THE ROLE OF IDB IN PROMOTING DEVELOPMENT ......Providing Resources . Fighting Poverty .Restoring...
Transcript of THE ROLE OF IDB IN PROMOTING DEVELOPMENT ......Providing Resources . Fighting Poverty .Restoring...
Providing Resources . Fighting Poverty .Restoring Dignity
THE ROLE OF IDB IN PROMOTING DEVELOPMENT THROUGH ISLAMIC FINANCE
WIFE – AFFRoundtable 2015
TOKYO, JAPAN
https://youtu.be/shxj0WOkBo8
Providing Resources
Fighting Poverty
Restoring Dignity
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Agenda
1. THE ISLAMIC FINANCIAL SERVICES INDUSTRY
2. IDB GROUP AND ISLAMIC FINANCE DEVELOPMENT
3. JAPAN & ISLAMIC FINANCE
4. POTENTIAL COOPERTAION BETWEEN IDB and JAPAN
The Pillars of Islamic Finance Internationalization
Growth
• US$ 2 trillion by Design
• growing 50% faster than Traditional Banking
Profitability
• Average ROE of 12% for top 20 Islamic
Customers
• –25% of the world’s population is Muslim
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Current Outlook
Asset Growth17%
ROA1.6%
Customers+70 million
Islamic Financial Service Industry - Overview
Countries92+
Institutions900+
Strategic Needs
Increased Focus on Financial Inclusion
Create Regional Champions
Increasing Cost Efficiency
Islamic Financial Service Industry - Overview
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S&P 500: $1.9 Trillion of Assets
Islamic Financial Service Industry - Overview
What’s required for growth of Islamic Finance ?
To achieve this goal, the top three priorities have to be
• Knowledge/Human Capital Capacity Building
• Regulatory Clarity
• Responsible Innovation
• Technology
• Integrative Thinking Framework
A Bird’s eye view of the Muslim Population Distribution
Prospective cross border Islamic Finance investment prospects and implications on the global economic
development
Opportunities for Islamic Financial Investments & SRI
Countries with presence in IF
Conceptual exploration
Economic Developments Islamic Financial Markets
Growth of Islamic funds in
developed markets will attract
investors from other
jurisdictions with existing
Islamic finance presence
Establishment of a Islamic
financial hub in a developed
market will encourage the
introduction of more innovative
products and a more developed
secondary market
Islamic finance will thus be a
critical factor for continued
global economic growth
FDINiche Presence
Engaging with regulator
Multiple economies have
announced clear
development plans that will
require long term financing
Some of these plans were
announced but are not yet
fully financed
Capital mobility will thus be
critically important to
achieve those plans
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The Islamic finance ecosystems across many countries is significantlyunderdeveloped, with only 12 countries having developed systems. Only 28countries have some of Islamic finance regulations, with only 4 havingcomprehensive regulations (Source: IFDI)
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Outstanding performance by the top 4 countries Malaysia, Bahrain, Oman and UAE
8 others aiming for the next level of Development
A majority of countries have undeveloped Islamic finance ecosystems
Global Islamic Finance Development
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Agenda
1. THE ISLAMIC FINANCIAL SERVICES INDUSTRY
2. IDB GROUP AND ISLAMIC FINANCE DEVELOPMENT
3. JAPAN & ISLAMIC FINANCE
4. POTENTIAL COOPERTAION BETWEEN IDB and JAPAN
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Islamic Development Bank (IDB)
Foster the economic development and
social progress of MCs and Muslim
communities.
International Islamic Trade Financing
Corporation (ITFC)Promote and
enhances intra-trade and trade cooperation through trade finance
and promotion programs
Islamic Corporation for the Development of the Private Sector
(ICD)Promote development
of private sector
development.
Islamic Research & Training Institute
(IRTI)Undertake applied &
basic research in Islamic Economics and
Finance.
Islamic Corporation for Insurance of Investment &
Export Credit (ICIEC)Provide Shariah-
compatible export credit insurance,
political risk insurance, technical assistance.
Sharia's Compliance
1975 1981 1994 1999 2008
The Islamic Development Bank Group
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The Islamic Development Bank
Est. 1975 Authorized
Capt. of ID 100 B & Subscribed
of ID 50 B
1,128 staff distributed across entities & regional offices / Gateways
A Unique Model of South-South
Cooperation
Global MDB: Membership 56 Countries
Spread over 4 Continents
4Regional offices
AFRICA 27
LATIN AMERICA
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ASIA26
EUROPE2
Rabat, Morroco(1993)
Dakar, Senegal(2006)
Kuala Lumpur, Malaysia( 1993)
Almaty, Kazakhstan( 1997)
5 new Country Gateway offices starting with Indonesia & Turkey
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Sector-wise
Aggregate IDB Group Financing (1975-2014)
Trade Financing, 54,853m
Project Financing, 47,308m
Special Assistance,
1,320m
Technical Assistance,
1,487m
Over the last 40-years, IDB Group has approved net financing of: ID 71.2 Billion (approx. US$ 103.3 billion)
Major Activities
Energy, 33%
Trade, 27%
Transportation, 11%
Agriculture, 8%
Water, Sanitation & Urban
Services, 6%
Industry & Mining, 5%
Education, 4%
Health, 3% Finance, 1%
Other, 1%
* Special Assistance primarily includes social sector projects e.g. relief operations, scholarships etc.
Good governance
Infrastructure for prosperity
Inclusiveness of muslim communities
Poverty alleviation
Crisis support
Promoting education
• “Promote comprehensive human development, with a focus on the priority areas of alleviating poverty, improving health, promoting education, improving governance and prospering the people.”
Mission
Vision 1440H
Improving health
By the year 1440H (2020G) IDB Group shall have become a world class development bank inspired by Islamic principles, that has helped significantly transform the landscape of comprehensive human development in the Muslim world and helped restore its dignity.
Member country prospective needs
Strategic alignment of the 10YS: IDBG Mission and Vision aligned to MCs' needs and challenges
The Mission and the Vision 1440H are validity with the MC current and prospective needs
IDBG missionPriorities addressed
Vision strategic thrustsPriorities addressed
MC needsPriorities identified
Alleviate Poverty
Promote Health
Universalize Education
Prosper the People
Empower the Sisters of Islam
Facilitate integration of IDBG MC Economies
Improve the Image of Muslim World
Expand the IF Industry
Prospering people
Alleviating poverty
Promoting education
Improving health
Improving governance
Food and water security
Energy security and renewable energy
Private sector development
Education
Social inequalities
Women empowerment
Employment, specially in the youth population
Health
IF Sector as a mean to develop the country
Infrastructure across sectors
Source: BCG, IDB mission statement, MC megatrends, MC stakeholders consultations
CONNECTIVITYA Strong Catalyst for
South-South Collaboration
ISLAMIC FINANCE SECTOR GROWTHA Leading Reference in
Islamic Finance
INCLUSIVENESSBecome a Preferred Partner
for MCs1 Social and Economic Development
Strategic objectives: The Vision translates into strategic objectives that will drive the core activities of IDBG
Addresses the needs of the poorer
and marginalized communities who
represent a significant
portion of the IDBG's stakeholders
Promotes cooperation among its MCs to enhance
trade, investment, knowledge, and capacity
development as part of its mandate
Facilitates the development of the global Islamic Financial
industry as a part of its unique mandate
1. Member Countries YSource: IDB; BCG
Strategic objectives
Rationale
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Underpins the achievement of the strategic pillars and strengthens the institutional and social capabilities of the member countries
Projects with infrastructure
component across sectors (Agriculture, education,
health, transport, etc.)
Non- sovereign related activities conducted with the purpose to
develop the private sector1
Activities with the primary purpose to develop the
Islamic finance sector
Interventions with a special focus on the
neediest populations3
Activities conducted with the purpose to enhance trade
and investments between MCs
Strategic pillars: The five pillars (+1 CC) outline the core focus areas over the next 10 years will be the basis of IDBG Core
Competencies – What IDBG is good/best at …
1. PPPs are included as part of Infrastructure 2. Member countries and muslim communities in non-member countries 3. Excludes infrastructure financing Source: BCG
Economic and social
infrastructure
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Private sector development
2Islamic
finance sector development
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Social development
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Cooperation between MCs2
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CapacityDevelopment
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Establish single source of capacity development
The Cross Cutting Areas: Capacity development is integrated in each strategic pillar and coordinated across IDBG
Training, education and other 'softer'
elements complimenting
the 'hard' physical build
out
Advising and training financial
institutions through which
IDBG will channel the
financing to the private sector
Assisting MCs in standard setting
and harmonization,
advisory of legislative and
regulatory frameworks
Building capacity for
implementation channels (NGOs,
governments) through which
IDBG offers support
Interconnector for MC'scapacity
development & build capacity in
regional integration and
cooperation organizations
Centrally Coordinated and reported across different pillars
Economic and social
infrastructure
Private sector development
Islamic finance sector development
Social development
Cooperation between MCs2
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Strategic objectives
Strategic pillars
Overarching Vision
Cooperation between Member Countries
Economic and social infrastructure
Private Sector Development
Inclusive Social Development
Islamic Financial Sector
Development
Guiding Principles
Manage for ResultResource
Mobilization
Link Strategy to Budget & Resources
Group Synergy & Governance
Selectivity
Financial SustainabilityBuild Capabilities in Strategic
Pillars
INCLUSIVENESS:Become a preferred partner for MCs
economic and social development
IFS GROWTH:The leading reference in Islamic
Finance
CONNECTIVITY:A strong catalyst
For South-South Cooperation
IDBG Vision
Strategy Implications Financial Implications Operational Implications Organizational Implications
Communication & Change Mgmt
Strategy Focus
Ops. Effectiveness & Org. EfficiencyFinance
Internal and External Communication & Change Management
Capacity Development
IDBG 10 Year Strategy Framework
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Sector Results
IDBG Performance
Overarching Goals
20% increase in strategic alliances and MOUs with
Multilateral/IIIs, and No. of Master Plans developed
Islamic Financial Sector Development in 10 Years
40 MCs shall have the
appropriate eco-system for Islamic Finance
4 MCs have 100% of
their population have access to financial services
12 countries shall have
integrated domestic IFIs with international system
20% increase in IFIs with IDBG Equity
participation
20% increase in contribution to the global
dialogue on IF
25%of global population regardless of their
status and wealth, should have access to Islamic financial services
Are aware and familiar with… Can afford to use…Can reach physically/virtually...
Islamic Finance Industry to Reach 7.5 Trillion
Develop A synergy strategy between IDBG Department and Entities
1-2 years 3-5 years >5 years
Enablement• Enabling regulations and
prudential standards – IFSD and IFSB
• Enabling regulations for Islamic instruments – IIFM / IILM / IFSD
• Funding for poor / disadvantaged – WWF / APIF / IFSD
• IRTI – Capacity building and Public awareness programs
• Government and CB
Performance• Equity investments – IDBi• Adoption of compatible
accounting and auditing standards – AAOIFI, CIBAFI, IFSB. IFSD
• Highest levels of corporate governance and transparency –AAOIFI, CIBAFI, IFSD
• ITFC, ICIEC, ICD and FPDC• IRTI – Capacity building and
Public awareness programs
Reach• SME Funding – ICD• Engagement on global forums –
IDBG• New Product Innovations and
Social Impact – IDBG, CIBAFI and FPDC
• University programs in Islamic finance – IRTI
• Research and publication - IRTI
Enablers
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Islamic Financial Sector Development in 10 Years
Contribute to the Islamic Finance Industry Development/ Efficiency and stability
Contribute to the economy Development (Public & Private Sectors)
(Islamic Finance Industry)
IFSD FPDC
IDBi Treasury
WWF/APIF
Training & Research +Public Dissemination+ Consultancy/Services
ICDITFC ICIECIRTI
OC
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Each member country confronts three broad types of issues in the development of Islamic finance
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2. PERFORMANCE
Isla
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Fin
anci
al In
du
stry
So
ph
isti
cati
on
TIME - Stage of Industry Growth
1. ENABLEMENT
3. REACH
Member countries need to have the appropriate eco-system to facilitate transactions and establishment of institutions
Islamic Financial Institutions need to perform according to the highest of standards and be considered as the leading providers of financial services
All segments of the population that require Islamic financial services have access to it, regardless of their ability and wealth
IDB Islamic Finance Development Strategy
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By supporting the development of Islamic finance, microfinance andAwqaf sectors, the IDB is working towards its objective of providingaccess to financial services for all Muslims
Ultra High Net Worth Individuals
Islamic Financial
Institutions
High Net Worth Individuals
Affluent Individuals
Upper Mass
Mid Mass
Lower Mass
Economically DisadvantagedAwqaf
Institutions
Microfinance & Microtakaful
Financial Services Ecosystem
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Regulatory & Supervisory
Agencies
Islamic Infrastructure Institutions
Multilateral / Bilateral
Institutions & Bodies
Muslim Consumers
Islamic Finance Development Impact
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Islamic Infrastructure Institutions
Global
Country
Institutional
Legal, Regulatory & Supervisory Framework
Research, Training Capacity Building
New Islamic Banks &
Windows
Conversion of Conventional
Banks
Advisory and Product
Development
Creating Sound International Regulatory
Environment and Industry Best Practices
Enabling Robust Environment
Supporting the growth of the Industry
Islamic Finance Development Impact
Microfinance,Awqaf (Trust),
Zakat
Strategic Partnerships
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Agenda
1. THE ISLAMIC FINANCIAL SERVICES INDUSTRY
2. IDB GROUP AND ISLAMIC FINANCE DEVELOPMENT
3. JAPAN & ISLAMIC FINANCE
4. POTENTIAL COOPERTAION BETWEEN IDB and JAPAN
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Agenda
1. THE ISLAMIC FINANCIAL SERVICES INDUSTRY
2. THE ISLAMIC DEVELOPMENT BANK (IDB) GROUP
3. JAPAN & ISLAMIC FINANCE
4. POTENTIAL COOPERTAION BETWEEN IDB and JAPAN
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10Y Strategy Implementation
Recommendations
Thank you