Durham University Durham, United Kingdom July, 2016

1. The 2030
Development
Agenda &
Islamic Finance
Senior Vice President
Mahmoud Mohieldin
Durham University
July, 2016

2. PRESENTATION OBJECTIVES
1. Take a look back at how the 2030 Development Agenda shaped up in a
global context of raising debt and complex institutional arrangements
2. Note global trends affecting implementation of the SDGs
3. Discuss how the World Bank Group maintains institutional focus the
2030 commitments and approaches on data, financing, and
implementation
4. Describe how the Islamic Finance can help leverage partnerships and
innovative financing mechanisms for the 2030 Development Agenda
implementation
1
1
2
3
4

3. 1 Shaping the 2030 Development Agenda
2

4. MDGs ERA: LOOKING BACK AT THE STATE OF THE WORLD
Source: World Bank
• Shift in income distribution affected by :
• rural- urban divide
• demographic features
• Other aspects impacting development
progress:
• delayed or stalled transition to low
fertility and to low mortality rates
• Sample countries:
• 24 AE (Advanced Economies)
• 14 EMDE (Emerging Market and
Developing Economies)
• Data is the market value of private
sector non-financial debt to GDP
Global Income Distribution Shifting… … with Rapidly Rising Private Debt
Sources: World Bank, Federal Open Market Committee
3

5. PROGRESS TOWARDS MEETING THE MDG TARGETS:
UNEVEN
4

6. 5
PROGRESS ON THE MDGs IN MENA REGION
Success on some MDGs offset by underachievement in other vital areas
MENA countries have drastically
improved access to
Water and Sanitation
Maternal and Infant Mortality,
Undernourishment goals
remained unmet by most of MENA countries *
* World Bank analysis (2015) showing the number of
countries that have met the above MDGs

7. GLOBAL FRAMEWORKS FOR DEVELOPMENT:
FROM MDGs TO SDGs
MDGs (1990-2015) SDGs (2016-2030)
Goals 8 17
Targets 21 169
Indicators 60 ~231
Priority Areas Human Development
Holistic: Economic, Social,
Environmental
Scope Developing Countries Universal
6

8. July 2015 – Third Financing for Development Conference in
Addis Ababa
September 2015 – SDG Summit & United Nations General
Assembly in New York
October 2015 – WBG-IMF Annual Meetings in Lima
December 2015 – Conference of the Parties of the UN
Framework Convention on Climate Change in Paris
KEY MILESTONES THAT HELPED SHAPE
THE 2030 DEVELOPMENT AGENDA
7

9. THE 2030 DEVELOPMENT AGENDA:
Ending Poverty, Preserving the Planet, While
Leaving No One Behind
8

10. 2 Global trends affecting implementation of
the 2030 Development Agenda
9

11. GLOBAL TRENDS AFFECTING THE 2030 AGENDA
GLOBAL
TRENDS
SDG implementation
Evolution of
globalization
ADDRESSING THE CHALLENGES AHEAD
• Protecting the poor and displaced from conflict,
violence, fragility and other disruptions (SDG#1;
SDG#16)
• Sustainable health and welfare systems for
vulnerable population segments (SDG#3)
• Jobs and economic opportunities (SDG#8)
• Disaster risk preparedness and mitigation of macro-
shocks (SDG#13)
• Adaptation of agriculture to changing climate
(SDG#2)
• Shift in public/private spending from fossil fuels to
renewables and energy efficiency (SDG#7)
• New sources of growth and trade, especially for
commodity exporters (SDG#9)
• Urban management for sustainable cities (SDG#11)
• Private expertise/funding for infrastructure/urban
services (SDG#11; SDG#9; SDG#17)
Cycles, disruptions,
and fragility
Pressure on resources
and climate change
Urbanization
Demography
10

12. 11
SUMMARY BASED ON OFFICIAL STATEMENTS* BY
MEMBER STATES AT THE UN GENERAL ASSEMBLY
64
20
Government
statements
client countries, in all regions
OECD countries
84
presented their plans on achieving the SDGs:
* Official statements made are available online: https://papersmart.unmeetings.org/ga/70th-session/high-level-thematic-debate-on-
achieving-the-sustainable-development-goals/statements/
Country development strategy aligned Institutional structures aligned
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
OECD EAP LCR SAR MNA AFR ECA
Not declared
No
In progress
Yes
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
OECD EAP SAR LCR MNA AFR ECA
No
No
In
Ye
Yes In progress No Not declared

13. 12
PRIORITY GOALS HIGHLIGHTED BY COUNTRIES*
Countries
SDG # %
SDG
13 25 31%
SDG
1 21 26%
SDG
5 15 19%
SDG
4 14 17%
SDG
8 14 17%
SDG
16 12 15%
SDG
2 11 14%
SDG
10 10 12%
SDG
3 9 11%
SDG
6 7 9%
SDG
7 7 9%
SDG
12 7 9%
SDG
9 5 6%
SDG
14 4 5%
SDG
17 3 4%
SDG
11 2 2%
SDG
15 2 2%
* Based on analysis of statements made on April 21, 2016 during the High-Level Thematic Debate (HLTD) event
held at United Nations. Statements available online: https://papersmart.unmeetings.org/ga/70th-session/high-level-
thematic-debate-on-achieving-the-sustainable-development-goals/statements/ 12

14. 13
MOST FREQUENTLY IDENTIFIED CHALLENGES:
CONFLICTS, CLIMATE CHANGE, FINANCING, DATA
Conflicts
Lack of
financing
Lack of
capacity
Clim.
change
Lack
data
Environ
ment
Viol-
ence
Climate
change
Lack of
financing
Lack
data
Lack
capa-
city
Lack of
capacity
Climate
change
Lack of
financing
Conflicts
Violence/
extremism
Environ-
ment Lack of
capacity
Climate
change
Lack of
data
Conf-
licts
CC
Lack
capa-
city
Climate
change
Trade
restric-
tions
Pop.
displa-
cement
Conflicts
violence
Lack
data Lack
fin.
(OECD: no specific themes
consistently raised)
Topic
Size proportional to
share of countries with
a statement identifying
the challenge within the region
30%
40%
50%
70%
20%
* Based on analysis of statements made on April 21, 2016 during the High-Level Thematic Debate (HLTD) event held at United Nations.
Statements available online: https://papersmart.unmeetings.org/ga/70th-session/high-level-thematic-debate-on-achieving-the-sustainable-
development-goals/statements/

15. 3 World Bank Group‘s institutional focus on
the 2030 commitments
14

16. 15
WBG COMMITMENTS AND APPROACHES TO THE 2030 AGENDA
September 2015 December 2015 May 2016
April 2015
July 2015
April 2016
MDBs Extend
$400B+/3 years,
Joint IMF/WBG
Tax Initiative
Household-Based
Surveys in 78
poorest countries
by 2020
Increase climate
financing from 21%
to 28% of WBG
portfolio by 2020
Joint MENA Financing Facility
supports refugees and host
communities
Commitments in
response to forced
displacement
crisis
In 2016 co-host
with MDBs first
Global Infrastructure
Forum
October 2015

17. 16
WBG AREAS OF ACTION TO SUPPORT THE 2030 AGENDA
IMPLEMENTATIONDATA FINANCING
Country engagement
model; Draw on strength
of entire WBG to provide
integrated solutions
Domestic resource
mobilization; leveraging
private sector; addressing
needs of regional and global
public goods
Ensure availability of
household budget surveys in
78 poorest countries every
three years; data revolution;
statistical capacity building
WBG action on the SDGs has been articulated along these three focus areas

18. 17
NEW FINANCING TOOLS UNDERPIN EFFORTS TO
STENGTHEN THE HUMANITARIAN – DEVELOPMENT NEXUS*
NEW WAY OF WORKING WITH UN AND MDBs
REINFORCE, DO NOT REPLACE
national and local systems
ANTICIPATE, DO NOT WAIT
for possible crises
DELIVER COLLECTIVE
OUTCOMES
Strengthen the basis on
which policies and
programs are designed
Engage collaboratively
on crises’ prevention
and response
Strengthen MDBs
engagement, with first
concrete opportunity being
MENA Facility
Dataand
evidence
Joint
engagements
Financing
instruments
NEW ACTION-ORIENTED PARTNERSHIP
Source: OECD-DAC data, World Bank analysis
* Based on the outcomes of the March 16, 2016 Roundtable held at the World Bank

19. Attracting FDI,
Remittances,
Philanthropic
finance
Unlocking private investment
Better and smarter aid
Improving domestic resource
mobilization
WBG PROMOTES ISLAMIC FINANCE IN DIFFERENT
AREAS OF FINANCING FOR DEVELOPMENT
wbg
NATIONAL
PUBLIC
FUNDS
GLOBAL
PUBLIC
FUNDS
NATIONAL
PRIVATE
FUNDS
GLOBAL
PRIVATE
FUNDS
18

20. 19
• Issuance of various
Islamic Finance
instruments, incl.
sukuk, which have
raised $700M in 2015
EXAMPLES OF WBG SUPPORT TO ISLAMIC FINANCE
DIFFERENT PARTS OF THE WBG SUPPORT ISLAMIC FINANCE
• Establishment of the
IFC Sukuk Company,
which issued $100M in
trust certificates in
2015
• 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 help advance Islamic Finance and has
introduced investment projects that use Islamic financing across the world.

21. 4 Role of the Islamic Finance in supporting
the 2030 Development Agenda
20

22. ISLAMIC FINANCE –
A PRO-DEVELOPMENT FINANCIAL SYSTEM
•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
21

23. 22
 Helps Islamic financial institutions to be more
resilient to particular shocks
 May help to diffuse risk in the financial system
 Helps achieve empowerment of marginalized
groups
 Helps access funds used for nutrition,
healthcare and education
ISLAMIC FINANCE SUPPORTS A NUMBER OF
SUSTAINABLE DEVELOPMENT OBJECTIVES
 Helps attract investment in infrastructure
 Can be leveraged to attract private funding and
form private public partnerships (PPPs)
Financial
stability
1
Financial
inclusion
2
Social
impact
3
Infrastructure
development
4
 Helps widening the range of products and
services available to businesses and
households
 Helps improving access of the underserved to
financial services

24. 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
Financial
stability
1
23

25. 24
Example: Financial Stability Through Equitisation of Debt
• Equitisation of bank debt (moving from bonds to
equity): True risk and profit sharing would not put
undue burden on tax payers
• Equitisation of mortgage debt: whereby resident
households and banks become joint owners of the
house until it is fully repaid by the resident
• Equitisation of public debt: by linking interest rates with
growth rates of nominal GDP
Buiter And Rahbari 2015

26. 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
• 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
Financial
inclusion
2
25

27. 26
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).
Example: Financial Inclusion Through Financial Sector
Development

28. 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
zakat and waqf
Social
impact
3
27

29. 28
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
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
Example: Social Impact Through Financial
Sector Development

30. Financial Institutions Capital Markets
• Syndicated finance • Private/public sector sukuk for
infrastructure
• Retail sukuk
Infrastructure
development
4
29

31. 30
Example: Infrastructure Investment and Public
Private Partnerships
Global
Infrastructure
Finance
Islamic Finance
(Sovereign direct
borrowing,
sovereign sukuk
etc)
Islamic Finance
for PPP
• Islamic finance for infrastructure
development is a niche segment in
the global PPP space:
• Sovereign direct borrowing,
sovereign sukuk can be leveraged
to attract private funding and form
PPPs.
• It can be leveraged to cover the
global infrastructure financing gap
of nearly US$ 1 trillion every year:
• annually, the world spends
approximately US$ 9 trillion in
infrastructure across all the
different assets classes
• by 2030, the world will need US$
60 – 70 trillion additional
infrastructure capacity.

32. 31
SUMMARY
• The SDGs will require unprecedented mobilization of resources and
Islamic Finance has the potential to support progress
• Islamic Finance specifically supports financial inclusion, financial
stability, social and environmental development, and infrastructure
investment, as well as humanitarian work
• These aspects are fundamental to the achievement of the SDGs and
thus the development community could greatly benefit from the
adoption of Islamic Finance principles in their financial institutions,
capital markets, or social sectors
• The World Bank Group and its partners have a role to play in
supporting the growth of the role of Islamic finance in supporting
development and humanitarian goals

33. Thank You
Senior Vice President
Mahmoud Mohieldin
Durham University
July, 2016

34. Annex 1: Contribution of the financial and social sectors to
the achievement of the 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
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

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