New effort seeks to boost Islamic finance for sustainable development

Boxes of COVID-19 vaccines, redeployed from the Democratic Republic of Congo, arrive at a cold storage facility in Accra, Ghana. Photo by: Francis Kokoroko / Reuters

The United Nations and Islamic Development Bank launched an initiative Tuesday aimed at accelerating the use of Islamic finance to tackle the COVID-19 pandemic response, address poverty, and support sustainable development.

What it is: The new International Dialogue on the Role of Islamic Social Financing in Achieving the SDGs will include a series of virtual meetings that bring together Islamic financial institutions and humanitarian and development experts.

The intent is to produce a report on leveraging Islamic social finance to achieve the Sustainable Development Goals, develop an e-learning and knowledge platform on the subject, and create a road map for better mobilizing and using Islamic finance for the COVID-19 response and other sustainable development priorities.

The backstory: While discussions about ways to leverage Islamic finance have been ongoing, many efforts so far have been individual deals. These range from green “sukuk” — Shariah-complaint bonds for environmental projects — to the Global Muslim Philanthropy Fund for Children, a partnership between the Islamic Development Bank and UNICEF.

“Islamic social financing can and must be an integral part of the solution for financing sustainable development,” said Amina Mohammed, deputy secretary-general at the U.N., during a launch event for this week’s new initiative.

Why it matters: There are several traditional forms of Islamic social financing, including “zakat,” or obligatory annual giving; “sadaqah,” or charitable giving; and “waqf,” or endowments and trusts. But giving is often not formalized in a way that can scale and address development challenges.

For example, the Islamic Development Bank estimates that zakat amounts to about $300 billion annually. A fraction of that could close the funding gap for the equitable vaccine distribution facility COVAX. A religious ruling, or fatwa, in March determined that zakat could be used to fund COVID-19 vaccine purchases and distribution.

This coverage exploring innovative finance solutions and how they enable a more sustainable future, is presented by the European Investment Bank.

About the author

  • Adva Saldinger

    Adva Saldinger is a Senior Reporter at Devex, where she covers the intersection of business and international development, as well as U.S. foreign aid policy. From partnerships to trade and social entrepreneurship to impact investing, Adva explores the role the private sector and private capital play in development. A journalist with more than 10 years of experience, she has worked at several newspapers in the U.S. and lived in both Ghana and South Africa.