IDB’s Cross Country Experiences in Development of Islamic Finance 6 th Meeting of the COMCEC Financial Cooperation Working Group 17-18 March 2016 Wasim A. Abdulwahab Islamic Financial Services Department 1 Islamic Financial Services Department
Technical Assistance to Islamic Finance Industry 47 TAs US$ 8.8 m Technical Support Program Financial 12 Sector Development Microfinance Development Program Countries IFIs Strategic Partnerships Bilaterals MDBs 12 Islamic Financial Services Department
47 TAs Technical Support Program Objective: To develop Islamic finance enabling environment (legal, regulatory US$ 8.8 m & supervisory framework) and institutional capacity building in Islamic finance Beneficiaries: central banks, capital market authorities, supervision agencies, public sector banks, ministries of finance, as well as Islamic Infrastructure Institutions. What have the TA Projects achieved? IFSB – Standard on ‘Core Principles for Islamic finance regulation’ developed. Other prudential work. IIRA – Fiduciary Rating Methodology developed. Assisting in issuing sovereign ratings of IDB MCs Indonesia – Detailed Masterplan for developing Islamic finance architecture under implementation by the Govt. Tajikistan – Standalone Islamic banking law passed by the Parliament Djibouti – Preparing for issuing Islamic banking law Senegal – Provided regulatory policy advice leading to interest in Islamic finance from BCEAO Kyrgyzstan – Converted EcoBank into an Islamic bank Oman – Implementation Guidelines for Sukuk & Takaful Afghanistan – Islamic banking operations introduced in Bank Milli Afghan Nigeria – Central Bank capacity building. Two Islamic banking licenses 13 issued. Jaiz bank established. Islamic Financial Services Department
47 TAs Technical Support Program Objective: To develop Islamic finance enabling environment (legal, US$ 8.8 m regulatory & supervisory framework) and institutional capacity building in Islamic finance Beneficiaries: central banks, capital market authorities, supervision agencies, public sector banks, ministries of finance, as well as Islamic Infrastructure Institutions. Geographic diversity of projects 9% Regional 8% 13% SSA 36% 14% 35% By Number MENA of TAs 14% 15% CIT 28% Asia By $ Approval 27% Amount of TAs - The Program has successfully targeted key emerging Islamic finance markets: IDB-IMF LOU IDB-WB WG 21 countries targeted GCC CIBAFI IFSB IICRA IIFM IIRA - Regional TAs to IIIs - Joint projects with World Bank & IMF TAs to Regional Bodies/IIIs/MDBs’ WGs 14 Islamic Financial Services Department
47 TAs Technical Support Program Objective: To develop Islamic finance enabling environment (legal, regulatory US$ 8.8 m & supervisory framework) and institutional capacity building in Islamic finance Beneficiaries: central banks, capital market authorities, supervision agencies, public sector banks, ministries of finance, as well as Islamic Infrastructure Institutions. Who are the Beneficiaries? Capital Market EcoIslamic Bank, Central Bank Gumhouria Bank, Bank of Mozambique Bank-e-Milli Afghan of Libya Authority Oman Libya Kyrgyz Republic Bank Al Magrib Under Secretariat of National Bank of National Bank of National Bank of Treasury, Turkey (Morocco) Kyrgyz Republic Tajikistan Kazakhstan Ministry of Finance of Libya Development Central Bank of Maldives Monetary Ministry of Economy Oman Authority of Senegal Bank Mauritania Banque Centrale des BAPPENAS Central Bank Bank of Central Bank Central Bank Gulf Cooperation Etats de l'Afrique de Indonesia of Tunisia Uganda of Nigeria of Djibouti Council (GCC) l'Ouest (BCEAO) 15 Islamic Financial Services Department
Lessons learned 6 Islamic Financial Services Department
Countries tak ake different routes to im implementing Is Isla lamic fi finance en enabling en environment • To what extent is the legal and regulatory systems are developed (Basic, Intermediate or Advanced)? • To what extent is the demand from the population for various Islamic finance product from the population? • How much political will is present? • How well developed is the country? • What are the Government’s objectives and how much is it willing to pursue them? • How well is the financial market developed? Islamic Financial Services Department
What is is an an Enabling Environment f for Isl Islamic Finance Preparation Assessment Gap Analysis Developing n ecosystem for Islamic finance by incorporating, or permitting, Agree target Establish Obtain political Islamic financial framework working groups support activity within a model country or a group of countries’ financial system Identify other Evaluate & Monitor & available implement review support groups change Islamic Financial Services Department
Steps Required for Enabli ling Environment for Is Isla lamic Fin inance Awareness building Organize stakeholder groups Understand the necessary enabling environment Preliminary studies & gap analysis Roadmap & Time table Islamic Financial Services Department
Components of f an an Isl Islamic Finance Enabling Environment Islamic Banking Ijarah Legal Liquidity Regulations Management Shariah Accounting Takaful Taxation Islamic Capital Market Islamic Financial Services Department
Components of f an an Isl Islamic Finance Enabling Environment Islamic Banking Ijarah Legal Liquidity Regulations Management Shariah Accounting Takaful Taxation Islamic Capital Market Islamic Financial Services Department
Components of f an an Isl Islamic Finance Enabling Environment Islamic Banking Ijarah Legal Liquidity Regulations Management Shariah Accounting Takaful Taxation Islamic Capital Market Islamic Financial Services Department
Ensuring robust Islamic financial transactions, products and Sharia'a Legal services can enforceability be undertaken compliancy in a vibrant Islamic financial market place requires three major Commercial elements to Viability be working in harmony: Islamic Financial Services Department
TA to Maldives Capital Market Development Authority to Develop Sukuk Market & Maldives Monetary Authority to Develop Regulatory Framework for Islamic Banking The TA Project Recipients: (i) Maldives Monetary Authority and (ii) Capital Market Development Authority Amount: US$ 150,000 TA Agreement Signed:2012 Status: Completed Objective Scope - Prepare report on legal, To set up legal, regulatory and regulatory and supervisory supervisory framework for framework for developing Islamic financial institutions in Islamic finance sector Maldives and to assist the - Develop Sharia governance country to launch Islamic capital framework market instruments starting - Capacity building of staff from with Sukuk CMDA & MMA Impact - Regulations for Sukuk Issuance were drafted by Capital Market Development Sukuk Market Authority. The Regulations came into force in 2013 The TA helped in developing - Issuance of the first corporate Sukuk by Housing Development Finance Corporation Development in September 2013 - Islamic finance enabling environment Consultant prepared detailed report on the necessary modifications needed in the Financial legal, regulatory and supervisory framework for Islamic financial institutions Sector & the Sukuk market in Capacity Project dissemination workshops were conducted for the concerned stakeholders Maldives and enhanced Building including staff of MMA and CDMA awareness about Sukuk The Islamic Development Bank Group Islamic Financial Services Department Together we build a better future
TA to Oman Capital Market Authority to Develop Islamic Capital Market & Takaful The TA Project Recipient: Capital Market Authority Amount: US$ 150,000 TA Agreement Signed:2014 Status: Completed Objective Scope To provide consultancy Review and assist the services to the CMA to CMA in implementing the assist in the newly developed implementation of the regulations for Sukuk and newly developed Sukuk Takaful and Takaful regulations Impact Expert hired for 12 months to implement Sukuk and Takaful Regulations regulations by way of developing policies, procedures, Implementation guidelines for the CMA. TA helped in implementing the regulations related to Oman issued its first sovereign Sukuk amounting to OMR 200 Sukuk and Takaful and Sukuk Issuance million (US$ 520 million) in October 2015. The Ijara Sukuk enhanced the understanding tenor is 5 years. of Sukuk and Takaful for CMA Capacity staff Building The Islamic Development Bank Group Islamic Financial Services Department Together we build a better future
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