idb’s microfinance development program islamic financial services industry department islamic...

IDB’s Microfinance Development Program

Islamic Financial Services Industry DepartmentIslamic Development Bank

Presentation at 5th Global Islamic Microfinance Forum, Kuala Lumpur/Malaysia, November 24-25, 2015

Islamic Development Bank

Introduction (Membership and Characteristics)

•A Unique Model of South-South Cooperation•Global MDB: Membership started with 22 countries in 1975, now 56 Countries spread over 4 continents

IDB Mission & Strategic Thrusts

“To promote comprehensive human development, with a focus on the priority areas of alleviating poverty, improving health, promoting education, improving governance and prospering the people.”

IDB Group Financing Approvals

Education; 3.3

Energy; 43.4

Finance; 12.1

Health; 12.3

Industry & Mining; 11.3

IT; 0.6

Other Social Services; 0.4

Real Estate; 0.2

Transportation; 10.1

Water & Sanitation; 5.3

IDB’s Sectoral Financing

IDB Approvals by Region

Islamic Financial Services Industry

Islamic Financial Services Industry Components

Growing 50% faster than Conventional Banking25% of the world’s population is MuslimLess than 10% of the world’s Muslim population has access to Islamic FinanceOnly 1% of the world’s financial assets are sharia-compliant by designAcross MENA region, less than 20% of adults have a

formal bank account

• Enormous potential

Islamic Finance Industry – Points to Ponder

Market size estimate in 2014 - approximately US$ 1.7 - 2.0 trillion (in terms of Assets) in over 800 institutions

Presence in over 75 countries. Growth rate of over 20% for the past decade

Expected growth rate of 15-20% p.a. in foreseeable future. Slight slowdown predicted due to lower oil prices.

Major Islamic banks spread across Middle East and East Asia. Emergence of multinational banks with Islamic windows/subsidiaries in new jurisdictions

Wide ranging products: Simple retail to structured wholesale

Islamic Financial Services Industry Department

IDB – Microfinance Development Program

1. Lack of specially tailored regulation and supervision and no regulatory impact assessments (RIA) to-date

2. Limited outreach of the Microfinance Institutions up to the gross root level due to small size.

3. Poor legal, supervisory and institutional infrastructure4. Lack of capacity building programs for the management & staff

of Microfinance Institutions, the functionaries of civil organizations and the beneficiaries.

5. The exclusion of ultra poor, particularly the rural poor6. Lack of clear policy, vision and coordination among the

stakeholders7. Low awareness about iMFI’s Products

Challenges

Traditionally, the extreme poor are rarely reached by microfinance.

IDB-MDP would endeavor to reach even the destitute by channeling resources from the wealth owners to the poor.

IDB-MDP Aims

The MDP aims to increase outreach of microfinance to reduce poverty through the development of Islamic Microfinance industry Several modes of intervention, both Financial and

Technical, designed to address the wide ranging microfinance needs in member countries, thus avoiding the one-size-fits-all approach

Leverages resources and partners with established Microfinance organizations – such as Grameen, BRAC, AGFUND and Government agencies such as AFD (France) DFID (UK), and GIZ.

IDB-MDP Components

Sudan: Bank Al-Usra - Capacity building TA for microfinance completed

successfully Irada - Equity in MFI with Bank Al-Khartoum Ibdaa Bank - Equity participation in MFI with Agfund

Senegal: Phase I - Developing the Enabling Environment - (a)MOF-Senegal (b)

BCEAO Phase II – Equity Investment in MFI with Government, Local MFI and

other local/international institutions

Improving Access to Islamic FinanceIDB’s Interventions

Indonesia: $50m Islamic Microfinance Fund - in collaboration with Government

and local financial institutions

Tunisia: Equity investment in a new Islamic MFI with Zeitouna Bank.

Pakistan Initial discussions held with a few parties desirous of starting

Islamic microfinance. Various intervention options being explored.

Improving Access to Islamic FinanceIDB’s Interventions

Tajikistan Local sponsors being identified

Egypt: Local sponsors being identified

Next set of countries sent to Management for approval

Improving Access to Islamic FinanceIDB’s Interventions

Improving Access to Islamic Finance

Thank You

Together we build a better future

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AlHuda Center of Islamic Banking & Economics - PakistanPh: (92-42) 35913096 - 98, Fax: (92-42) 35913056

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