Islamic Finance And Impact Investing For Sustainable Development
Fatma Çınar, Islamic Finance Portfolio Lead of United Nations Development Programme, Istanbul International Center for Private Sector in Development (UNDP IICPSD),shared her views on Islamic finance in the context of sustainable development, the 11th International Sara- jevo Business Forum, and the Massive Open Online Course (MOOC) project for Islamic finance education for Katılım Finans.
How can Islamic finance and impact investing contribute to sustainable development?
As a result of the COVID-19 pandemic, government financing to tackle today’s global challenges of poverty, social inequality and environmental degradation has
become more pressing than ever before. Before the COVID-19 pandemic, developing countries were facing a USD 2.5 trillion annual financing gap for achieving the Sustainable Development Goals (SDGs) by 2030, but this increased to USD 4.5 trillion by the pandemic . Meeting this growing SDG financing gap requires the effective use of available resources and the exploration of innovative sources of financing.
Islamic finance is an important non-traditional source of financing the SDGs, with global assets of USD 3.4 trillion in 2020 representing a 14% year-on-year growth rate . Total Islamic finance assets are expected to grow 8% a year hereafter, reaching USD 4.94 trillion by 2025. This growth has been driven by expanded reach in Asia and the Middle East, but Islamic finance also retains high growth potential in South America and Europe.
Impact investing is another valuable source of funding for the SDGs, with USD 2.3 trillion invested for impact in 2020 . As a key part of the Addis Ababa Action Agenda, impact investing is recognized by the Group of Eight (G8), the Organisation for Economic Co-operation and Development (OECD) and the European Union (EU) as an alternative instrument for development financing.
The principles of Islamic finance and impact investing are deeply compatible and both have the potential to contribute to the 2030 Agenda in several ways. Both industries promote value-based investments where investors aim to “do good and avoid harm to others.” Additionally, both Islamic financiers and impact investors seek to generate positive social and environmental impact alongside financial return, thereby harmonizing business and social inter- ests. Finally, both sectors contribute to building inclu- sive financial systems, which integrate those otherwise excluded from the formal financial sector.
How has UNDP IICPSD’s engaged the private sector and Islamic financiers in sustainable development?
United Nations Development Programme, Istanbul International Center for Private Sector in Development (UNDP IICPSD) and Islamic Development Bank (IsDB) established the Global Islamic Finance and Impact
Investing Platform (GIFIIP) in 2016 to position Islamic finance and impact investing as leading enablers of financing global SDG implementation. Engaging the private sector, governments and key stakeholders operating in Islamic finance and impact investing markets, the Platform promotes market-based solutions to sustainable development challenges by creating a collaborative working space.
Under the GIFIIP and Islamic finance portfolio, IICPSD, in partnership with the Securities Commission (SC) of Malaysia, the Islamic Corporation for the Development of the Private Sector (ICD) of the Islamic Development Bank (IsDB) launched the Green Sukuk Initiative in 2018. The initiative implemented its activities in Turkey, Pakistanand Uzbekistan. IICPSD delivered training on Islamic finance and impact investing in Pakistan, Indonesia, Morocco and Turkey. IICPSD also provides technical assistance on Islamic finance to UNDP country offices by engaging Islamic financiers in credit guarantee funds in Djibouti and Afghanistan, by enhancing the resil-ience of vulnerable SMEs in Djibouti and by providing strategic recommendations and model proposal for the development of microfinance in Afghanistan. Addition- ally, the portfolio conducts evidence-based research in related areas .
What insights can you share from the 11th International Sarajevo Business and Investment Forum?
The Forum, organized by Bosna Bank International (BBI) in cooperation with IsDB, Dubai Islamic Bank and Abu Dhabi Islamic Bank, was held on 11-12 May 2022 in Sarajevo.
As part of the SBF, I moderated a panel on Islamic finance and the SDGs attended by panelists Mr. Sahba Sobhani, Director of UNDP IICPSD, Dr. Mohammed Kroessin, Microfinance Programme Lead at Islamic Relief UK, Mr. İsmail Vural, Acting Secretary-General of TKBB, Mr. Amel Kovačević, CEO of United Bank of Albania, Mr. Tamim Nayef Qasrawi, Board Secretary-General at the Amman Chamber of Industry, Jordan, and Dr. Admir Mešković, Project Manager at BBI.
The panel discussions focused on Islamic finance and the banking sector’s contributions to sustainable development. The panelists also discussed the potential of Islamic finance for creating inclusive financial systems at both the regional and global level, and addressed the main challenges and opportunities in this field.
Following the panel discussion, as UNDP IICPSD, we launched our Massive Open Online Course (MOOC) on Islamic finance for the SDGs. The MOOC received a lot of interest from Islamic finance institutions, academia, banks and other private sector stakeholders.
Could you tell us more about the MOOC on Islamic finance for the Sustainable Development Goals?
UNDP IICPSD, the IsDB, and Durham University Business School, developed the “Massive Open Online Course (MOOC): Islamic finance for the Sustainable Development Goals.” The MOOC is the first open course designed to build development professionals and Islamic finance partners’ capacity to leverage Islamic finance for sustainable development. The course includes 5 modules and features 27 internationally recognized subject matter experts from 11 countries and 3 continents as course instructors.
The free course will be publicly available on both the IsDBI’s EdX channel and UNDP’s Learning for Nature Platform. In addition, the SDG Academy Library will feature learning videos.