IDB Increases Project Financing by 17 Per Cent

JEDDAH — The Islamic Development Bank, or IDB, significantly increased its project financing in member countries in 2008 by 17 per cent over the previous year totalling $3.1 billion, according to the latest annual report which was made available at a Press conference at the bank headquarters.

Published: Sat 27 Jun 2009, 10:33 PM

Last updated: Sun 5 Apr 2015, 9:42 PM

The overall financing (including project, trade and grants) to public and private sectors in member countries grew by 5 per cent to reach $5.7b.

The bank formally began operations in October 20, 1975.

According to Dr. Ahmed Mohammed Ali, bank president, the year under review was a challenging year for the IDB Group and its member countries because of three unprecedented crises — food, energy, and financial and economic recession that changed the development landscape.

Each crisis has weakened the ability of member countries to meet the challenge of the subsequent crisis.

“The crises are a source of concern for the IDB Group because of the magnitude of their impact with varying degrees on the economies of many member countries and the lives of citizens.

They were adversely affected by job losses, shrinking remittances and development assistance, and declining world trade. Consequently, the MDGs (Millennium Development Goals) appear to suffer a serious setback as the decade long gains made by countries and their development partners are under stress,” he said.

He stressed an urgent need to undertake concerted efforts at all levels — global, regional, and national — to respond to the crises.

In particular, Multilateral Development Banks were urged to protect ongoing investment in social and physical infrastructure to sustain growth potential in their member countries.

Besides a 17 per cent increase in project financing, the bank also introduced special crisis-addressing initiatives.

Ali said that in order to effectively face the deep economic recession, Islamic Development Bank supports a coordinated approach, forming new partnerships, and working closely with international bodies, G-20, and member countries to discourage and avoid trade protectionism in every form.

According to the bank president, the Islamic finance principles and practices have much to offer.

The fundamental underpinning of Islamic finance that is unique and distinct is that there should be a systemic link between financial sector and the real sector of the economy.

Combined with the exclusion of debt instruments and derivatives, such a link significantly reduces the emergence of asset bubbles. The principles of Islamic finance do not allow, among others, to trade loans and engage in short-selling but ensure that all financial transactions are real asset backed. In 2008, despite the global financial crisis, IDB having strong financial position maintained its highest ratings of AAA assigned by Standard & Poors’, Moody’s, and Fitch for the seventh consecutive year. The IDB Group financing of $5.7b in the year under review, was for 399 operations in 49 member countries and 46 non-member countries (of which 44 countries received Special Assistance financing) and four regional programmes, compared to 330 operations in the previous year.

Trade financing operations amounted to $2.6b. During the year, the IDB Group approved $2.4b for 66 projects and $36.2m for 107 technical assistance operations. Project financing by affiliates and funds reached $598.8 million covering 87 operations during the year.

At end-1429H, cumulative net approvals of the IDB Group reached $56.868b. The share of project financing and trade financing operations in cumulative approvals stood at 41.8 per cent and 57.0 per cent respectively, while the share of special assistance operations was 1.2 per cent. As a development institution, the IDB Group has continued to increase net resource transfers to member countries in order to meet their financing needs.

· habib@khaleejtimes.com