The World Bank and Islamic Development Bank have signed a Memorandum of Understanding (MoU) to set out a framework for collaboration between the two parties and lend support to global, regional and country efforts in the development of Islamic Finance.
World Bank Managing Director Dr. Mahmoud Mohieldin and Islamic Development Bank Group President Dr. Ahmad Mohamed Ali signed the memorandum on behalf of their institutions with the common objectives of fostering, encouraging, and studying the expansion of Islamic finance globally.
The MoU adopts the following principles:
- Knowledge sharing to identify and disseminate sound practices in the Islamic financial services industry.
- Cross fertilization of ideas that would foster the development of Islamic finance that is critical for growth, efficiency and financial inclusion.
- Encourage research and promote awareness of appropriate risk management framework for Islamic financial institutions in particular and the Islamic finance industry in general; and
- Capacity building in the Islamic financial services industry with a view to fostering financial stability and promoting increased access to Islamic financial services in markets around the world.
World Bank Managing Director Dr. Mahmoud Mohieldin stressed the importance of the memorandum for increased capacity-building and knowledge-sharing between the two organizations.
“The MoU signed today between the IDB and WB will help us deepen our understanding of Islamic finance and build capacities to develop institutions and instruments to support sustainable inclusive growth and help societies to achieve their development goals with emphasis on poverty alleviation and shared prosperity,” he said.
“The signing of MoU between the World Bank and IDB aims to forge a strategic partnership between our two institutions in the area of Islamic finance to support inclusive growth, including greater access to finance for the poor, and financial stability in our mutual member countries,” said IDB President Dr. Ahmad Mohamed Ali.
“We expect to do this by expanding our knowledge base as well as our ability to support our member countries’ efforts to build resilient institutions and develop instruments to achieve greater financial inclusion and sustainable development,” he added.
The core tenant of Islamic finance is a system which promotes risk-sharing and the avoidance of interest and leverage.
Global Islamic Financial assets have increased significantly over the past three decades, crossing $ 1 trillion in 2010 and estimated to have exceeded $ 1.2 trillion in 2011, up from about $ 5 billion in the late 1980s.
Islamic finance could accounts for a substantial share of financial services in many countries in the coming years.
Through the MoU, the World Bank and Islamic Development Bank will explore Islamic Finance as a potential tool supporting the efforts of countries to reach their development goals.