This document discusses how Islamic capital markets can support sustainable development goals. It provides an overview of the SDGs and financing needs. Islamic finance principles like risk-sharing and asset-backed instruments allow sukuk to finance infrastructure. The large and growing Islamic finance industry worth over $2 trillion indicates its potential. However, markets require robust legal and regulatory frameworks. The World Bank Group is leveraging Islamic finance through various projects and instruments like green sukuk and social bonds. Collaboration between public and private sectors is needed to mobilize financing and achieve the 2030 development agenda.

1. On the
Sustainable
Development
Goals and
Islamic Capital
Markets
Senior Vice President
Mahmoud Mohieldin
Durham University
July, 2018

2. Presentation Objectives
• Take a look at the 2030 Development Agenda and SDGs and understand
their importance and implications,
• Provide a comprehensive overview of financing for sustainable
development
• Describe how Islamic Finance can help leverage partnerships and
innovative financing mechanisms for the SDGs
• Discuss the connection between Islamic capital markets and SDGs
• Discuss the role of the WBG
1
1
2
3
4
5

3. 1 The 2030 Development Agenda & the SDGs
2

4. Progress on the MDGs was uneven
4

5. Poverty declined significantly, largely
due to major progress in East Asia
4
51%
0%
4%
30%
15%
1990
East Asia and Pacific Europe and Central Asia
Latin America and the Caribbean South Asia
Sub-Saharan Africa
Global poverty:
1.96 billion
37.1 % of global
population
12%
1%
4%
33%
50%
2015
Global poverty:
702 million
9.6% of global
population

6. The SDGs present a major
opportunity for transformation
Global development agendas serve as a guide for countries to determine their national development path
MDGs (2000-2015) SDGs (2016-2030)
Goals/
Targets/Indicators
8/21/60 17/169/~230
Priority Areas Human Development Holistic: Economic, Social, Environmental
Scope Developing Countries Universal
5

7. Global Megatrends and Challenges
Source: World Bank Forward Look, September 2017
Fragility and violence
Shifts in the global economy
Climate and resources
Commodity cycles
Urbanization
Demographic transitions
Renewed political debate about globalization
Technological disruptions

8. 2 Financing Sustainable Development
2

9. Key enablers of the ‘Financing for
Development’ agenda:
8
● Mobilizing all sources of finance and increasing their
combined impact
● Leveraging public finance
● Crowding in the private sector in financing development
● Strengthening MDBs’ capacity to catalyze finance.
● Harnessing technology and disruptive business models.
● Improving investment data.
● Creating development finance partnerships and building
multi-stakeholder platforms

10. A LARGE POOL OF
PRIVATE CAPITAL
IS YET TO BE
CATALIZED
WITH JUDICIOUS USE OF
SCARCE PUBLIC
AND CONCESSIONAL
RESOURCES
9
Finance for the SDGs will need to
come from multiple sources

11. Financing sustainable development
Source: World Bank, 2018
When a project is presented, apply the “Cascade”. You should
ask: “Is there a sustainable private sector solution that limits public debt and
contingent liabilities?” If the answer is...
Promote such private sector solutions
• The WB could play an important role in supporting the govt to
advance appropriate private sector solutions. i.e. thru technical
assistance for relevant reforms and capacity building, project
identification and prep support, project structuring, and support to
the govt in negotiations with the private sector
Ask whether its because of:
• Policy or regulatory gaps or weaknesses? If so, provide
WBG support for policy and regulatory reforms.
• Risks? If so, assess the risks and see whether WBG
instruments can address them.
YES
NO

12. How can the private sector get
involved?
$24.4 trillion
in low-yield
government
securities
More than
$10 trillion
invested in
negative
interest rate
bonds
$8 trillion
sitting in
cash
How much is out there?

13. 3 Trends in Global Islamic Capital Markets
20

14. 13
Total Islamic financial assets now
exceed US$ 2 trillion
Global Islamic Finance Assets (US$ Billion)

15. 14
In tandem, the sukuk market has
also expanded substantially
Demand for sukuk has been surpassing the level of sukuk issuances worldwide.
Source: Thomson Reuters
Global Sukuk Supply & Demand (US$ Billion)

16. Source: MIFC
Infrastructure
Sukuk :
$73.1 Billion;
17%
Infrastructure
Sukuk :
$20.8 Billion;
13%
Infrastructure Sukuk as % of Total Sukuk
Issuances (2012 – 3Q2015)
Infrastructure Sukuk as % of Total Sukuk
Issuances (2009 -2011)
Total Sukuk Issuances: $160 Billion (2009 -2011) Total Sukuk Issuances: $420 Billion (2012 – 3Q2015)
Malaysia ;
61%
Saudi Arabia ;
30%
UAE; 7%
Indonesia ;
1%
Pakistan; 1% Others ;
0.2%
Infrastructure Sukuk Issuances by Country (2012 –
3Q2015)
Infrastructure sukuk issuances
15

17. 4 Role of Islamic Capital Markets in
supporting the 2030 Development Agenda
20

18. Islamic finance can support
sustainable development
objectives
17
Financial
Stability
Financial
Inclusion
Social
Impact
Infra
Development
Source: On the Sustainable Development Goals and the Role of Islamic Finance, Mohieldin et al, 2015

19. Islamic Capital Markets can be viable
sources of long-term development finance
18
Shariah-
Compliant
Activities
Money as
Potential
Capital
Sanctity of
Contract
Prohibition
on
Speculative
Transactions
Risk-Sharing
Asset-
Backed
Instruments
Prohibition of
Interest
Islamic
Capital
Markets
18
Islamic
Banking
Islamic
Capital
Markets
Takaful

20. Can sukuk be used for infrastructure
investment?
19Source: Naveed, Sukuk: asset securitization based on shari’a principles, 2015

21. 1
• Asset–backed nature of sukuk
2
• The link between underlying asset`s revenue and sukuk investor`s return
3
• Infrastructure financing is a leading reason for sukuk issuance
4
• Sukuk enables risk-sharing in high-risk development projects
5
• Sukuk offers flexible structures for different phases of development projects
6
• Sukuk might enhance Public-Private Partnership structures
7
• A wider investor base for Sukuk
Sukuk: A viable instrument for
development finance
2
0
20

22. Role of sukuk in financing sustainable
development
21
Usage Example
Fiscal support
Sudan: Over $100 million of Sukuk issued in 2012 to raise funds for the
government
Liquidity
management
Bahrain, Gambia and Brunei: Short-term Sukuk as tools of liquidity
management
Education
Osun State, Nigeria: Local currency, sub-sovereign Sukuk issue ($62 million
equivalent) for the construction and rehabilitation of 24 schools in 2013
Health
World Bank: Global Sukuk for $500 million raised by International Financial
Facility for Immunization to fund the supply of vaccines to some of the
world’s poorest nations in 2014
Infrastructure
Saudi Arabia: Global Sukuk for $1.7 billion to finance electricity projects in
2010.
Malaysia: Global Sukuk for $300 million to finance the Klang Valley Rapid
Mass Transit Project
Environment
Malaysia: The World’s first green sukuk launched in 2017 to finance
sustainable, climate-resilient growth
21

23. ICM
Ecosystem
Legal and
Regulatory
Framework Shariah
Governance
Framework
Tax
Framework
Gov’t
Support
Diverse
Pool of
Players
Strong
Intermediation
Institutions
Talent Pool
Markets require a robust enabling
environment
22
22

24. Enhance corporate governance and risk management
Strengthen the regulatory and supervisory framework
Promote standardization of products & documentation
Improve bankruptcy and insolvency regimes
Raise public awareness (financial literacy)
Increase the number of skilled professionals
Policy interventions will be critical
23
23

25. Components of a sound financial
sector
24
Consumer/
Investor
Protection
Effective
Regulations
Financial
Literacy
Financial
Innovation
Mobilize Savings and Allocate
Investments
Legal framework to enhance trust, confidence in financial
contracts and transactions
24

26. 5 The Role of the World Bank Group
20

27. • First green sukuk, in 2017
in Malaysia for $59M
• Issuance of various Islamic
Finance instruments, incl.
sukuk, which have raised
$700M in 2015
• Doraleh Container
Terminal Project, Djibouti
• Technical Assistance to
various governments
Examples of WBG work using Islamic finance
• Financing package for
Iraqi power company for
$375 million
• Establishment of the IFC
Sukuk Company, which
issued $100M in trust
certificates in 2015
• Queen Alia Airport Project,
Jordan
• Hajj terminal and Madinah
airport in Saudi Arabia and
• Provision of a $427M
Sharia-compliant
investment guarantee
for infrastructure
projects
• Political risk insurance
worth $450M in 2015
The WBG is working with partners to leverage the potential of Islamic finance and has introduced investment
projects that use Islamic financing across the world
Different parts of the WBG support Islamic finance

28. World Bank Group and socially
responsible investing
Sources: World Bank Group Treasury, Press Release from 03/09/2017
27
Impact investing instruments have social impact-linked goals,
similar to Islamic finance – and some instruments have the
potential to be Islam compliant. The WBG issues these types of
bonds. Examples include:
The SDG Bonds: Equity-linked bonds that link returns to
the performance of companies advancing global
development priorities
IFC’s Social Bond Program

29. 28
Source: World Bank Group Treasury, Press Release from 03/09/2017
Equity index linked bonds
Step 1: Exclusion of companies
Step 2: Selection of companies
contributing to the SDGs
Step 3: Final selection based on
suitability for equity index investing
The index composition follows a 3-step methodology to select
companies from the overall investment universe (developed country
companies assessed by VigeoEiris):
50 Companies (rebalanced annually)
28

30. The index
consists of 50
companies. The
graph shows the
current index
composition
mapped against
each companies’
contribution to
each of the 17
SDGs.
Source: VigeoEiris, Solactive (For illustrative purposes only.)
Index
composition

31. IFC’s Social Bond Program
Sources: IFC Social Bond Program Presentation, 2017
30
Bond
Structure
• Smallholder farming
• More affordable health, education,
utilities or housing services
• Goods and services
• Access to telecommunication and
payment platforms
• Lending to financial intermediaries;
proceeds of which must be on-lent to
women-owned enterprises
Projects will generally involve support for
low-income populations in the areas of:

32. Collaboration is necessary to meet
our collective potential
31We share a common goal: eliminating extreme poverty by 2030 and boosting shared
prosperity. We must work in partnership to be successful.

33. Senior Vice President
Mahmoud Mohieldin
Durham University
July, 2018
Thank You
worldbankgroup.org/sdgs
Follow us on twitter @WBG2030
Mahmoud-Mohieldin on
mmohieldin@worldbank.org

34. 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
forests, combat desertification, and halt and reverse land degradation and halt biodiversity
loss
X
Promote peaceful and inclusive societies for sustainable development, provide access to
justice for all and build effective, accountable and inclusive institutions at all levels
X X
Strengthen the means of implementation and revitalize the global partnership for sustainable
development
X X
Annex 1: Contribution of the financial and social sectors
to the achievement of the SDGs

35. Annex 2: Zakah can fill poverty gaps in 20 Muslim countries
(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: Mohieldin et al. 2011