www.saudigazette.com.sa - LONDON — The Islamic Development Bank (IDB) is
exploring social and financial inclusion opportunities in the UK
including the provision of community-based microfinance, SMEs
(small-and-medium-sized enterprises) financing and technical assistance
programs.
An IDB delegation, led by its President Dr.
Ahmed Mohammed Ali, participated in a roundtable here Monday with
financial institutions, law firms, corporates and community
organizations and leaders.
Dr. Ali said that in addition to
the direct assistance to microfinance institutions, initial discussions
have taken place with the UK’s Department for International Development
(DFID), World Bank and CGAP to start some pilot projects in various
common member countries and eventually develop a global Islamic
microfinance facility. (source)
In the UK, there are several
initiatives aimed at helping small business start-ups and young
entrepreneurs and to promote financial inclusion. These include
Community Development Financing Institutions (CDFI), the Enterprise
Capital Fund, and regional ones such as Bolton Business Ventures.
On Monday, Lord Young, the former Conservative cabinet minister,
announced the launch of a GBP85 million initiative to help young people
in the above respect. The reality is that the UK is facing a
multi-billion pound funding gap for small businesses.
One
microfinance initiative that is seeking to cooperate with the IDB is
GLEOne London, whose CEO Nicholas Nicolaou, revealed that the entity is
working on a program to assist Muslim immigrants starting up small
businesses and becoming entrepreneurs.
In fact, City law firm
Norton Rose; Gatehouse Bank, one of the five UK-authorized Islamic
banks; and international auditing firm and consultancy KPMG have been
cooperating with GLEOne London to develop an Islamic microfinance
product based on the Mudaraba (trust funding) concept.
According to Farmida Bi, Partner at Norton Rose, the product is ready to
roll out and addresses the various tax and legal issues especially
under the Consumer Credit Act, which protects the rights of customers.
Dr. Ali reiterated IDB’s support for various microfinance initiatives.
He stressed that the Islamic banking industry registered a year-on-year
growth of 35 percent in 2010 to 2011. Within OIC countries for instance,
Islamic financial institutions are becoming major economic players in
an increasing number of these countries.
In Indonesia, for
instance, a recent Central Bank of Indonesia report has indicated that
the industry is growing very fast at a rate of 35 to 40 percent per
annum and is expected to capture up to 20 percent market share of the
total banking industry in the next few years.
“If this trend
continues the Islamic financial industry will become a major industry
with an important role to play in global finance. London being the
gateway for Islamic banking in Europe, needs to be prepared for this
tremendous growth of this industry,” he said.
Dr. Ali also
held talks with the Lord Mayor of the City of London, Alderman Ian
Luder; the Sheriff of the City of London, Alderman Alan Yarrow; the
British Consul General in Jeddah, Mohamed Shokat, and Richard Thomas,
CEO, Gatehouse Bank, at Mansion House, the official residence of the
Lord Mayor.
The IDB president’s visit was at the invitation of
the Lord Mayor who earlier this year visited the bank’s headquarters in
Jeddah.
Dr. Ali also met Andrew Mitchell, UK Secretary of State
for International Development, to review progress on the implementation
of the Memorandum of Understanding (MoU) signed by the two parties in
Jeddah in March whereby the UK and the IDB agreed to cooperate in
co-financing projects in IDB member countries aimed at generating youth
employment and reducing poverty.
Alderman Luder stressed the
close and historical relations between the City of London and the IDB
and the GCC countries, in particular, Saudi Arabia. The City of London,
as a premier international financial center, has much to offer not only
in innovation, but also in education and training and also in the
growing phenomenon of Islamic finance.
Dr Ali emphasized that
the visit was a testament to the IDB’s partnership with the UK and
specially with the City of London. “We have worked together to further
some areas of our common interest. This visit also provides IDB with the
opportunity to support the development of Muslim communities in the
UK,” he said.
IDB’s Medium Term Note Program amounting to $6.5
billion for sukuk issuance is registered with the Financial Services
Authority in UK and is listed on the London Stock Exchange.Under this
program, IDB has made several issuances in US dollars, as well as pound
sterling denominated private sukuk issuances have been made.
As far as the money market placements are concerned, the IDB has over
the years increased its exposure to the UK’s financial institutions and
IDB stands ready to do more in this regard when appropriate
opportunities are identified.
The IDB is working with such
recognized institutions as the Prince of Wales’ Prince’s Charities and
has contributed just under $1 million to help young people in the inner
cities to start up projects or small businesses.
The IDB has
also been providing assistance for economic and social empowerment to UK
citizens as part of IDB’s special assistance program for cooperation
with Muslim communities in non-member countries. To date IDB has
approved a total of 19 projects for the UK and further projects are
being planned. These projects are mainly in the field of education,
social welfare and research.
In the wake of the global
financial crisis, economic recession and the impact of the eurozone debt
crisis, the issue of embedded inclusiveness especially of the financial
services industry is increasingly important. Not surprisingly, the IDB
President appealed to the financial institutions to help in this
respect.
“Achieving sound and sustainable socio-economic
development is not simply a financing issue. It is a much broader
endeavor,” said Dr. Ali, adding: “It is not within the bandwidth
capacity of a single institution or even a single country. It requires
strong commitment to reform the socio-economic system and its
institutions. All stakeholders, including the government, private
sector, civil society and donor community, have to play an active role
and align their priorities and activities to achieve this common goal.
Due to the strong banking traditions in the UK, it can contribute
significantly to this endeavor.”
This, he added, is a
once-in-a-lifetime opportunity and called upon all the Institutions to
pull together and work towards building “an equitable, just and stable
financial system which is capable of providing sustainable growth with
employment creation for our own future. IDB would be happy to cooperate
with initiatives in this regard.”
A key delivery vehicle for
inclusiveness which the IDB has been promoting is through SME financing
and microfinance programs aimed at generating employment, especially
youth employment, and economic growth.
Due to the recent
changes in the MENA region as a result of the Arab Spring, there has
been a demand for funding of SMEs. In this context, the Bank has
launched the IDB Youth Employment Support (YES) Program for which the
IDB’s Board of Executive Directors approved $250 million to help empower
Financial Institutions, Employers, Education and Vocational training
organizations in the Arab Region to reduce youth unemployment.
Dr. Ali revealed that the targeted countries include Tunisia, Egypt and
Morocco and that the first disbursements have started with Tunisia.
However, he pointed out that it is up to the receiving countries to come
up with project proposals to access the funding.
Furthermore,
the Islamic Solidarity Fund for Development has allocated $500 million
for Islamic microfinance and a similar amount for vocational literacy
programs (VOLIP). The IDB Islamic Microfinance Development Program was
established to strengthen the Islamic microfinance institutions and
develop the overall enabling environment for them.
According to
the IDB, the French Development Agency (AFD) and the Consultative Group
to Assist the Poor (CGAP) are also collaborating with the IDB in the
development of Islamic microfinance.
Source : http://www.saudigazette.com.sa/index.cfm?method=home.regcon&contentID=20120530125389 - May 30, 2012
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