The Islamic Development Bank (1DB) is a multilateral International Islamic financial institution with 54 countries of the Organization of the Islamic Conference (010) as its members.
It provides a framework to fulfil aspirations of the Ummah for economic and financial cooperation among Muslim countries in a global environment characterized by economic blocks and regional groupings. The Bank was officially inaugurated on 20th October 1975. Its Head Office is at Jeddah, Saudi Arabia.
MISSION AND CHALLENGES
During the last 25 years, the Bank made sustained efforts for developing its capacity in Islamic financial and economic practice. It is making significant contribution for enhancing economic and social development in member countries.
As a long term policy, it is helping the Muslim countries in facing the challenge of different global currents through direct trade channels and technical cooperation programmes. But it stands out quite distinctly from other financial institutions as it performs all its activities in the framework of the Islamic Shariah.
The Bank has devised a number of financing modes based on the Islamic Shariah such as grants, interest-free loans, profit sharing, equity participation, leasing murabaha, installment sale, istisna’a, and technical assistance.
By June 1999, the Bank had financed about 3,000 operations for 53 member countries and 63 Muslim communities involving more than US $ 20 billion. The Bank extends financing not only for implementation but also for feasibility studies, engineering designs, consultancy for supervising projects in the form of grants and concessionaire loans.
In a bid to stimulate development in 21 least developed member countries, the Bank has set up a Special Account with a capital of US$ 150 million for those projects that cannot be financed through its ordinary operations.
MODES OF FINANCING
Islamic Development Bank is implementing its policies through following modes of financing. Import Trade Financing Operation.
The Bank started this scheme in 1977 for financing import trade operations of basic commodities and development oriented production equipments from member countries. The Bank has spent over US$ 11 billion, since its inception, on more than 925 financing operations under this Scheme involving 32 countries.
EXPORT FINANCING SCHEME
The Bank established this scheme in 1987 in order to finance export of consumer goods, semi-processed goods and non-traditional capital goods among member countries. The scope of market has now been expanded to include OECD countries. The repayment period extends normally from six to sixty months.
The mode of financing is usually modaraba. The scheme has its own membership capital. By the close of 1998, it had 23 members with a subscribed capital of Islamic Dinar (ID) 315 million. The Bank had approved operations worth ID 306 million under the scheme by then.
ISLAMIC BANKS’ PORTFOLIO
The Bank has managed this portfolio since 1987 in collaboration with 20 banks with a capital of US$ 65 million. The capital has now been increased to US$ 380 million. It is an investment pool which mobilizes available liquidity with the Islamic banks. The 1DB channels it for trade and leasing with special emphasis on private sector.
THE IDB UNIT INVESTMENT FUND
The 1DB launched this Fund in 1990, with an initial capital of US$ 100 million and then increased it to US$ 325 million by 1998. The Fund purchases leasing and installment sales projects financed by the Bank and thus re-finances its activities. In order to enhance its investment activities, the Fund also invests from its own account.
THE ISLAMIC CORPORATION FOR THE INSURANCE OF INVESTMENT AND EXPORT CREDIT
It is an independent institution affiliated with the 1DB. It commenced business in 1995 and by 1998, 34 countries of the OIC had signed its Articles of Agreement.
The Corporation issues insurance policies to cover capital invested in export trade. It has a capital of US$ 150 million. Twelve member countries had availed of the insurance facilities of this scheme till now.
SPECIAL ASSISTANCE TO MUSLIM COMMUNITIES IN NON-MEMBER COUNTRIES
The 1DB gives special attention to Muslim communities living in non-member countries. The Bank has so far provided US$170 million to over 285 educational and health projects in 63 Muslim Communities.
The Bank has also contributed towards technology transfer. In 1984, it set up a Special Technical Cooperation Programme in order to provide technical assistance to member countries for capacity building and exchange of information. In 1991, the Bank also set up a Special Scholarship Programme in science and technology for outstanding students.
The Bank is always striving to face the challenges of future. It is playing an active role in meeting development needs of its member countries.
To celebrate the Silver Jubilee of Islamic Development Bank, Pakistan Post Office is issuing a commemorative postage stamp of Rs 5 denomination on September 18, 1999.