About a third of those who suffer from extreme poverty worldwide are nationals of member countries of the organization of Islamic cooperation (OIC). Of the 57 countries of the organization into the 21st less than half of the population is provided with adequate sanitary conditions. 4% of children in these countries die before the age of five.
As noted in his article for Project Syndicate, the former Minister of Egypt on investment Mahmoud Mohieldin, despite its enormous potential, many States of the OIC are unable to achieve all-round development.
"Many of these countries are exposed to the infamous "resource curse"; in others we have to blame poor management and dysfunctional institutions. The situation is complicated by the fact that the vast majority (about 71%) of those 125 million people who are in the zone of conflict and natural disasters, live in OIC countries. The instability leads to a huge voltage budgetary resources of the countries of the region.
But these countries have options. For example, the capital accumulated in the financial systems of some of the States of the OIC could play an important role in helping to achieve development goals, especially if you manage to use the full force of Islamic Finance.
Islamic Finance has important advantages compared with traditional financial products. The prohibition of interest, when investment demand in the real economy, as well as the principle for sharing of profits and losses - all this increases the stability of the financial sector. In addition, Islamic Finance contribute to the growth of access to financial services, as they are acceptable to people who for cultural or religious reasons, excluded from traditional financial systems. Perhaps this explains the fact that in the last decade or so Islamic Finance growing at an average 10-12% per year.
In order for Islamic Finance to fully play its role in revitalizing and diversifying the economy of the OIC countries, the governments of these countries need to undertake important reforms. First and foremost you need strong legal institutions that protect property rights and guaranteeing the enforcement of contracts. In addition, in order to have people there full confidence in Islamic financial products, it is necessary to introduce standards and regulation in this industry. Tax policy also should be adjusted to prevent discrimination of Islamic financial instruments.
The world Bank group, together with its partners is working to assist in these reforms. Moreover, it has already launched in the region investment projects that use Islamic financing. The world Bank Treasury has released several Islamic financial instruments, including two issues of sukuk (bonds, corresponding to the Islamic ban on interest) in the amount of $700 million. in addition, the division of the Bank working with the private sector (international Finance Corporation, abbreviated as IFC), established the IFC Sukuk Company. In 2015, this company issued trust certificates in the amount of $100 million.
The subdivision of the Bank engaged in the political risk insurance (multilateral guarantee Agency investment), provided investment guarantees, Sharia-compliant, in the amount of $427 million for infrastructure project in Djibouti and insure political risks in the amount of $450 million for an investment project in the telecommunications sector of Indonesia. Together with the Islamic development Bank group, the UN and other donors, the world Bank created a joint venture to assist the countries that are most affected by instability, by providing them concessional financing. This includes Islamic financial instruments for Lebanon and Jordan to assist them to cope with the costs of refugees from Syria.
A key role in increasing access to financial systems, particularly for those population groups for whom this access is particularly difficult, unable to play with new technologies. For example, about 90% of the Syrian refugees have access to smartphones through which they can access financial services. We need to achieve the fullest possible use of these technologies.
Finally, there are humanitarian tasks. Work is already underway to address the question, how the Waqf (donations to charity), zakat (compulsory tax for the poor) and various other Islamic financial instruments are effectively and productively used to meet humanitarian needs.
Islamic Finance can become a welcome solution to the problems of development of the Muslim world. Their ability to enhance financial stability, increase access to financial services and stimulate sustainable development can lead to transformative change in the region. In order to realize this potential, Islamic Finance is no less than the traditional financial sector requires an enabling environment, so where there is a level playing field, adequate regulation and effective partnerships".
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