Providing Resources . Fighting Poverty .Restoring Dignity

THE ROLE OF IDB IN
PROMOTING
DEVELOPMENT THROUGH
ISLAMIC FINANCE
WIFE – AFF
Roundtable 2015
TOKYO, JAPANhttps://youtu.be/shxj0WOkBo8

Providing ResourcesFighting Poverty
Restoring Dignity

Agenda1. THE ISLAMIC FINANCIAL SERVICES INDUSTRY

2. IDB GROUP AND ISLAMIC FINANCE DEVELOPMENT

3. JAPAN & ISLAMIC FINANCE

4. POTENTIAL COOPERTAION BETWEEN IDB and JAPAN3

Islamic Financial Service Industry - Overview
The Pillars of Islamic Finance Internationalization
1Growth• US$ 2 trillion
by Design• growing 50%
faster than
Traditional
Banking

23Profitability• Average ROEof 12% for
top 20 Islamic

CurrentOutlook

Asset Growth Countries
17%92+

StrategicNeeds

Increased Focus on
Financial Inclusion

ROA
1.6%

Customers

25% of theworld’s
population isMuslim• –Institutions
900+

Increasing Cost
Efficiency

Customers+70 million
Create RegionalChampions

Islamic Financial Service Industry - Overview

14S&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

Economic DevelopmentsIslamic Financial Markets

Multiple economies have

developed markets will attract

announced clear

investors from otherdevelopment plans that will

jurisdictions with existing

require long term financing

Islamic finance presenceSome of these plans wereEstablishment of a Islamic
financial hub in a developed

announced but are not yetGrowth of Islamic funds inmarket will encourage thefully financed

introduction of more innovative

Capital mobility will thus be

products and a more developed
secondary market

critically important toachieve those plans

Islamic finance will thus be a
critical factor for continued
global economic growth

Countries with presence in IF
FDI
Niche Presence
Engaging with regulator
Conceptual exploration

Opportunities for Islamic Financial
Investments & SRI

9080

5040300Malaysia
BahrainOman
United Arab Emirates
Qatar
KuwaitJordanPakistan
Saudi Arabia
Brunei Darussalam
Sudan
Indonesia
Bangladesh
Egypt
Sri Lanka
Syria
Lebanon
Iran
Palestinian territories
United Kingdom
Tunisia
TurkeyMaldives
Yemen
Nigeria
Mauritius
Singapore
DjiboutiSouth Africa
Luxembourg
Kazakhstan
MoroccoGambiaLibya
Kyrgyzstan
Tajikistan
SenegalAustralia
Bosnia and…
Albania
Italy
Philippines
Iraq
Azerbaijan
Somalia
Kenya
Ghana
Afghanistan
Mauritania
Mozambique
Algeria
India
IrelandUnited States
Comoros
Guinea-Bissau
GuyanaNiger
Suriname
UgandaBenin
Tanzania
Sierra Leone
ChadGabon
TogoGuinea
Mali
Burkina Faso
CameroonJapan
CyprusBelgium
Botswana
ThailandHong Kong
Eithiopia
CanadaUzbekistan
Switzerland
Netherlands
Turkmenistan
FranceAustria
Russian Federation
Germany
New ZealandSouth Korea
Trinidad and Tobago
Denmark
Ivory Coast
China

Global Islamic Finance Development

The Islamic finance ecosystems across many countries is significantly
underdeveloped, with only 12 countries having developed systems. Only 28
countries have some of Islamic finance regulations, with only 4 having
comprehensive regulations (Source: IFDI)

100

Outstanding performance bythe top 4 countries Malaysia,Bahrain, Oman and UAE

7060

8 others aiming for thenext level of Development
A majority of countries
have undeveloped
Islamic financeecosystems

201010Agenda

1. THE ISLAMIC FINANCIAL SERVICES INDUSTRY

2. IDB GROUP AND ISLAMIC FINANCE DEVELOPMENT

3. JAPAN & ISLAMIC FINANCE

4. POTENTIAL COOPERTAION BETWEEN IDB and JAPAN11

The Islamic Development Bank Group
1975

1981

1994

1999

2008

Islamic Development
Bank (IDB)

Islamic Research &Training Institute(IRTI)

Islamic Corporation
for Insurance ofInvestment &Export Credit (ICIEC)

Islamic Corporation
for the Developmentof the Private Sector(ICD)

International Islamic
Trade Financing
Corporation (ITFC)

Provide Shariahcompatible export
credit insurance,
political risk insurance,technical assistance.

Promote developmentof private sector
development.

Foster the economic
development andsocial progress of MCs
and Muslimcommunities.

Undertake applied &basic research inIslamic Economics andFinance.

Promote andenhances intra-trade
and trade cooperation
through trade financeand promotion
programs

Sharia's Compliance

12

The Islamic Development Bank
Est. 1975
Authorized
Capt. of ID 100
B & Subscribedof ID 50 B

1,128 staff
distributed acrossentities & regional
offices / Gateways

A Unique Modelof South-South
Cooperation

2Rabat, Morroco(1993)EUROPE

Global MDB:
Membership56 Countries
Spread over 4Continents

Almaty, Kazakhstan( 1997)LATIN AMERICA

26
14
Regional
officesASIA

Dakar, Senegal(2006)

Kuala Lumpur, Malaysia( 1993)27

AFRICA

5 new Country Gateway offices starting with Indonesia & Turkey
13Aggregate IDB Group Financing (1975-2014)
Over the last 40-years, IDB Group has approved net financing of:
ID 71.2 Billion (approx. US$ 103.3 billion)

Major Activities

ProjectFinancing,
47,308m

SpecialAssistance,
1,320mSector-wise
Industry &Mining, 5%

TechnicalAssistance,
1,487mHealth, 3% Finance, 1%

Education,
Water, Sanitation
4%& Urban
Services, 6%

Other, 1%
Energy, 33%

Agriculture,
8%

Trade
Financing,
54,853m

Transportation,
11%

Trade, 27%* Special Assistance primarily includes social sector projects e.g. relief operations,scholarships etc.

14Strategic alignment of the 10YS:IDBG Mission and Vision aligned to MCs' needs and challenges
Mission•“Promote comprehensive humandevelopment, with a focus on thepriority areas of alleviating poverty,improving health, promoting
education, improving governance andprospering the people.”

Member country prospective needs
Improving health

Promoting education

Crisis support

Vision 1440H
By the year 1440H (2020G) IDB Group shallhave become a world class developmentbank inspired by Islamic principles, thathas helped significantly transform thelandscape of comprehensive humandevelopment in the Muslim world andhelped restore its dignity.

Poverty alleviation
Inclusiveness of muslim
communities
Infrastructure for prosperity

Good governance

The Mission and the Vision 1440H are validity with the MC current andprospective needs
IDBG mission
Priorities addressed

Alleviating poverty

Vision strategic thrusts
Priorities addressed

MC needs
Priorities identified

Alleviate Poverty

Food and water security

Empower the Sisters of Islam

Social inequalities
Infrastructure across sectors

Prospering people

Prosper the People
Improve the Image of Muslim
WorldPromoting education

Improving healthFacilitate integration of IDBGMC Economies
Universalize Education

Employment, specially in theyouth population
Energy security andrenewable energy
Women empowerment
Private sector development
Education

Promote Health
Improving governance

Expand the IF IndustrySource: BCG, IDB mission statement, MC megatrends, MC stakeholders consultations

HealthIF Sector as a mean to develop
the country

Strategic objectives: The Vision translates into strategic objectives that will
drive the core activities of IDBG

Strategicobjectives

Rationale

INCLUSIVENESS
Become a Preferred Partner
for MCs1 Social andEconomic Development

A Strong Catalyst forSouth-South Collaboration

Addresses theneeds of the poorer

Promotes cooperationand marginalized
communities who
represent a significant
portion of the IDBG'sstakeholders

1. Member Countries Y
Source: IDB; BCGCONNECTIVITY

among its MCs to enhance
trade, investment,knowledge, and capacity
development as part of its

mandateISLAMIC FINANCESECTOR GROWTH
A Leading Reference inIslamic Finance

Facilitates thedevelopment of the
global Islamic Financial
industry as a part of its

unique mandate

17

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 …
12

3

4

5

Economicand social
infrastructure

Private sector
development

Islamic
finance sector
developmentSocialdevelopment

Cooperation
between MCs2

Non- sovereign
related activities
conducted withthe purpose todevelop theprivate sector1

Activities withthe primary
purpose todevelop theIslamic financesectorInterventions
with a special
focus on theneediest
populations3

Activities
conducted withthe purpose toenhance tradeand investments
between MCs

Projects with
infrastructurecomponent
across sectors(Agriculture,education,health,transport, etc.)

Capacity
Development

Underpins the achievement of the strategic pillars and strengthens theinstitutional and social capabilities of the member countries

1. PPPs are included as part of Infrastructure 2. Member countries and muslim communities in non-member countries 3. Excludes infrastructure financing
Source: BCG18

The Cross Cutting Areas: Capacity development is integrated ineach strategic pillar and coordinated across IDBG
Establish single source of
capacity development

Economicand social
infrastructure
Training,education andother 'softer'
elements
complimenting
the 'hard'
physical buildout

Private sector
development
Advising andtraining
financial
institutions
through which
IDBG willchannel thefinancing to theprivate sector

Islamic
finance sectordevelopment

Socialdevelopment

Cooperation
between MCs2

Assisting MCs instandard settingandharmonization,
advisory oflegislative andregulatory
frameworks

Building capacityfor
implementation
channels (NGOs,governments)
through which
IDBG offers
supportInterconnector
for MC's
capacity
development &build capacity inregional
integration andcooperation
organizations

Centrally Coordinated and reported across different pillars
19

IDBG 10 Year Strategy Framework
Strategy Focus

IDBG Vision

Overarching Vision

Strategic
objectives

Strategic pillars

INCLUSIVENESS:CONNECTIVITY:IFS GROWTH:

Become a preferred partner for MCs
economic and social development

A strong catalyst
For South-South Cooperation

The leading reference in Islamic
Finance

Economic and social
infrastructure

Private Sector
Development

Inclusive Social
Development

Islamic
Financial Sector
Development

Cooperation between
Member Countries

Capacity Development

Resource
Mobilization

Selectivity

Manage for Result

Guiding Principles
Group Synergy& Governance

Financial Sustainability

Strategy Implications

Financial Implications

FinanceCommunication & Change
Mgmt

Build Capabilities in Strategic
Pillars

Operational Implications

Link Strategy to Budget &Resources

Organizational Implications

Ops. Effectiveness & Org. Efficiency
Internal and External Communication & Change Management20Islamic Financial Sector Development in 10 Years
Are aware and familiar with…
Can afford to use…
Can reach physically/virtually...

25%
Overarching
Goals
SectorResults

IDBG
Performanceof global population regardless of theirstatus and wealth, should have access to Islamic financial services

Islamic Finance Industry to Reach 7.5 Trillion

40 MCs shall have the 12 countries shall have 4 MCs have 100% of
their population haveappropriate eco-system integrated domestic IFIs
with international system access to financial services
for Islamic Finance

20% increase in strategic
alliances and MOUs withMultilateral/IIIs, and No. ofMaster Plans developed

20% increase in IFIs
with IDBG Equity
participation

20% increase incontribution to the global
dialogue on IF

Develop A synergy strategy between IDBG Department and Entities

Enablers

Performance
Enablement• Equity investments – IDBi
• Enabling regulations andprudential standards – IFSD and • Adoption of compatible
accounting and auditing
IFSB
standards – AAOIFI, CIBAFI,• Enabling regulations for Islamic
IFSB. IFSD
instruments – IIFM / IILM / IFSD
• Highest levels of corporate• Funding for poor /governance and transparency –disadvantaged – WWF / APIF /AAOIFI, CIBAFI, IFSD
IFSD
• ITFC, ICIEC, ICD and FPDC• IRTI – Capacity building and• IRTI – Capacity building andPublic awareness programs
Public awareness programs• Government and CB

1-2 years

3-5 years

Reach• SME Funding – ICD• Engagement on global forums –IDBG• New Product Innovations andSocial Impact – IDBG, CIBAFI andFPDC• University programs in Islamicfinance – IRTI
• Research and publication - IRTI>5 years

21Islamic Financial Sector Development in 10 Years(Islamic Finance Industry)
IFSD

FPDC

WWF/APIF
Contribute to the Islamic Finance Industry
Development/ Efficiency and stability

IDBiTreasury

Training &Research+
PublicDissemination+Consultancy/Services

Contribute to the economy Development(Public & Private Sectors)

ITFC

ICD

ICIEC

OC

IRTI

22

IDB Islamic Finance Development Strategy
Each member country confronts three broad types of issues in thedevelopment of Islamic finance

Islamic Financial Industry Sophistication

3. REACH

Islamic FinancialInstitutions need toperform according to thehighest of standards andbe considered as theleading providers offinancial services
Member countries needto have the appropriate
eco-system to facilitatetransactions andestablishment ofinstitutions

2. PERFORMANCE

All segments of thepopulation that require
Islamic financial services
have access to it,
regardless of their abilityand wealth

1. ENABLEMENTTIME - Stage of Industry Growth2323

Islamic Finance Development Impact
By supporting the development of Islamic finance, microfinance andAwqaf sectors, the IDB is working towards its objective of providing
access to financial services for all Muslims
Muslim Consumers

Financial Services Ecosystem

Ultra High Net Worth Individuals
Regulatory &Supervisory
Agencies

High Net Worth Individuals
Affluent Individuals

Islamic
Financial
Institutions
Islamic
InfrastructureInstitutions

Upper Mass
Mid Mass
Lower Mass

Microfinance &Microtakaful

Economically Disadvantaged

Awqaf
Institutions

Multilateral /Bilateral
Institutions &Bodies

242

Islamic Finance Development Impact
Creating Sound
International Regulatory
Environment and Industry
Best Practices

GlobalIslamic Infrastructure Institutions

Country

Institutional

Legal, Regulatory & Supervisory
Framework

New Islamic
Banks &Windows

Conversion ofConventional
Banks

Research, TrainingCapacity Building

Advisory andProductDevelopment

Microfinance,
Awqaf (Trust),Zakat

Enabling Robust
Environment

Supporting the growth ofthe Industry

Strategic Partnerships

25

Agenda1. THE ISLAMIC FINANCIAL SERVICES INDUSTRY

2. IDB GROUP AND ISLAMIC FINANCE DEVELOPMENT

3. JAPAN & ISLAMIC FINANCE

4. POTENTIAL COOPERTAION BETWEEN IDB and JAPAN27

Agenda1. THE ISLAMIC FINANCIAL SERVICES INDUSTRY

2. THE ISLAMIC DEVELOPMENT BANK (IDB) GROUP

3. JAPAN & ISLAMIC FINANCE

4. POTENTIAL COOPERTAION BETWEEN IDB and JAPAN31

10Y Strategy
ImplementationRecommendations

Thank you33