelopments needs of IDB's stakeholders to achieve an immediate impact. TheTCO therefore assigns priority to the following areas: a. Human development i.e.education (enhancing education and vocational training systems), and health care,b. Agricultural development and food security c. Infrastructure development, d.Intra-trade among member countries, e. Islamic banking and finance andmicrofinance 56. What is the difference between Technical Assistance (TA)and Technical Cooperation programs of the Bank? Technical Assistance (TA),as defined by the Bank, is the provision of technical expertise, means and know-how to assist in preparation or implementation of a policy or project, or to helpdevelop the capacity of institutions and human resources in charge of carrying outsuch policies and projects. While technical assistance is broader in scope, technical

cooperation program is limited in the following levels: - TCP involves onlymember countries and institutions as beneficiaries and technical providers ofexpertise, - TCP is based on "tripartite cooperation" concept whereby all threeconcerned parties (the beneficiary, the technical provider and the IDB) contribute, -TCP operations are typically smaller in size and more informal than TA i.e. noagreement is signed between the IDB and the beneficiary.45COOPERATION OFFICE 57. What is main objective and purpose of theCooperation Office? The Cooperation Office was established on 15-8-1420H(23.11.1999). Its main objective is to coordinate and follow-up on the activities ofthe Bank related to the promotion of cooperation among Member Countries, andthe cooperation of the Bank with International Institutions. In addition, it serves therole of reinforcing and expanding the Banks existing ties and collaboration thatexists with Member Countries and International Institutions. The CooperationOffice comprises 4 units, namely: OIC Coordination Unit, WTO Unit, Promotionof Cooperation among Member Countries Unit, and International Institutions Unit.Currently three Units are active, OIC Coordination Unit, WTO Unit andInternational Institutions Unit. 58. What are the roles and functions of the OICUnit? The principal role and functions of the OIC Unit can be described as

follows: a. Collaborate with OIC, its organs and affiliated institutions on behalf ofthe Bank on matters related to cooperation and coordination between MemberCountries; b. Undertake and prepare background documents, reports and papers inrelation to conferences and meetings organized by OIC and its affiliatedInstitutions, such as the Islamic Summit, Islamic Conference of Foreign Ministers,COMCEC, Commission on Social and Cultural Affairs, Commission on Scienceand Technology, and so on;


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framework of Memorandum of Understanding (MoU), Cooperation Agreements,and so on. e. Reinforce the existing ties of collaboration between the IDB and theInternational Institutions, integrated organizations, regional and nationalorganizations and NGOs in areas related to promoting cooperation anddevelopment among OIC member countries. f. Create a forum for multilateralconsultations, discussions and exchange of views and information, disseminationof studies and research related to trade and development, as well as issuesparticular to WTO. SCIENCE & TECHNOLGOY OFFICE61. Why a Science & Technology Office at IDB? The IDB being a developmentfinancing institution, it has a deliberate, conscious drive to evolve and strengthenthe most appropriate tools for contributing to the substantial social and economicprogress of its member countries. Science & Technology has proven to be thesingle most important contributor to increase in productivity and wealth generationworldwide. Therefore, the IDB has established a dedicated office to formulate

policies and to implement programs in the area of science & Technology. 62.What is the mission of the STO?49The overall mission of the STO is to provide support to the Bank's activities inpromoting science and technology as a basic instrument for the development of themember countries. 63. How does STO operate? The mechanisms of STOintervention are combinations of the following means: - IDB's Advisory Panel onScience & Technology composed of selected eminent scientists from membercountries and dedicated to advising the Management on priority S&T policy issues;- the general and specialized financing windows of the Bank available for S&Tprojects financing, promotion of S&T in member countries, and S&T capacitybuilding; and; - the strategic S&T partners of the Bank, foremost the OIC sisterinstitutions involved in S&T and the major regional/international S&T-relatedorganizations. The role of the STO is to utilize the above means in order to deviseor improve policies, formulate or optimize strategies, implement specific S&Tprogrammes and assist other IDB departments and strategic partners in their S&Tactivities; while doing so, the STO ensures an appropriate monitoring of thedesired impact of IDBs S&T activities for the benefit of its clients. 64. Who are

STO's strategic partners? Strategic partners are identified, tested and selected

through actual cooperation in implementing joint activities or parts of IDBs S&Tagenda.50At OIC level, these are the Ministerial Standing Committee for Scientific &Technological Cooperation (COMSTECH) and its specialized S&T InterIslamicNetworks, the ISESCO, the Islamic Academy of Sciences (IAS) and the IslamicUniversity of Technology (IUT). International and regional partners include the


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UNESCO, the African Foundation for Science & Technology (AFRISTECH), theInternational Islamic Forum for Science, Technology and Human ResourcesDevelopment (IIFTIHAR), the Pathfinder Foundation for Education &Development (PATHFINDER), the African Regional Center for Technology(CRAT) among others. A number of national S&T institutions and R&D centers ofexcellence also play a major role in IDBs strategic S&T partnership. 65. Whatare the main programs and activities of STO? There are a number of initiativestaken by STO in collaboration with its partners to support the development ofscience and technology resources. The major programs are the following: 1-Capacity Building Operations: IDB finances activities such as short-termexchange of experts, on-the-job training, and conferences aiming at developing thecapacity of human resources in science and technology; 2- Centres of ExcellenceCooperation Scheme: The IDB facilitates cooperation between various centres ofexcellence across Member Countries by encouraging the formulation of joint

projects between the centres;3- IDB Prizes for Science & Technology: As part of the Bank's efforts to promoteexcellence in scientific research51and education, three IDB Prizes for Science & Technology (US$ 100,000 each) areawarded annually to distinguished S&T institutions; 4- Self Reliance in VaccineProduction (SRVP) Program: IDB is supporting through capacity buildingoperations the production of affordable, good quality and effective vaccines for theMuslim World. INTERNATIONAL ISLAMIC TRADE FINANCECORPORATION (ITFC)

66. How the Bank will develop Trade among its member countries?- The International Islamic Trade Finance Corporation (ITFC) will continue tobuild on the successes of the Bank over a period of more than 30 years. The Banksupported and promoted intra-trade and trade cooperation among its membercountries through its various programmes and activities of financing imports andexports in these countries as well as the trade activities of the private and publicsectors.- The total amount approved for trade operations since the inception of the Bankexceeded US$ 27 billion, and intra-trade operations accounted for about 77% of

this total. The ITFC will continue to build on this impressive record to raise thecurrent level of intra-trade, estimated at 13%, to the level called for by theOrganization of Islamic Conference in its meeting in Makkah Al Mukarrama in2005, i.e. 20%.- The ITFC is one of few multilateral financial institutions which focus onincreasing the volume of trade among its member countries with a view to supporteconomic development in these countries.


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52- The ITFC will endeavour to develop new financing products to fulfill the needsof exporters and importers in member countries through mechanisms which aligntrade opportunities and transactions among exporters and importers in membercountries, and encourage them through attractive financing terms to trade amongthemselves instead of seeking help from non member countries.- In order to meet the growing demand of member countries for intra-tradeoperations, the ITFC will seek to develop and enhance its mechanisms formobilizing additional resources from international and regional financial marketsfor financing intra-trade operations.- The ITFC will also work through the Trade Cooperation and PromotionProgramme in order to contribute to promoting trade among its member countries.The programme's activities include capacity building and trade facilitation throughspecialized trading courses, on the job training, workshops, support of market

studies and organizing businessmen meetings and conferences, as will as tradefairs to promote member countries' products, and all other activities that indirectlyfacilitate trade and streamline its procedures and regulations.- The ITFC will endeavour to increase its technical assistance activities andtraining programmes for local personnel in public institutions engaged insupporting member countries exports, in addition to participating in promotion andmarketing activities for the benefit of member countries at international andregional trade forums.- Consistent with its belief in the vital role played by the private sector in thedevelopment of member countries' economies, the ITFC will also focus onproviding financial resources to the private sector corporations through53attractive and flexible mechanisms and procedures that will accelerate decisiontaking to respond to the various changes and developments which take place inlocal and international markets.FINANCIAL MANAGEMENT 67. What are the Ordinary Capital Resourcesof the Bank? The Ordinary Capital Resources of the Bank comprise the paid-upcapital reserves, retained earnings and funds placed by others for utilization in theBanks ordinary operations.

68. Islamic shariah prohibits interest on loans. How does the Bank earnincome? The Bank does not charge interest in its financing operations. Most of itsincome is derived from leasing, instalment sale and foreign trade financing onwhich a mark-up rate is applied in accordance with shariah principles. Further, itrecovers the administrative costs of loan and technical assistance financing bycharging a service fee based on the actual cost incurred by the Bank.


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69. How does the Bank mobilize resources beyond its share capital? The Bankmobilizes resources through financial instruments such as Sukuks, reverseMurabaha, Syndication, etc. which conform to shariah principles, either directlyor through its other financing windows, such as Unit Investment Fund.70. What currencies does the Bank use for disbursement of funds and for

accepting repayment? How does it determine the exchange rates?54The Bank disburses funds in all major convertible currencies as well as in localcurrencies of member countries depending on the supply contracts and theprovision of the IDB financing agreement. The Bank accepts repayment in mostmajor convertible currencies. All disbursements and repayments are converted intoIslamic Dinars for accounting purposes. The exchange rate for the Islamic Dinarvis--vis the currency of disbursement/repayment is based on the IMF rate for theSDR on the date preceding the value date of the payment.

71. How does the Bank utilize funds that are not needed for immediatedisbursement? All funds that are not immediately needed for disbursement areplaced in shariah-compatible short-term investments, mainly in commoditytrading.72. What are the measures taken by the Bank to control overdues? In its effortto control overdues, the Bank has devised a set of policies and procedures, whichdeal with follow-up, control, and collection of overdue instalments. In case aninstalment becomes overdue, the Bank resorts to invoking of the guaranteeprovided. In serious cases of default, the Bank suspends disbursement of on-goingprojects and stops approval of new projects in the country concerned.SPECIAL ASSISTANCE PROGRAMME 73. What are the objectives of the

Special Assistance Programme of the Bank?The main objective of the Special Assistance Programme is to provide financialassistance to Muslim communities in non-55member countries to improve their socio-economic conditions and to provide reliefin the form of appropriate goods and services to member countries and Muslimcommunities in non-member countries afflicted by natural disasters and calamities.Special Assistance provided by the Bank is classified into five categories: a)

Educational, health and social projects for Muslim communities in non-membercountries; b) Assistance to refugees from member countries or Muslimcommunities to neighboring member countries; c) Assistance to member countriesafflicted by natural disasters; d) Support to centers of research in teaching Islamicculture or the Arabic language; e) Support to the Muslim scientific heritage. 74.Does IDB offer scholarships, and what are they? There are three scholarshipprogrammes funded and implemented by the IDB as a part of its overall effort in


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the development of human resources of its member countries and those of theMuslim communities in non-member countries, i.e., Scholarship Programme forMuslim Communities, M.Sc. Scholarship Programme and Merit ScholarshipProgramme. 75. What is the Scholarship Programme for MuslimCommunities?The Scholarship Programme for Muslim Communities was launched in 1404H(1983). The objective of the Programme is to assist Muslim communities in non-member countries of IDB to enable Muslim students to undertake undergraduatestudies in56medicine, engineering, agriculture and other related fields in their own countries orin the IDB member countries. The Programme is implemented jointly with theCounterpart Organizations through which interested candidates may submit theirapplications if they meet the necessary requirements (e.g., graduated from senior

high school at age 24 years or less with good grades in basic sciences and Englishor French language, etc.). The Programme covers tuition fees, stipend,books/clothing allowance, etc. all as interest-free loan to the students payable to alocal Trust after graduation and gainful employment. 76. What is M.ScScholarship Programme? The M.Sc. Scholarship Programme was launched in1419H (1998) with the objective to assist the IDB Least Developed MemberCountries (LDMCs) in the development of their human capital specially in scienceand technology that are both relevant and necessary for their development. TheProgramme offers scholarships in science, engineering, technology and medicalsciences, statistics and related fields, such as applied statistics, demography,operational research, econometrics, etc., fields of study relevant to the needs andnational development programmes of the IDB LDMCs. The Programme isimplemented jointly with the IDB Governor Offices in member countries throughwhich interested candidates may submit their applications if they meet thenecessary requirements. This scholarship is awarded for M.Sc. degree (in 2 years)in institutions in the IDB member countries. The scholarship covers the tuitionfees, living allowance, clothing & books allowances, computer allowance,conference allowance, medical coverage and a return air-ticket. It also coversresearch fees for those who do their studies by research. 77. What is the Merit

Scholarship Programme?The Merit Scholarship Programme was launched in 1411H (1991). TheProgramme is for advanced studies and/or research (3-year Ph.D. and 6-12 monthPost-Doctorate) in 16 applied science57and high technology areas deemed necessary for the development of the membercountries. The Programme is implemented jointly with the IDB Governor Offices


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in member countries through which interested candidates may submit theirapplications if they meet the necessary requirements. The Programme coversmonthly stipend, books/clothing allowance, tuition fees, thesis/scientific paperspreparation, medical insurance, air-ticket, etc. Scholars below the age of 35 forPh.D. study and below the age of 40 years for Post-Doctoral research are eligiblefor the Programme, if they have a good M.Sc. degree, "very good" grades (forPh.D. study) and Ph.D. (for Post-Doctoral research), 2-5 years of experience, somepublications and can meet other requirements. 78. How to obtain the applicationforms and whom to be submitted?For the Scholarship Programme for Muslim Communities from the CounterpartOrganizations in non-member countries and for the M.Sc. Scholarship Programmeand Merit Scholarship Programme from the Offices of the IDB Governors of themember countries and/or designated contact points. The application forms can alsobe downloaded from the IDB website www.isdb.org or can be requested by e-mail

([email protected]). The application forms for Scholarship Programme for MuslimCommunities are to be submitted to the Counterpart Organizations in non-membercountries, whereas, for M.Sc. Scholarship Programme and Merit ScholarshipProgramme are to be submitted to the Offices of the IDB Governors in membercountries and/or designated contact points.ISLAMIC RESEARCH AND TRAINING INSTITUTE

79. What are the objectives of the Islamic Research and Training Institute

(IRTI)?58IRTI was established in 1401H (1981) with the main objective of conducting basicand applied research in the fields of economics, finance and banking in conformitywith the principles ofshariah and to provide training and development ofprofessional personnel in the field of Islamic economics to meet the needs ofresearch in shariah-observing agencies. The Institute is also charged with theresponsibility of training personnel engaged in development activities in membercountries and establishing an information center to collect, systematize anddisseminate information in fields related to its activities. IRTI publishes its selectedresearch work and seminar proceedings in the three working languages of theBank. It also publishes a bi-annual journal on Islamic Economic Studies in English

and Arabic. A French version of the Islamic Economic Studies is also in the offing.80. How are participants in IRTIs training programs selected? IRTI has anannual training program which is open to development personnel in membercountries. The participation in these programmes is sought through the offices ofIDB Governors in the respective member countries. Information on these programscan be obtained by writing directly to the Institute. Those interested in participatingin the training programs are however required to send their nomination through the


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office of the respective IDB Governor. 81. What type of research is conductedby IRTI? How does IRTI assist Islamic scholars?IRTI conducts basic and applied research aimed at developing models and methodsfor the application ofshariah in the field of economics, finance and banking. TheInstitute studies ways and means of enhancing cooperation among membercountries. It also conducts research in crucial economic issues59facing member countries, particularly, in the field of economic development. Anyresearcher in the areas of Islamic economics, banking and finance may contactIRTI for assistance. The Institute may help by providing copies of its publicationsor with necessary references and bibliography. In some cases it may also considerlimited financial grant to complete the research. If a research work is directlyrelated to its research program and conforms to its academic standards, IRTI canpublish the work and give the author a suitable honorarium. If the topic is not

directly related to its current research priorities, but meets acceptable academicstandards, it may provide modest financial help to enable the author to publish theresearch work at his own, subject to evaluation and approval by the IRTIAcademic Committee. IRTI may also consider publishing it in its journal IslamicEconomic Studies, which is a refereed journal and published twice in a year. 82.

What is the Visiting Scholars Scheme? Under this scheme, the Institute invitesscholars of international repute to visit IRTI for a short duration ranging from 3months to a year to work on some specific research project related to IRTI researchpriorities. The scholars familiar with IRTIs research interests may write to theDirector, IRTI, with a specific research project and their C.V. to indicate theirintention to benefit from this scheme. 83. What is the IDB Prize? What are thecriteria for nomination?The Islamic Development Bank awards an international Prize every yearalternating between Islamic Economics and Islamic Banking. The Prize currentlyincludes a citation and a cash award of Islamic Dinars 30,000 (US$ 43,00060approximately). The objective of the Prize is to recognize, reward and encouragecreative efforts of outstanding merit in the fields of Islamic Economics andBanking. Nominations are sought every year through announcements made in the

international press and distributed directly through universities, researchinstitutions and government ministries in the IDB member countries. Individuals ororganizations may be nominated for the Prize, though self and posthumousnominations are not acceptable. The nomination procedure is given in theadvertisement as well as in the brochures, which are published and distributedevery year. Copy of it can be obtained from the Director of IRTI. A nominee forthe IDB Prize should have conducted research work to his credit or rendered


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services of outstanding merit, such as: a) Research work of outstanding merit in thefields of Islamic economics/Islamic banking as the case may be for the Prize forthat year. b) Mobilization of intellectual capabilities and/or creative efforts for thepromotion of Islamic economics/Islamic banking. c) Implementation of Islamiceconomics/Islamic banking programs designed to achieve the objectives of thePrize. The research works, on the basis of which nomination for the Prize is made,should have been published and received academic recognition. Works which havealready won any other international Prize are not considered for the Prize.More information about IRTIs various activities and other programs may beobtained either by writing to the Director, IRTI, or by visiting IRTIs home page at

http://www.irti.org.6184. What is the IDB Prize for Trade Promotion among OIC MemberCountries? What are the criteria for nomination? The Islamic Development

Bank awards another international award every year for the Promotion of Tradeamong OIC Member Countries. The Prize consists of a certificate with the IDBlogo and a monetary award of US$20,000. The objective of the Prize is torecognize, appreciate and encourage the activities and efforts contributing to thepromotion and increase of trade among member countries and also to celebrate theoutstanding success of individuals/institutions in the said activities. Nominationsare sought every year through announcements made in the international press anddistributed directly through universities, scientific centres, public institutions,commercial and financing agencies in the public and private sector, Islamicassociations and bodies and individuals all over the world. Candidates for the Prizemay be individuals, a group of individuals, an organization, an institution or agovernment agency although self and posthumous nominations are not acceptable.The nomination procedure is given in the advertisement as well as in thebrochures, which are published and distributed every year. Copy of it can beobtained from the Director of IRTI. The activities and efforts carried out by thecandidate for the Prize should be related to the promotion and enhancement oftrade among member countries. These activities and efforts must involve thefollowing: a) Contribution to the promotion of intra-OIC trade and the execution ofspecialized programmes to that end. b) Contribution to the creation of new

instruments and institutions to facilitate trade among member countries.62c) Establishment of vital alliances to expand trade among member countries. d)Finding innovative solutions to remove or alleviate the obstacles, and overcomethe risks of trade among member countries. e) Contribution to applied research thatmay strengthen trade among member countries. f) Efforts of institutions and bodiesthat contribute effectively and directly to the development of trade among member


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countries (such as ports, ports bodies and other public and private institutions).ISLAMIC FINANCIAL SERVICES INDUSTRY DEPARTMENT (IFS) 85.What is the area of concern of the IFS Department? IFS Department has beenestablished as the focal point for IDB's Group efforts to develop the IslamicFinancial Services Industry.86. What is IFS's mission? The mission of the IFS is to: 1. Assist in the creationof enabling environment for the Islamic Financial Industry. 2. Provide capacitybuilding through Technical Assistance for the support and development of currentand new Islamic financial institutions. 3. Strengthen existing Islamic financialinstitutions and support the establishment of new ones through equity participation.6387. What are the IFS Department organization structure? The IFS Departmentis headed by the Adviser-in-Charge and has three Divisions, which are: 1.Advisory and Support Services Division. 2. Awqaf Investment Division. 3. Equity

Investment Division. 88. What are the major functions of IFS Department? Thefollowing are the major functions, which are mandated to IFS Department: -Advisory and Support Services Division: Provide, in coordination with relevantother entities of the IDB Group and stakeholders, advisory, technical assistanceand capacity building services for creating an enabling environment for the IFSthereby facilitating its integration with the Islamic financial sector. - AwqafInvestment Division: Manage and develop the current portfolio of AwqafProperties Investment Fund (APIF) and ensure that its operations within itsregulations and policies, and carry out Awqaf investments through Shari'ahcompatible modes of financing. - Equity Investment Division: Manage and monitorperformance of current IDB portfolio of equity investments in IFIs and othersectors, and carry out equity investments in new IFIs and any other equityinvestments.RISK MANAGEMENT DEPARTMENT 89. What is the Risk Management

Governance in IDB?64The risk management and governance framework in the IDB is structured asfollows: - The Board of Governors (BOG) - The Board Executive Directors (BED)- The Audit Committee of the BED - The IDB Group Risk Management

Committee - The IDB Group Risk Management Department - The IDB GroupGeneral Counsel - The Assets Management Committee - The OperationsCommittee - The Trade and Investment Committee 90. What is the RiskManagement Strategy of the IDB? The Risk Management Strategy of the IDB isto embed risk management within the daily operations from strategy formulationthrough to business planning and processes. Through understanding risks,decision-makers will be better able to evaluate the impact of a particular decision


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or action on the achievement of the Banks objectives. Risk management strategydoes not focus upon risk avoidance but on the identification and management of anacceptable level of risk and is based on five pillars: - Risk Identification &Assessment - Risk Management Policies and Guidelines - Risk ManagementInformation System - Risk Management Monitoring & Reporting - RiskManagement Culture 91. What are the major risks faced by the IDB?65The major risks faced by the IDB: (a) credit risks (country risks constitute themajor risks faced by the IDB, (b) liquidity risks, (c) market risks, and (d)operational risks (compliance with Shari'ah principles is among the mostimportant operational risks).AL-QUDS INTIFADA FUND AND AL-AQSA FUND 92. What are Al-QudsIntifada Fund and Al-Aqsa Fund?Al-Quds Intifada Fund and Al-Aqsa Fund are2 funds that were established by the Arab leaders in the Summit held in Cairo,

Egypt in October 2000 to assert the comprehensive Arab support for thePalestinian people in face of continuous Israeli aggression. 93. What are theobjectives of theAl-Quds Intifada Fund andAl-Aqsa Fund and what is the

capital of each Fund?Al-Quds Intifada aims at providing assistance to thefamilies ofvictims and wounded persons and to provide health care and educationservices to their children. The objective of Al-Aqsa Fund is to finance projectsaimed at preserving the Arab and Islamic identity of the City of Jerusalem and toenable the Palestinian economy build its capacity, stands on its own against theIsraeli onslaught and gradually disengage from Israeli economy. The capitals ofAl-Quds Intifada Fund and Al-Aqsa Fund are US$ 200 million and US$ 800million respectively. 94. How the two Funds will be managed?The Arab finance ministers in their meeting held in Cairo on 23 November 2000entrusted the Islamic Development Bank (IDB) to manage the two Funds becauseof the IDB's involvement in the human development of Palestine over the past 25years. The ministers decided that management of the 2 Funds through the SupremeCouncil and the Administrative66Commission. The Supreme Council consists of finance ministers of participatingcountries and the Secretary General of the Arab League as permanent members,

and the Islamic Development Bank as an observer. The AdministrativeCommission is composed of representatives of the countries that pledged 3% of thedeclared capital of the two funds, a representative of countries pledged less than3%, in addition to representatives of the Palestinian Authority and the ArabLeague.ISLAMIC CORPORATION FOR THE INSURANCE OF INVESTMENT &

EXPORT CREDIT (ICIEC) 95. What is the purpose of the Islamic


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Corporation for the Insurance of Investment and Export Credit (ICIEC)? TheIslamic Corporation for the Insurance of Investment and Export Credit (ICIEC) is amember of the Islamic Development Bank Group, rated "AAA" and having itsheadquarters as an international organization in Jeddah, Kingdom of Saudi Arabia.ICIEC was established on 1st August 1994 as an autonomous internationalinstitution with a full legal capacity. So far, the number of shareholders in thecapital stock of ICIEC stands at 38. They include the Islamic Development Bankand 37 countries that are members of the Organization of the Islamic Conference(OIC). ICIEC was established to expand the scope of business transactions amongmember countries of the OIC, by providing export credit insurance to promoteincreasing the volume of exports from these member countries, as well asinsurance on foreign investment to facilitate the flow of foreign direct investmentinto these countries. ICIEC also provides re-insurance facilities to export creditagencies in member countries, by providing reinsurance and technical support.

67ICIEC has a capital of USD 250 million, 67% of which is subscribed by theIslamic Development Bank and the remainder by the member countries. ICIECwas assigned a rating of Aa3 by Moody's rating agency. Contact address: SalesDivision Tel. (+966 2) 6467597 Fax: (+966 2) 6443447

E-mail: [email protected]

Website: www.iciec.com 96. How can ICIEC help exporters in membercountries expand their exports? By giving export credit insurance against therisk of non-payment by buyers in foreign countries, ICIEC enables exporters to dobusiness with risky partners and markets. In addition, they can extend creditfacilities to foreign buyers and obtain financing for their export from banks andother financial institutions. ISLAMIC CORPORATION FOR THEDEVELOPMENT OF THE PRIVATE SECTOR (ICD) 97. What is the

Islamic Corporation for the Development of the Private Sector (ICD)? Howwas it established? When did it start its operations? The Islamic Corporationfor the Development of the Private Sector (ICD) is an affiliate of the IslamicDevelopment Bank (IsDB). It is an international multilateral financial institutioncreated for the development of its member countries through the provision offinancial services and technical support to the private sector.

The ICD was established as per the resolution of the IsDB Board of Governorsduring its 24th meeting held on 24-25 Rajab681420H (2-3 November 1999) in Jeddah, Kingdom of Saudi Arabia. The ICDstarted its operations on the same day its Inaugural General Assembly Meeting washeld, i.e. 6 Rabi II 1421H (8 July 2000). 98. What is the mission of the ICD?The mission of the ICD is to complement the role played by the Islamic


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Development Bank through the development and promotion of the private sector asa vehicle for economic growth and prosperity. 99. What is the vision of the ICD?The vision of the ICD is to become a premier Islamic multilateral financialinstitution for the development of the private sector. 100. What are the mainobjectives of the ICD? The ICD focuses on the following objectives:- Identifying opportunities in the private sector that could function as engines ofgrowth.- Providing a wide range of Sharia compatible financial products and services(equity participation, leasing, installment sale, etc).- Expanding access to Islamic capital markets by private companies in IDBmember countries.In achieving these objectives, ICD seeks to play a role in:- Mobilizing funds for private sector investment;69

- Acting as a catalyst in privatization programs and restructuring of companies inmember countries by providing advisory services to both public and privatesectors;- Encouraging the development of Islamic capital markets.101. Which countries are entitled to become members of the ICD? How manyhave joined the ICD? All member countries of IDB are entitled to becomemembers of the ICD. As of05 Safar 1430H (31 January 2009) fifty four (54)countries had signed the Articles of Agreement of the ICD; out of these 54countries, 45 had ratified the said Agreement and become member countries ofICD. 102. Are public and private companies entitled to become shareholdersof the ICD? For the time being, only public financial institutions whosemembership consists of one or more IDB member countries which possess most ofits shares or dominate the management can apply for membership in ICD. As of05Safar 1430H (31 January 2009), five (5) public financial institutions are membersof the ICD. However, as stipulated in the Articles of Agreement of the ICD, theGeneral Assembly may open membership of the ICD to private sector institutionson such terms and conditions as it may determine. 103. What is the capitalstructure of the ICD? The authorized capital of the ICD is US$ 1.0 billion ofwhich US$ 500 million is available for subscription. The structure of the

subscribed capital is as follows: IDB 50% Member Countries 30%70Financial Institutions of member countries 20% 104. How many shares must acountry subscribe to the ICDs share capital upon joining theCorporation? Upon joining the ICD, a country agrees to subscribe the number ofshares that was allocated to it as per the resolution of IDB Board of Governorsduring its 24th meeting held on 24-25 Rajab 1420H (2-3 November 1999) in


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Jeddah, Kingdom of Saudi Arabia. Moreover, the Articles of Agreement of ICDexplains the following about subscription: 1. The Bank and the founding membercountries shall initially subscribe the number of shares specified according to theagreement. 2. Each other founding member shall subscribe at least one hundredshares. 3. Shares initially subscribed by the founding members shall be issued atpar. 4. The conditions governing the subscription of shares to be issued after theinitial share subscription by the founding members which shall not have beensubscribed under related item defined in the Articles of Agreement, as well as thedates of payment thereof shall be determined by the General Assembly of the ICD.105. What is the organizational structure of ICD? The ICD has a GeneralAssembly representing its shareholders (countries and institutions), a Board ofDirectors, and an Executive Committee that consists of a selected number of Boardmembers and acts as a fast track decision making body.71

The President of the IDB is the ex-officio Chairman of the ICD Board of Directors.In October 2001, the Board of Directors appointed the first full-time CEO andGeneral Manager who conducts business under the general supervision of theChairman of the Board of Directors. The ICD has also a Shari'a Committee thatadvises on the Shari'a compliance of ICD products and services and an AdvisoryBoard that comprises renowned personalities well versed with the ICD's field ofactivities. 106. Does the ICD have the same Board of Directors as the IDB? No.Despite the fact that the IDB has 50% shareholding in the capital of the ICD, thetwo institutions have different Board of Directors. 107. What are the productsand services of the ICD? The ICD provides a wide variety of financial productsfrom which its clients can choose. This enables the ICD to offer a mix of financingthat is tailored to meet the needs of each project. The main products and servicesare:

Direct financingICD's direct financing is implemented through the subscription and purchase ofshares or the provision of term financing in productive and viable projects orcompanies operating in member countries. The fundamental rule is that ofprohibitions of acquiring shares of and transactions (investment and trading) in theshares of corporation that sometimes undertake transactions in Riba and other

prohibited things. As a policy, the ICD shall not be the single largest shareholder inany project nor shall it acquire a majority or controlling interest in the72share capital of a project or enterprises except when it is necessary to protect itsinterest.Corporate finance


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ICD' extends short-term corporate finance to cover working capital or raw materialrequirements of private sector entities throughMurabaha, Mudaraba or purchaseand lease-back for a tenor to or less than 24 months.

Lines of FinancingICD' extends lines of financing to commercial banks and national developmentfinancing institutions. These lines represent a means to contribute in a cost-effective manner in the financing of small and medium enterprises (SMEs). Themode of financing used within the framework of the lines is usually Murabaha.

Asset ManagementThe ICD acts as aMudarib and/or investment agent or arranger for funds createdby other institutional investors. It can create venture capital or sector funds forfinancing of projects or companies.Structured FinanceThe ICD structures, participates and manages syndications, underwrites and

manages share and securities issues, makes private placements and also carries outsecuritizations for its clients. ICD also structures Sukuk arrangements and workingas bookkeeper.73

Advisory ServicesThe ICD provides advisory services to governments, public and private companiesand Banks on economic, financial, institutional, and Shari'ah aspects relating tointer alia, creating a suitable environment for private sector development, projectfinancing, establishment of Islamic windows and branches, restructuring andrehabilitation of companies, privatization, securitization, Islamic finance anddevelopment of Islamic capital markets. 108. What are the operating principlesof ICD? The ICD operates along the following principles:- Provide financing on terms and conditions which take into account therequirements of the project/company to be financed, risks of the project and themarket terms and conditions of similar financing. - Seek representation on theBoard of the companies it invests in but without assuming responsibility formanaging any of these companies.- Maintain reasonable diversification of its investments.109. What are the modes of financing of the ICD? The ICD utilizes Shari'a

compatible modes of financing/financial products, in particular:- Equity: participating in the share capital DiminishingMusharaka, profit sharingwith declining participation, or trustee profit sharing (Mudaraba) or (FixedMusharaka).- Term Financing: leasing (Ijara), installment sale (Bai Ajel), istisna'a (financingof a construction and manufacturer order) and murabaha to purchase order (forcertain projects).


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74- Co-financing and/or participating in financing as leader of Islamic finance trench.110. What are the types of projects eligible for financing by the ICD? Theprojects eligible for financing by the ICD are mainly: Greenfield projects Thisrefers to investment/financing of new companies/projects, which will havedevelopmental impact on the economy as a whole, and fulfill the criteria oftechnical soundness and financial proficiency. Expansion projects This refers tofinancing/investment in plant expansion or capacity enhancement. Existingprojects under restructuring/rehabilitation As most countries are restructuringtheir industries to reduce dependence on a particular sector, the ICD will have theopportunity to finance companies that are being restructured or rehabilitated.Privatization operations The ICD will finance state-owned enterprises, which arebeing privatized as long as the remaining investment by the government in thecompany does not exceed 49% of voting stock. Moreover, it will structure and

finance projects implemented through concession agreements (BOT, BOOT, BOO,etc.) and also finance the modernization of privatized companies to enhance theirproductivity and competitiveness. 111. What are the criteria of eligibility forICD financing?75All productive or service activities that are legal, Shari'a compliant, financiallyprofitable, economically viable and contribute to the development of the membercountries are eligible for ICD financing as long as the public ownership of theproject does not exceed 49% of the voting stock. Further, all sectors are eligiblewith the exception of recreation and defense. 112. What types of collateral doesICD require? When financing a project, ICD may resort to a variety of securitiessuch as pledges, mortgages, bank guarantees, personal guarantees, corporateguarantees, promissory notes and assignment of receivables. The value of the totalsecurities for any project is to be determined on case by case basis. 113. What isthe Unit of account and operation? The ICD currency of account is the USdollar. However, ICD can also extend financing in the major convertiblecurrencies. 114. What is the project information required for ICD financing?When undertaking a preliminary evaluation of the possibility of investment orfinancing of a project, the ICD requires information on the project such as the

project sector, project objective, details on company and sponsor, ownershipstructure and management profile, project cost and financing requirements.Following a first expression of interest in the request, the basic information on theproject has to be complemented by a market study or a feasibility study and otherelements of information that may be deemed necessary to enable the ICD make thefinal decision. 115. Does the ICD contribute in the financing of micro-enterprises, small and medium scale enterprises?


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76The ICD does not contribute in the financing of micro-enterprises as this activity isbeing carried out by the Islamic Development Bank which extends also lines offinancing to National Development Financing Institutions (NDFIs) to financeSMEs. The ICD can, however, provide financing to SMEs through special fundsestablished on a regional or country basis in promising sectors such astelecommunications, technologies, etc, or through lines of finance. 116. Can theICD co-finance projects with non-Islamic financing institutions? The ICD canco-finance projects with non-Islamic financing institutions including conventionalbanks provided that the financing to be extended by the ICD itself is Shari'ahcompliant. Thus, two cases may arise in this respect, one possibility is that the ICDand the non-Islamic financing institutions undertake parallel co-financing wherethe component financed by the ICD is separate from those financed by the otherinstitutions even though they relate to the same project. Another possibility is that

the other institutions are willing to apply the same Sharia compliant mode offinancing as the ICD, in this case a joint co-financing may be envisaged and even afinancing syndication. 117.

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