IDB’s Microfinance Development Program Islamic Financial Services Industry Department Islamic Development Bank Presentation at 5th Global Islamic Microfinance Forum, Kuala Lumpur/Malaysia, November 24-25, 2015

Islamic Development Bank

Introduction (Membership and Characteristics) A Unique Model of South-South Cooperation Global MDB: Membership started with 22 countries in 1975, now 56 Countries spread over 4 continents

IDB Mission & Strategic Thrusts “To promote comprehensive human development, with a focus on the priority areas of alleviating poverty, improving health, promoting education, improving governance and prospering the people.”

IDB Group Financing Approvals

IDB’s Sectoral Financing

IDB Approvals by Region

Islamic Financial Services Industry

Islamic Financial Services Industry Components

Enormous potential Growing 50% faster than Conventional Banking Islamic Finance Industry – Points to Ponder Growing 50% faster than Conventional Banking 25% of the world’s population is Muslim Less than 10% of the world’s Muslim population has access to Islamic Finance Only 1% of the world’s financial assets are sharia- compliant by design Across MENA region, less than 20% of adults have a formal bank account Enormous potential

Wide ranging products: Simple retail to structured wholesale Market size estimate in 2014 - approximately US$ 1.7 - 2.0 trillion (in terms of Assets) in over 800 institutions Presence in over 75 countries. Growth rate of over 20% for the past decade Expected growth rate of 15-20% p.a. in foreseeable future. Slight slowdown predicted due to lower oil prices. Major Islamic banks spread across Middle East and East Asia. Emergence of multinational banks with Islamic windows/subsidiaries in new jurisdictions Wide ranging products: Simple retail to structured wholesale

Islamic Financial Services Industry Department

IDB – Microfinance Development Program

Challenges Lack of specially tailored regulation and supervision and no regulatory impact assessments (RIA) to-date Limited outreach of the Microfinance Institutions up to the gross root level due to small size. Poor legal, supervisory and institutional infrastructure Lack of capacity building programs for the management & staff of Microfinance Institutions, the functionaries of civil organizations and the beneficiaries. The exclusion of ultra poor, particularly the rural poor Lack of clear policy, vision and coordination among the stakeholders Low awareness about iMFI’s Products

IDB-MDP Aims Traditionally, the extreme poor are rarely reached by microfinance. IDB-MDP would endeavor to reach even the destitute by channeling resources from the wealth owners to the poor.

IDB-MDP Components The MDP aims to increase outreach of microfinance to reduce poverty through the development of Islamic Microfinance industry Several modes of intervention, both Financial and Technical, designed to address the wide ranging microfinance needs in member countries, thus avoiding the one-size-fits-all approach Leverages resources and partners with established Microfinance organizations – such as Grameen, BRAC, AGFUND and Government agencies such as AFD (France) DFID (UK), and GIZ.

Improving Access to Islamic Finance IDB’s Interventions Sudan: Bank Al-Usra - Capacity building TA for microfinance completed successfully Irada - Equity in MFI with Bank Al-Khartoum Ibdaa Bank - Equity participation in MFI with Agfund Senegal: Phase I - Developing the Enabling Environment - (a)MOF-Senegal (b) BCEAO Phase II – Equity Investment in MFI with Government, Local MFI and other local/international institutions

Improving Access to Islamic Finance IDB’s Interventions Indonesia: $50m Islamic Microfinance Fund - in collaboration with Government and local financial institutions Tunisia: Equity investment in a new Islamic MFI with Zeitouna Bank. Pakistan Initial discussions held with a few parties desirous of starting Islamic microfinance. Various intervention options being explored.

Improving Access to Islamic Finance IDB’s Interventions Tajikistan Local sponsors being identified Egypt: Next set of countries sent to Management for approval

Improving Access to Islamic Finance

Thank You Together we build a better future

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