One of them is the UN Development Programme (UNDP), which sees Islamic social finance as a viable tool to support and contribute to the UN’s Sustainable Development Goals (SDG), according to Ulrika Modeer, director of the bureau of external relations and advocacy at the UNDP.
Modeer, at a workshop during the annual meetings of World Bank and International Monetary Fund on Bali, Indonesia, earlier this month said that Islamic finance has the “potential to be a crucial tool” to offer governments a strong, non-traditional source of financing to advance their SDG implementation, particularly in fragile and conflict-affected countries – many of which are also in Muslim-majority or countries with significant Muslim populations.
Among those tools are primarily zakat, waqf and sadaqah – alms-giving, charitable endowments mostly in form of property and voluntary offerings – which Modeer noted had “significant potential to address marginalisation and vulnerability when directed towards locally driven programmes promoting social and economic inclusion.”
In Indonesia, the UNDP is co-operating with the national zakat collection agency to set up funds for renewable energy projects in underserved communities and provide emergency relief to people affected by the latest earthquakes and the tsunami in Central Sulawesi and Lombok. It also wants to tap the country’s large potential of waqf land and property estimated to have an economic value of $27bn. To that end, Jeddah-based Islamic Research and Training Institute and Bank Indonesia have set up core regulations for waqf sukuk to support the development of Islamic social finance on an international scale.
For supervision purposes of waqf funds, the UNDP is further contributing know-how to develop the first blockchain enhanced waqf digital platform to increase waqf collections and enhance the effective use of waqf land and will also offer technical support on policy, administration and regulatory best practices for Islamic social finance as a whole.
Meanwhile, the Islamic Development Bank (IDB) is working on Islamic social finance-linked sukuk some of which some would also be based on blockchain technology, Reuters reported from an Islamic finance industry event jointly hosted by the World Bank and the Accounting and Auditing Organisation for Islamic Financial Institutions held in Manama on October 23 and 24. Such bonds, offered through Islamic finance institutions, could support the mobilisation of “large pools of assets across the Muslim world and increase the impact of Islamic finance,” the report said.
As reported by Gulf Times on October 17, Bank Indonesia will issue a cash-waqf sukuk as a new financing instrument. The sukuk is designed as a hybrid financial product underlying the sukuk with waqf assets and will invest its proceeds in public or private social projects.
And as a world-first for a private bank, HSBC Amanah, the Malaysian Islamic banking unit of HSBC Group, in early October issued a sukuk linked to the SDGs at a volume of about $120mn whose proceeds will be used to fund projects for poverty relief and sustainable energy generation in poorer communities in Malaysia.
“With sukuk representing 16% of the total Islamic finance assets, the potential to catalyse Islamic impact investing towards sustainable development knows no bounds,” Modeer concluded.
