Islamic Finance’s Potential to Achieve Sustainable Development
Exploration report from UNDP Indonesia and Baznas on zakat and other forms of Islamic Financing in Indonesia
JAKARTA, 7 May 2018—United Nations Development Programme (UNDP) Indonesia and The Islamic Research and Training Institute of Islamic Development Bank (IRTI) are hosting an Islamic Finance Training Event on 7-9 May 2018. The training is aimed to enhance capacity for UNDP country offices on the implementation of Islamic Finance. The programme covers how Islamic Finance can contribute to sustainable development results, its current trends, and set up a further collaboration between UNDP and other development institutions in the work of Islamic Finance.
The Islamic finance industry is growing at 10-12 percent annually. It has reached a global asset size exceeding $2 trillion. These assets include Islamic banking, asset management, capital market instruments such as Sukuk, and Islamic insurance types such as Takaful accounts. Furthermore, other non-commercial instruments such as Zakah, Sadaqah, Waqf and Qard al-Hasan (interest free loans) have started to get attention at a global level.
UNDP sees the principles of Islamic Finance as relevant to the achievement of the Sustainable Development Goals (SDGs). As such, starting in October 2017, UNDP Indonesia has hosted knowledge sharing sessions for other UNDP offices from around the world.
The growing interest in Islamic Financing points to the need for a set comprehensive capacity building activities. The workshop will cover three areas of training: (1) Islamic finance foundations: to understand the principles, structure and current landscape; (2) Islamic Social Finance: entry points, tools and experiences; and (3) developing Islamic finance partnership and projects.
This training attracted participants people from across Asia, Africa, Arab States and Central/Eastern Europe who see opportunities in partnering around Islamic finance to achieve environment, social and economic results.
“This training seeks to explore how Islamic finance in its different form of Islamic giving and commercial financing, can contribute to achieving the Sustainable Development Goals. Our discussions have highlighted the common underlying philosophy and shared values of the United Nations and Islamic finance to reduce poverty and inequalities and improve people’s life” said Christophe Bahuet, Country Director of UNDP Indonesia. Bahuet added “UNDP has established an Innovative Finance Lab to hold training like this one and to forge new cooperation among partners committed to the SDGs. We hope that this event on Islamic Finance for the SDGs will lead to innovative partnerships in Indonesia and in other participating countries“
Rami Abdelkafi, Manager Learning Division IRTI added “The training is an opportunity with mutual benefits. It will pave the way in a better cooperation between IRTI and UNDP in order to unleash the potential of Islamic Finance in achieving the SDGs”.
At the workshop opening, UNDP Indonesia also launched the joint report with the National Zakat Agency (Baznas), entitled: Unlocking: The Potential of Zakat and other forms of Islamic Finance to Achieve the SDGs in Indonesia. The publication explores the tremendous potential of Islamic Finance to alleviate poverty alleviation and help achieve the 2030 Agenda. The report shows how Islamic Finance can bridge the SDGs financing gap through private sector and religious giving based on experiences in Indonesia.
In addition to zakat, Islamic finance instruments also include Islamic microfinance, waqf and sukuk. The report outlines how different forms of Islamic giving and commercial financing, while separate and with different rules governing their use, can complement each other to support inclusive and sustainable development.