International Symposium on Financing for Development Islamic Re-Distributive Instruments and Financing Infrastructure Development International Symposium on Financing for Development 21-24 November 2018

Introduction Infrastructure is not the end-result of economic activity; it plays an important role in promoting sustainable growth and development. Economic (facilities of telecommunication, electricity, transportation, energy etc.) social (education, public healthcare, governance systems and correctional facilities)

Spillover Effect of Infrastructure on Other SDGs SDG-9 Infrastructure   Resilient infrastructure, industrialization and innovation Goal 1 End poverty Goal 2 End hunger Goal 3 Healthy life Goal 4 Quality education Goal 5 Gender equality Goal 6 Sustainable management of water & sanitation Goal 7 Sustainable energy Goal 10 Reduce inequality Goal 11 Sustainable cities and communities Goal 13 Climate change

Despite the importance of infrastructure, many OIC MCs are facing severe deficiency, due to growing populations, economic growth, and increasing urbanization.

The poor state of infrastructure in SSA cuts economic growth by two percentage points every year and reduces productivity by 40%

Water and sanitation 15- 30% of the total infrastructure investment

Global Investment Gap To reach the needed trillions, the flows must come from new financial mechanisms

Strong emphasis on domestic resource. Mobilizing financing resources will impose different challenges to OIC MCs, according to their income level and the depth of their financial system. OIC savings % of GDP (30%) and total investment( 26%) ( Find proper ways to channel idle domestic savings into investments effectively In addition to blended finance, SWF and PPPs …..

Mainstreaming Islamic finance into the financial system will improve resources mobilization IF is a solidarity-based financing with important features of social sustainability. Re-distributive tools (Waqf, Sadagha) have played an important role in the provision of social infrastructure such as education, hospitals. Historically, education has been the second largest recipient of Waqf revenues after religious matters. Health services are the third big beneficiary of Waqf. Waqf will be very important in countries with high levels of exclusion as it can play a critical role in protecting the poor and vulnerable against sudden risks of unemployment, hunger, illness, drought, etc.

Recommendations Three major constraints hindering the effectiveness of Islamic re-distributive finance: Inadequate awareness about the role of Islamic re-distributive instruments in addressing socioeconomic difficulties in many OIC MCs; Insufficient widely accepted Shariah compliant products to integrate these Islamic redistributive institutions (i.e., Waqf and Zakat) to inclusive development; lack of innovative products to use these re-distributive funds under certain programs to support SDGs such as, Poverty Entrepreneurship Schemes that can be used for creating employment opportunities.

At the country level OIC MCs need to play critical role in mobilizing resources generated by Islamic re-distributive funds The potential range of zakat revenue in different countries to be from 0.9% to a high of 7.5% of GDP). Indonesia has waqf land valued at US$ 60 billion. If these assets yield a return of 5% per annum, then US$ 3 billion could be used for various socio-economic purposes. Specifically, they need to develop a supportive legal and regulatory framework and “proactive” policy targets on usage, access and quality of these instruments.

At the OIC level OIC Regional Financial Institutions need to play more active role in supporting the efforts of OIC MCs to explore the relevant policy, regulatory and institutional arrangement to expand the part of Islamic re-distributive institutions to create new source of finance. Specifically, they may consider (i) supporting the creation of a common platform to enhance dialogue among MCs with the aim of promoting practical knowledge and increasing awareness on the role of Islamic re-distributive funds in socioeconomic infrastructure development; (ii) identifying successful case studies and good Islamic re-distributive income practices anywhere in the world (Lebanon, Turkey, Jordan, Sudan, Malaysia, Iran and Algeria). (iii) supporting the development of widely accepted Shariah compliant products related to Islamic redistributive institutions particularly Waqf and Zakat to support inclusive development.

Thank You Empowering People for Sustainable Future Deriving Innovation, Partnership, Islamic Finance and Value Chains Thank You