Good evening, ladies and gentlemen. I’d like to express my thanks to HE Dr. Ahmed Mohamed Ali – President of Islamic Development Bank group and Mr. Bill Gates – Co-Chair of Bill and Melinda Gates Foundation for giving me the opportunity address you this evening and for their insightful remarks.
I enjoyed this informative presentation and I would like to congratulate both institutions on this ideal concept and pragmatic implementation. The Live and Livelihood Fund offers an innovative blend of knowledge and financial resources to deliver measurable results on helping the poor and bettering lives.
This novel approach is opening new venues to address development challenges building on core principles of Islamic finance calling for solidarity, governance and redistribution of wealth and resources to eradicate poverty, strengthen social stability and deepen equity.
Today, these are combined with a strong international partnership with the Bill and Melinda Gates Foundation that brings the best global solutions together with an innovative platform that leverage financial resources to effectively achieve the development objectives through investing in human capital base and bettering in poor’s’ access to health. This is a powerful proposition that merits scale-up and replication.
In this context, I would like to emphasize that - if properly adhered to its core principles - Islamic finance can play a significant role in intermediation of financial resources towards poverty eradication and achieving the new Sustainable Development Goals on many promising fronts;
For example; Greater reliance on the principles underlying Islamic finance could improve financial sector stability and foster its resilience to shocks. The principles of risk-sharing and linking finance to the real economy would limit the amount of debt that can be created. Furthermore, the prohibition of using toxic financial instruments for speculation would produce a relatively resilient and stable financial system.
The business model of Islamic financial instruments is equipped to be more inclusive and can provide Shariah compliant microfinance more efficiently relative to many existing conventional institutions. This is an area that has a large potential especially in countries with high levels of poverty.
Islamic financial services can reduce vulnerability of the poor and strengthen their ability to mitigate risks through Shariah compliant mutual guarantees (takaful) that embrace risk sharing and circumvent the vulnerability of conventional risk shifting embedded in conventional insurance.
Global financial markets are voting with confidence to Shariah compliant instruments to source funds for infrastructure financing by both the public and private sectors. Different varieties of Sukuk instruments are now providing financing for infrastructure, power and utilities and transport. The potential for Sukuk has been extended to include advanced economies and many G20 members.
On another front, more efforts are needed to conceptualize and adopt broader goals (maqasid) of Islamic law for proper adoption of the broader environmental and social perspectives at the operational level. This would require proper endorsement of the environmental and social goals as essential components of Shariah compliant business model.
Ladies and Gentlemen,
The World Bank Group has realized the potential for Islamic finance to serve its client countries and was able to tap Islamic financial instruments to help create new jobs for the rural poor in member countries through mobilizing finance for micro and small businesses.
Through Shariah compliant Kafalah instrument we were recently able to leverage USD 1 billion private resources towards infrastructure and other development projects that are critical for accelerating sustainable and inclusive growth in East Africa and East Asia.
Six months ago, the World Bank tapped the global markets to mobilize Shariah compliant resources for health projects. We were able to raise US$500 million through a Sukuk issuance that was dedicated to the International Finance Facility for Immunization – (International organization established in 2006 to frontload funding for immunization in the poorest countries of the world).
These are few examples of solutions that Islamic finance can offer in the fight against poverty. There are many elements in the Islamic financial system as Zakah and Awqaf that can also help resolve problems of targeting, outreach and sustainability. This is in addition to serving as complementary vehicles to support poverty alleviation efforts and IsDB is playing a critical role on that front.
Thanks to HE Dr. Ahmad Ali’s and Dr. Jim Kim’s leadership; The World Bank and Islamic Development Bank are now working closely on many fronts in areas of financial development and inclusive and sustainable growth. We are complementing today’s initiative and joining forces to help member countries of both organizations develop joint strategies for improving education and training systems to boost the employability of youth and support regional efforts to improve the quality of education.
This joint initiative builds on three key pillars; the first, Education for Lifelong Learning, the second is Education for Employment, and the third pillar is learning for a competitive economy. This is another innovative venue to put a job-oriented education on the highest priorities in our member countries and bring energy of the young people and the dynamism of the private sector to build a brighter social and economic future and achieve the new SDGs.
The World Bank Group and Islamic Development Bank are in agreement that the complementarity of investments in health - building on today’s initiatives - and education – as reflected in joint World Bank – IsDB initiative –is vital to strengthen human capital and achieve sustainable and long term development.
Our institutions are having dedicated working groups to deepen collaboration on the technical level. This includes a working group on developing a comprehensive framework for measuring development impact and results within our member countries.
As you are aware, resources needed to achieve the SDGs will surpass current development flows, an ambitious plan for financing is needed, and there is a need to tap innovative venues to achieve these goals and Islamic finance is qualified to play a critical role on that front.
Only through partnerships, we can – and with the involvement of the private sector - make a transformative impact on key sectors such as education and infrastructure, and move "from billions to trillions".
This discussion is very relevant at this time, just a few weeks ahead of the FfD Conference in Addis in that it presents a real-case example of the kind of partnerships that allow for a multiplication of funding --and impact -- in key social sectors. The successful implementation of the SDGs hinges on ambitious agreements on policies, financing, and capacity building at the 3rd International Conference on Financing for Development, to be held in Addis Ababa, July 13-16, 2015.
The use of grants from the Gates Foundation to leverage 3-4 times more resources from the IsDB towards funding improvements in the Health Sector in developing countries is a powerful proposition that merits scale-up and replication.
Many MICs are reluctant to borrow from IFIs for the social sectors given their lending rates. Mechanisms which blend grants and loans and ultimately reduce the cost of borrowing for clients will help the IsDB group to substantially increase its investments in health and to make an impact. Without the Gates' grant funding, hundreds of millions of dollars LESS would have gone to a sector as important as health.
The partnership between the World Bank and the Islamic Development Bank has hitherto focused on parallel financing infrastructure operations. We went from practically no cofinancing to achieving substantial (around $5billion) of cofinancing with the group of Arab Funds over the last few years. An important share of such cofinancing was with the IsDB.
Our challenge is not only to maintain and expand such cofinancing, but also to broaden our sector coverage beyond infrastructure to sectors where our clients need us too, such as in education, which have a direct impact on jobs especially for youth. Our new partnership therefore aspires to achieve a similar aim -- enhance our collective impact on education by leveraging donor grants with our loans.
We are in discussions with potential grant-giving partners such as the EU to achieve this. Only through such schemes and eventually with the involvement of the private sector will we --as development institutions-- be able to make a transformative impact on key sectors such as education, and move “from billions to trillions.”
Thank you very much.