JEDDAH: A year after marking its 50th anniversary, the Islamic Development Bank remains at the forefront of global development finance, recognized for its distinctive model that blends Shariah finance principles with strategic investments.
Established in August 1974 and commencing operations in October the following year in 海角直播, the IsDB has grown into a distinctive institution within the global development landscape, championing ethics, equity, and solidarity among its 57 member countries and impacting one in five people worldwide.
The bank was founded through a visionary initiative led by Saudi King Faisal bin Abdulaziz and other Islamic leaders to foster development cooperation among member states of the Organization of Islamic Cooperation and enhance the wellbeing of Muslim communities.
Financial strength
The IsDB is recognized as one of the world鈥檚 most active multilateral development banks and a global leader in Islamic finance. It boasts prestigious AAA credit ratings by Moody鈥檚, S&P, and Fitch 鈥 reflecting its strong financial stability and low risk.
With a subscribed capital of $76 billion, the bank is well-positioned to support large-scale development projects and foster economic growth across its member countries.
FASTFACTS
鈥 Established in August 1974 in 海角直播, the IsDB has grown into a distinctive institution within the global development landscape, championing ethics, equity, and solidarity among its 57 member countries and impacting one in five people worldwide.
鈥 海角直播鈥檚 enduring support remains crucial as the IsDB charts its strategic future, committed to tackling today鈥檚 challenges and strengthening solidarity throughout the Muslim world.
The Jeddah-based organization has evolved into a group of five institutions representing member states across four continents, with total approvals exceeding $182 billion for more than 12,000 development projects, as of April 2024.
Built on strong partnerships and trusted governance, the bank continues to promote sustainable socioeconomic development. 海角直播鈥檚 enduring support remains crucial as the IsDB charts its strategic future, committed to tackling today鈥檚 challenges and strengthening solidarity throughout the Muslim world.
Among its strongest partnerships is with Turkiye, a founding member that has received nearly $13 billion in IsDB approvals across 545 projects. In April 2024, both sides launched a new $6.3 billion framework to boost sustainability, productivity, Islamic finance, and digital transformation, reaffirming the bank鈥檚 long-term commitment to Turkiye鈥檚 development.
Speaking to Arab News, Abdulmohsen Al-Alshiekh, assistant professor and board member of the Saudi Economic Association, said over the past five decades, the IsDB has played a critical role as a development catalyst across the Islamic world.
He added that its effectiveness can be assessed on several fronts, including Infrastructure development, human capital investment, Shariah-compliant financing, crisis response, and South-South cooperation.
鈥淚sDB has financed thousands of projects in transport, energy, water, and urban development, significantly improving connectivity and public services across its member countries,鈥 Al-Alshiekh said.
Abdulmohsen Al-Alshiekh, assistant professor and board member of the Saudi Economic Association. (Supplied)
He added that through scholarship programs, capacity-building initiatives, and education sector support, IsDB has contributed to advancing education, vocational training, and knowledge economies in low- and middle-income member states.
As for the bank鈥檚 Islamic law financing compliance, Al-Alshiekh said that one of IsDB鈥檚 unique strengths is its adherence to Islamic finance principles. 鈥淏y promoting risk-sharing and asset-backed investments, it has provided an alternative to interest-based lending and contributed to the growth of the Islamic finance industry globally,鈥 he added.
Crisis response
Al-Alshiekh said the bank has shown agility in responding to global crises, including the COVID-19 pandemic, by mobilizing special funds, providing concessional financing, and supporting resilience and recovery efforts in vulnerable member countries.
He added that the bank continues to foster cooperation among member states through trade finance, investment insurance, and technology transfer initiatives, reinforcing its role as a key platform for intra-OIC economic collaboration.
Development reach
Al-Alshiekh noted that countries across sub-Saharan Africa, the MENA region, South Asia, and Southeast Asia have benefited from IsDB鈥檚 interventions, underscoring several priority sectors including infrastructure, education, health, agriculture, and trade.
鈥淭hese investments have helped close infrastructure gaps and improve regional integration, especially in landlocked and low-income countries,鈥 he added.
On education and health, the assistant professor said the IsDB has funded scholarships, technical training, hospitals, and pandemic response. It has also supported irrigation, rural development, and agribusiness in sub-Saharan Africa and South Asia to fight poverty and boost food security.
IsDB has funded health programs in many countries听across sub-Saharan Africa, the MENA region, South Asia, and Southeast Asia . (Supplied)
鈥淐ountries such as Senegal, Niger, Nigeria, and Sudan have received substantial support in infrastructure, agriculture, and education,鈥 he said.
Countries recovering from conflict or facing economic challenges, such as Yemen, Egypt, Morocco, and Tunisia, have received significant assistance, while Bangladesh, Pakistan, Indonesia, and the Maldives have also benefited from a mix of infrastructure, health, and education investments, Al-Alshiekh added.
Unequal model
Unlike conventional multilateral development banks, all the bank鈥檚 financial transactions comply with Islamic principles.
鈥淥ne of IsDB鈥檚 unique strengths is its adherence to Islamic finance principles,鈥 Alalshiekh said 鈥淏y promoting risk-sharing and asset-backed investments, it has provided an alternative to interest-based lending and contributed to the growth of the Islamic finance industry globally.鈥
Youssef Saidi, a research fellow at the Economic Research Forum, emphasized the importance of distinguishing the IsDB鈥檚 model from that of conventional multilateral development banks.
鈥淭o understand the unique contributions of the IsDB, it is essential to examine how its development model contrasts with those of the conventional multilateral development banks, which often focus on standardized approaches that may not fully address the unique needs of developing countries, potentially limiting their effectiveness in fostering sustainable growth,鈥 Saidi told Arab News.
Youssef Saidi, research fellow at the Economic Research Forum. (Supplied)
He added that the IsDB focuses on Islamic finance principles, socio-economic development, and innovative approaches to financing and project implementation.
鈥淭hese characteristics emphasize the importance of adaptability and responsiveness to the specific needs of member countries, which is essential for effective development financing,鈥 he said.
He noted that this adaptability allows the IsDB to forge partnerships that boost funding and enhance project delivery, similar to other multilateral development banks.
Future priorities
As the global development landscape becomes increasingly complex, both Saidi and Al-Alshiekh agree that the IsDB must recalibrate its strategic focus to address emerging challenges.
鈥淭he challenges facing the IsDB include addressing governance issues, ensuring effective resource allocation, and adapting to the evolving needs of its member countries to enhance development outcomes,鈥 Saidi said.
To maintain its relevance, the IsDB must navigate challenges such as regional disparities in development, ensuring equitable resource allocation, and fostering innovation in Islamic finance practices, he also said.
Looking ahead, Al-Alshiekh said the IsDB is expected to broaden its role in key areas such as climate action through green sukuk, private sector partnerships focused on small and medium enterprises, fintech, digital infrastructure and e-governance, and support for fragile regions via stabilization funds and humanitarian-development-peace frameworks.
Enduring values
While the IsDB shares several features with conventional development banks, including alignment with the UN Sustainable Development Goals, it remains rooted in a distinct ethos.
鈥淯nlike conventional MDBs, IsDB operates entirely on Islamic finance principles. This means it avoids interest-bearing loans and instead uses instruments like Murabaha, or cost-plus sale, ijara, or leasing, and istisna鈥檃, or construction financing, as well as sukuk,鈥 Al-Alshiekh explained.
He added that the IsDB鈥檚 approach is value-based, emphasizing ethical finance, social justice, and equitable growth that aligns with Islamic principles. 鈥淭his contrasts with the often secular and market-oriented frameworks of conventional MDBs.鈥
Governance is another differentiator. 鈥淚sDB鈥檚 governance model is rooted in the OIC (Organization of Islamic Cooperation), with its members being exclusively Islamic countries,鈥 he said.
This allows for a greater cultural and strategic alignment among its stakeholders, while conventional MDBs tend to have a broader, more diverse global membership, he noted.
Al-Alshiekh also underlined the principle of solidarity that guides the bank鈥檚 resource allocation.听
鈥淭he IsDB emphasizes 鈥業slamic solidarity鈥, often prioritizing needs-based resource allocation and South-South cooperation, in contrast to performance-based lending criteria or conditionalities common in conventional MDBs,鈥 he said.
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