Prepared for delivery.
List of acknowledgements
- H.E. Dr. Mahathir bin Mohamad, Prime Minister of Malaysia
- H.E. Dr Berat Albayrak, Minister of Treasury and Finance, Turkey (TBC)
- H.E. Dr. Bandar M. H. Hajjar, IsDB (TBC)
Excellencies, Distinguished participants, Ladies and Gentlemen;
It is my great pleasure to welcome you today to discuss the role of Islamic finance as an innovative financing solution for sustainable development challenges.
The achievement of the 2030 Agenda requires substantial financial and technical resources. The gap in financing for the SDGs in developing countries is currently estimated at US$ 2.5 trillion every year , far beyond the scope of individual governments or Official Development Assistance (ODA). It requires a broader alliance of partners, new voices and new perspectives, including the private sector to jointly support development efforts.
According to the OECD, foreign aid from official donors was US$146.6 billion in 2017. By comparison, foreign direct investment flows to developing economies was US$671 billion, over four times larger than the ODA in the same year. And based on the World Investment Report by UNCTAD, global foreign direct investment totaled US$1.43 trillion. This potential should be captured, and private sector’s capital and financial resources should be mobilized towards the SDGs. For this, a new approach should be adopted, and innovative solutions should be developed.
Islamic finance, as one of the fastest growing sectors in the global financial industry, provides a unique opportunity for innovative solutions. Forecasts indicate that Islamic finance assets are expected to reach $3.8 trillion in 2022 . With their emphasis on inclusiveness and broad understanding of business society relations, Islamic finance principles are highly aligned with the SDGs, and forging new partnerships in this area will be essential to provide the much-needed reinforcements to finance and implement 2030 Agenda.
That is why UNDP and other parts of the UN have already begun to engage member countries and external partners on Islamic finance – both commercial and social finance tools - in innovative ways:
o In Palestine, for example, UNDP is facilitating the mobilization of funds for SMEs through Islamic microfinance;
o In Turkey, UNDP is exploring new ways to blend Islamic finance with crowdfunding through Blockchain technology to support refugees;
o In Bahrain, we’ve launched a new MoU with Al Baraka Bank on SDG alignment; and
o In Indonesia, UNDP has begun to partner with BAZNAS – the national Zakat collection body – to apply Zakat funds, for the first time ever, towards local SDG plans, beginning with renewable energy projects in underserved communities. We are also working with Badan Wakaf Indonesia, their national waqf board, to collaborate on SDGs and develop a digital platform for waqf endowment contributions.
One example of the strong partnerships that bridge Islamic finance with the SDGs is the Global Islamic Finance and Impact Investing Platform (GIFIIP), which UNDP established with the Islamic Development Bank in 2016. The platform provides market-based solutions to development challenges and to position Islamic finance impact investing as an enabler of SDG implementation. Through this platform:
1. UNDP and the Islamic Development Bank’s Islamic Research and Training Institute jointly produced a report, “I for Impact: Blending Islamic Finance and Impact Investing for the Global Goals”, in 2017. The report articulates the similarities and synergies between Islamic finance and impact investing and thus creates an enabling business ecosystem for the SDGs. GIFIIP also developed an Islamic finance and impact investing training program to help Islamic finance actors to build their capacities to seize SDG investment opportunities. The program was launched in Pakistan in August and will be replicated in other countries, starting with Indonesia.
2. Through the platform, UNDP will adopt the seal for commercial Islamic finance to endorse eligible Islamic based investments aligned with the SDGs. The seal will be operationalized with Islamic Finance Council UK and Islamic Research and Training Institute of Islamic Development Bank, as well as the partners of SDG Impact platform, which UNDP launched two days ago in the UN Headquarters in partnership with the Impact Management Program. The seal will help private sector actors and Islamic financiers to identify investable opportunities, while measuring the true impact of their interventions on the SDGs.
3. Considering the potential of green sukuk, GIFIIP introduced a new series of Green Sukuk stakeholder workshops to build a greater understanding of the concept and potential in renewable energy sector for Islamic financiers. Green Sukuk is a unique example of an Islamic-based impact investing instrument, which demonstrates how Islamic finance resources can be utilized towards renewable energy investments. The first Green Sukuk was issued in Malaysia last year to finance a solar power plant. This year, UNDP Indonesia worked with the Indonesian Ministry of Finance to support the issuance of their first $1.25 billion sovereign Green Sukuk.
We are today proud to announce our new partnership with the Securities Commission Malaysia to promote and implement Green Sukuk across the globe. We aim to increase awareness and build the capacity of both energy and investment companies as well as governments to harness the potential in renewable energy industry. We believe that this partnership will pave the way to explore new Islamic finance and SDG related investment instruments in the future.
Before I hand over the floor to our distinguished speakers, I would like to express my sincere appreciation to the Government of Malaysia for hosting this event with UNDP and the Islamic Development Bank, and for initiating a new partnership with us to promote Green Sukuk around the world. With their pioneer Green Sukuk transactions issued last year, and their strong position in the market, they set a great example for innovative thinking by mobilizing investors for a new type of instrument.
We strongly believe that this partnership will yield in exciting results with increased engagement of Islamic financiers in development. I would also like to thank the Islamic Development Bank for their dedicated partnership with UNDP on SDG implementation, including through the advancement of GIFIIP.
We look forward to hearing from our esteemed colleagues today what more we can all do to foster the innovative financing needed and to working with partners across the public and private sector to unleash the potential of Islamic finance to realize the SDGs.