2. Major events defining the Post 2015
framework
July 2015 – Third Financing for Development Conference in
Addis Ababa
Sept 2015 – SDG Summit & United Nations General Assembly
in New York
Oct 2015 – WBG-IMF Annual Meetings in Lima
Dec 2015 – Conference of the Parties of the UN Framework
Convention on Climate Change in Paris
Dec 2015 – WTO Ministerial in Nairobi
4. The MDGs: Still a Long Way to Go
27 33
25 22
2 2 8
19 23
27
52
40
28
34
77
88
40
582
13
17
11 37
28
20
12
14
7
4
11
7
16
23 11
3
7
11
8
12
10
18
9
3
5
771
35
40
67
38
6
15
67
36
0
20
40
60
80
100
120
140
Target Met
Sufficient Progress
Insufficient Progress
Moderately Off Target
Seriously Off Target
Insufficient Data
Source: World Bank – World Development Indicators and Global Monitoring Report team estimates, 2015.
Extent of progress toward achieving the MDGs, by number of countries
5. Lessons from the MDGs
• Countries with a good track record on the MDGs have
achieved the following:
• Growth, particularly inclusive growth
• Good policies
• Effective and capable institutions
• A combination of these factors almost always guarantees
progress on development outcomes
6. The Sustainable Development Goals
The 17 Goals and 169 targets will stimulate action over the
next fifteen years in areas of critical importance for ending
poverty, protecting the planet, and sharing prosperity with all:
• People We are determined to end poverty and hunger, in all their forms and dimensions, and to ensure
that all human beings can fulfil their potential in dignity and equality and in a healthy environment.
• PlanetWe are determined to protect the planet from degradation, including through sustainable
consumption and production, sustainably managing its natural resources and taking urgent action on climate
change, so that it can support the needs of the present and future generations.
• Prosperity We are determined to ensure that all human beings can enjoy prosperous and fulfilling lives
and that economic, social and technological progress occurs in harmony with nature.
• Peace We are determined to foster peaceful, just and inclusive societies which are free from fear and
violence. There can be no sustainable development without peace and no peace without sustainable
development.
• Partnership We are determined to mobilize the means required to implement this Agenda through a
revitalized Global Partnership for Sustainable Development, based on a spirit of strengthened global solidarity,
focused in particular on the needs of the poorest and most vulnerable and with the participation of all countries,
all stakeholders and all people.
7. How will the SDGs be met?
• Data
• More and better data is needed for monitoring, policy, learning and
accountability.
• Implementation
• Effective partnerships can facilitate implementation
• Move policy and resources together – “banking with ideas”
• “Acceleration” should start from day one: build ownership and
commitment early on; peer monitoring is useful; high level coordination,
e.g. through the CEB helps.
• Finance
• Finance needs to be substantial, flexible, and efficient.
9. Financing the SDGs: Context
2002 Monterrey Consensus on the MDGs
Global development cooperation to mobilize and
increase effective use of financial resources to
achieve the Millennium Development Goals
Post-2015 financing framework will build on:
1) Lessons learned from Monterrey and the MDG
effort
2) Changes in the global economic landscape:
For example:
• Growth of emerging economies
• Increasing role of the private sector
• Climate change
10. Critical Components of Financing
for Development
National public resources:
Improving domestic resource
mobilization
Global public resources: Better and smarter aid
National private resources:
Unlocking private investment for
development
Global private resources:
Attracting FDI, Remittances,
Philanthropic finance for
development objectives
11. Financial Flows to Developing Countries
Source: Organization for Economic Co-operation and Development
12. Optimizing Financing for Development
12
Source: Report of the Intergovernmental Committee of Experts on Sustainable Development Financing (2014), United Nations
13. Islamic Finance –
A pro-development financialsystem
•Economic and
Social Justice
•Inclusive Growth
• Entrepreneurship
• Redistributive
Instruments (Zakaat,
Qard-al-Hassan,
Waqf, Sadaqaat, etc)
• Economic Institutions
• Property Rights
• Contracts,
• Trust
• Rules of Markets
• Business Ethics
• Prohibition of
Interest,
• Promotion of
Exchange and Trade
• Information
Asymmetry (gharar)
Risk Sharing
Corporate
Governance
and
Leadership
Economic
Development
Financial
Inclusion
13
14. Improving financial
stability
Improving depth,
breadth and efficiency
Enhancing access to
financial services
Islamic financial institutions may be more resilient
to particular shocks
They may help to diffuse risk in the financial system
Diversification of financing sources
Providing competition to conventional financial
institutions
Widening the range of products and services
available to businesses and households
Improving access of the underserved to financial
services
14
Islamic finance improves overall
financial sector development
15. Critical components of Islamic
Finance with direct SDG impact
1. Financial inclusion;
2. Financial stability;
3. Social and environmental factors;
4. Infrastructure
Ahmed, H.; Mohieldin, M; et al. World Bank Working paper on Sustainable Development Goals and the Role of Islamic Finance, 2015
http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2015/05/15/090224b082e882eb/1_0/Rendered/PDF/On0the0sustain0e0of0Islamic0finance.pdf
16. In countries with more developed
financial intermediaries:
• Income inequality falls more
rapidly (declining Gini
coefficient)
• Income of the poorest 20%
grows faster
• Credit constraints on the poor
are less severe, helping capital
allocation and improving
growth
Vertical axis: Income Inequality –changes in Gini coefficient (1960-2005);
Horizontal axis: Financial Sector Development – logarithm of private sector credit to GDP ratio
(period average).
Source: Beck, Demirgüç-Kunt, and Levine (2007).
16
1a. Financial Development and Financial Inclusion
17. 1b. Role of Islamic Financial and Social Sectors
in Promoting Financial Inclusion
Financial Institutions Capital Markets
Social Sector –
Zakat and Waqf
• Special units to serve
microfinance in Islamic banks
• Organizational diversity
(cooperatives, NPOs, etc.)
• Use of ICT to expand provision
of services
• Savings opportunities for the
poor
• Expansion of micro-takaful
• Social Sukuk to raise
funds (BRAC)
• Retail sukuk
• Integration with microfinance
• Waqf /zakat based MFIs
• Subsidize MFIs
• Using zakat and waqf as
safety nets
• Use waqf/zakat to pay
contributions for takaful
18. 2a. Role of Islamic Financial Sectors in
Promoting Financial Stability
Financial Institutions Capital Markets
• Organizational diversity (VC private
equity firms, modarabah companies,
etc.)
• Equity based financing
• New equity-based financial firms
• Expansion of equity based capital
markets
• Listing opportunities for medium and
smaller firms
• Public and private risk-sharing sukuk
19. 2b. Example: Financial Stability through
Equitisation of Debt (Buiter and Rahbari 2015)
• Equitisation of bank debt (moving from bonds to equity)
• Because of regulatory and supervisory failures, creditors have had
free default insurance. True risk and profit sharing would not put
undue burden on tax payers
• Equitisation of mortgage debt
• For households, the greater use of Islamic mortgages, whereby
resident households and banks become joint owners of the house
until it is fully repaid by the resident, promotes financial stability
• Equitisation of public debt
• Risk-sharing by linking interest rates with growth rates of nominal
GDP plus or minus a fixed number
20. Higher levels of financial
development cause:
• a faster decline in the fraction of
population living below the
poverty line.
• a lower incidence of poverty
compared to other countries at
the same income level
Empirical evidence shows:
• a 10 percentage point increase in
private credit to GDP ratio
reduces the share of the
population in poverty by 2.5 to 3
percentage points
• a 1 percentage point increase in
private credit to GDP reduces
malnourishment by 0.2 to 2.5
percentage points
Romania
-2 -1 0 1 2
-4
-2
0
2
4
Slovenia
Jamaica
Malaysia
Thailand
Mali
Zambia
Uganda
Ghana
El Salvador
LAO PDR
● Residuals − Fitted Values
Cluster Representing
Most Countries
Change in poverty
headcount
Sources: Beck, Demirgüç-Kunt, and Levine (2007); Honohan (2004), Claessens and Feijen (2007).
Private credit as a
share of GDP
22
3a. Financial Development and Social Impact
21. 3b. Role of Islamic Financial and Social Sectors
in Promoting Social Impact
Financial
Institutions
Capital Markets
Social Sector –
Zakat and Waqf
• Incorporation of macro-
maqasid perspective in
operations
• Financing development of
social sector
• Positive screening (along
with negative screening)
• Social sukuk
• Sukuk to develop waqf
• Expand zakat and waqf
base
• Increase the efficiency
and effectiveness of
Z&W
22. 4a. Role of Islamic Financial Sectors in
Promoting Infrastructure Investment
Financial Institutions Capital Markets
• Syndicated finance • Private/public sector sukuk for
infrastructure
• Retail sukuk
23. 4b. Example:
Islamic Development Bank and
Infrastructure Investment
• World Bank has launched the Global Infrastructure Facility
(GIF), a platform to facilitate the preparation and
structuring of complex infrastructure public-private
partnerships (PPPs) to enable mobilization of private
sector and institutional investor capital.
• The Islamic Development Bank is a partner
IsDB is a development bank, so doesn’t really showcase
the potential of Islamic Finance in infrastructure investment
24. 4c. Example:
Role of Islamic Finance in Infrastructure
Investment
• 2012 witnessed a record-breaking number of new
infrastructure sukuk issuances, amounting to USD 27.8
billion (140% rise)
• During this year, infrastructure sukuk represented 21% of
total global sukuk issuances
Malaysia International Islamic Financial Centre, Sukuk Growing Relevance in Infrastructure Development, 2013
25. Concluding remarks
• Islamic Finance has the potential to support the achievement of the
Sustainable Development Goals
• Islamic Finance specifically supports financial inclusion, financial stability,
social and environmental development, and infrastructure investment
• These aspects are fundamental to the achievement of the SDGs and thus
the development community would greatly benefit from the adoption of
Islamic Finance principles in their financial institutions, capital markets, or
social sectors
• Despite the potential of Islamic Finance, attention must be paid to liquidity
and risk management and adherence to effective regulatory provisions and
adequate supervision
26. 1. End poverty in all its forms everywhere
2. End hunger, achieve food security and improved nutrition, and promote sustainable agriculture
3. Ensure healthy lives and promote well-being for all at all ages
4. Ensure inclusive and equitable quality education and promote life-long learning opportunities for all
5. Achieve gender equality and empower all women and girls
6. Ensure availability and sustainable management of water and sanitation for all
7. Ensure access to affordable, reliable, sustainable, and modern energy for all
8. Promote sustained, inclusive and sustainable economic growth, full and productive employment and
decent work for all
9. Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation
10. Reduce inequality within and among countries
11. Make cities and human settlements inclusive, safe, resilient and sustainable
12. Ensure sustainable consumption and production patterns
13. Take urgent action to combat climate change and its impacts*
14. Conserve and sustainably use the oceans, seas and marine resources for sustainable development
15. Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests,
combat desertification, and halt and reverse land degradation and halt biodiversity loss
16. Promote peaceful and inclusive societies for sustainable development, provide access to justice for all
and build effective, accountable and inclusive institutions at all levels
17. Strengthen the means of implementation and revitalize the global partnership for sustainable
development
29
Annex: Proposed Sustainable Development Goals (SDGs)
27. Annex: contribution of the financial and social sectors to SDGs
SDGs
Financial
Inclusion
Financial
Stability
Social &
Environmental Impact
Infrastructure
Development
End poverty everywhere X X
End hunger, achieve food security and improved nutrition and promote sustainable
agriculture
X X X
Ensure healthy lives and promote well-being for all at all ages X X X
Ensure inclusive and equitable quality education and promote lifelong learning opportunities
for all
X
Achieve gender equality and empower all women and girls X X
Ensure availability and sustainable management of water and sanitation for all X X
Ensure access to affordable, reliable, sustainable and modern energy for all X
Promote sustained, inclusive and sustainable economic growth, full and productive
employment and decent work for all
X X
Build resilient infrastructure, promote inclusive and sustainable industrialization and foster
innovation
X
Reduce inequality within and among countries
Make cities and human settlements inclusive, safe, resilient and sustainable X X
Ensure sustainable consumption and production patterns
Take urgent action to combat climate change and its impacts X
Conserve and sustainably use the oceans, seas and marine resources for sustainable
development
X
Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage
28. Annex: Zakahcan fill PovertyGaps in 20 Muslim Countries
31
(1)
Country name
(2)
Survey year
(3)
GDP
PPP
Current USD (Billion)
(4)
Muslim pop.
(%)
(5)
Adjusted GDP PPP
USD (Billion)
(6)
Domestic Zakah
(Billion USD)
(7)
Incoming
remittances
(Billions USD)
(8)
Domestic savings rate
(% of GDP)
(9)
Zakah considering
Remi-ttances
(% of GDP)
(10)
resource shortfall
under $1.25 per
annum as % of GDP
(11)
Does Zakah
cover (10)?
Albania 2008 26.45 79.9 21.13 0.38 1.50 1.60 1.44 0.01 y
Algeria 1995 129.75 98 127.16 2.29 1.12 28.11 1.77 0.14 y
Azerbaijan 2008 76.73 99.2 76.12 1.37 1.55 64.89 1.82 0.01 y
Bangladesh 2005 163.73 89.6 146.70 2.64 4.31 18.06 1.62 5.58 n
Benin 2003 9.14 24.4 2.23 0.04 0.06 5.98 0.44 5.78 n
Burkina Faso 2003 12.09 59 7.13 0.13 0.05 4.51 1.06 9.83 n
Cameroon 2007 39.77 17.9 7.12 0.13 0.17 18.53 0.32 0.26 y
Comoros 2004 0.63 98.3 0.62 0.01 0.01 0.00 1.77 8.89 n
Cote d'Ivoire 2008 34.30 36.7 12.59 0.23 0.20 17.85 0.66 2.05 n
Djibouti 2002 1.24 96.9 1.20 0.02 0.01 4.87 1.75 1.49 y
Egypt 2005 333.22 94.6 315.22 6.30 5.02 15.71 1.90 0.04 y
Gabon 2005 17.84 9.5 1.69 0.03 0.01 58.35 0.17 0.03 y
Gambia 2003 1.46 95 1.38 0.02 0.06 11.05 1.72 5.42 n
Guinea 2007 9.78 84.4 8.25 0.15 0.15 9.68 1.52 6.71 n
Guinea-Bissau 2002 1.26 42.2 0.53 0.01 0.02 0.00 0.76 8.21 n
Guyana 1998 1.54 7.2 0.11 0.00 0.01 16.94 0.13 0.88 n
Indonesia 2009 965.57 88.2 851.63 8.52 6.79 33.76 0.89 0.39 y
Iran 2005 643.50 99.4 639.64 11.51 1.03 41.09 1.79 0.02 y
Iraq 2007 94.97 99 94.02 1.69 0.00 0.00 1.78 0.09 y
Jordan 2006 26.14 98.2 25.67 0.46 2.88 0.00 1.77 0.01 y
Kazakhstan 2007 169.63 56.4 95.67 1.72 0.22 43.84 1.02 0.00 y
Kyrgyz Republic 2007 10.62 86.3 9.17 0.16 0.71 0.00 1.55 0.02 y
Malaysia 2009 384.88 60.4 232.47 4.18 1.13 36.03 1.09 0.00 y
Maldives 2004 1.20 98.4 1.18 0.02 0.00 46.15 1.77 0.02 y
Mali 2006 12.67 92.5 11.72 0.21 0.21 14.75 1.67 8.20 n
Morocco 2007 127.85 99 126.57 2.28 6.73 23.37 1.81 0.06 y
Mozambique 2008 18.89 22.8 4.31 0.08 0.12 1.57 0.41 13.62 n
Niger 2007 9.25 98.6 9.12 0.16 0.08 0.00 1.77 8.31 n
Nigeria 2004 224.62 50.4 113.21 2.04 2.27 0.00 0.91 8.26 n
Pakistan 2005 340.26 96.3 327.67 5.24 4.28 15.21 1.55 0.91 y
Senegal 2005 18.21 96 17.48 0.31 0.79 14.09 1.74 3.05 n
Sierra Leone 2003 2.72 71.3 1.94 0.03 0.03 0.00 1.28 16.10 n
Suriname 1999 2.02 15.9 0.32 0.01 0.00 11.25 0.29 0.61 n
Syrian Arab 2004 70.02 92.2 64.56 0.97 0.86 20.20 1.39 0.02 y
Tajikistan 2004 8.77 84.1 7.38 0.13 0.25 0.61 1.51 1.70 n
Togo 2006 4.96 12.2 0.61 0.01 0.23 0.00 0.22 6.42 n
Turkey 2005 781.24 98 765.62 14.55 0.89 16.49 1.86 0.04 y
Uganda 2009 39.81 12.1 4.82 0.09 0.75 12.52 0.22 3.10 n
Yemen 2005 46.13 99.1 45.71 0.82 1.28 0.00 1.78 0.87 y
Source: Mohiedin et al. 2011
Editor's Notes
They rise or fall together
Without finance: no clear understanding of means of implementation
Without the SDGs: no guidance on what is important as seen by the global community
Without successful climate summit – we might have in the end have ended poverty and improved other dimensions of peoples well being but probably no planet to enjoy it on. Well not as beautiful as he is today. Hence, no sustainable poverty reduction.
Focus today is on financing for (sustainable) development:
More precisely what the WBG and actually its multilateral partners are doing to assist with the preparation of the third conference on FfSD
Mention Doha, Rio + 20
Flows are trending higher, with strong growth in private flows and remittances
However, private flows tend to be pro-cyclical and concentrated in a few developing economies.
Most low income countries still lack access to international capital markets
restricted by regulation.
Islamic finance is not about what is prohibited, but about what it allows or advocates for
Characteristics of an Islamic Financial System:
Ensures a close link between the real economy and financial sector.
Emphasizes principles of morality and ethics in business conduct.
Advocates the sharing of risk and reward (Calls for bank deposits to be collected on a profit/loss- (PLS) sharing basis rather than fixed predetermined liabilities)
While the world as a whole averages just less than 12 accounts per 1,000 adults, the Organization of Islamic Cooperation (OIC) countries average about 8¾. On average, about 35 percent of firms worldwide report having a loan or line of credit from a formal financial institution, whereas the average for OIC countries is less than 21 percent. Similarly, the OIC countries’ average depth, at 32 percent of GDP, is 25 percentage points below the world average.
1c. Example of Islamic microfinance in Pakistan: Akhuwat Case Study (slide is hidden – will be in your printout but not on the screen)
1d. Example of “Hybrid” Islamic financing in Afghanistan (Helmand) (slide is hidden – will be in your printout but not on the screen) - Lease of a fixed asset to expand operations or to start a new income generating activity (Ijara) + Working capital financing to support the use of the fixed assets (Murabaha)
= Financing for small businesses and farmers
3c. Example: Potential of Awqaf in Meeting Poverty Gap
India: Estimated market valuation of registered awqaf assets: USD24 billion
Minimum expected annual cash flows: USD2.4 billion (0.325 percent of GDP)
Resources required to push all Muslims (153 million) above USD1.25 income per day: 0.301 percent of GDP
Indonesia: Market value of registered land wakaf assets: Rp 590 trillion (USD 60 billion)
Minimum expected annual cash flows: USD6 billion (0.849 percent of GDP)
Resources required to push all Indonesians above USD1.25 income per day: 0.411 percent of GDP
Malaysia represented 73% of all sukuk issuances that year
Saudi Arabia represented 22%
Compare to 8 MDGs, 21 targets, 60 indicators
17 SDGs, 169 targets
The proposed post-2015 development agenda is significantly more ambitious than the MDGs, a set of development goals aimed ensuring at the most basic services for the world’s poor. The post-2015 agenda embraces concepts of environmental, social and economic sustainability. It encourages every country to eradicate poverty, promote sustainability, and protect the natural resource base of social and economic development