Islamic finance can alleviate poverty – World Bank, IDB

Islamic social finance has the potential to alleviate poverty and create a social safety net for the extremely poor, the first global report on Islamic Finance has revealed.

The report published by the World Bank Group and the Islamic Development Bank said Islamic finance instruments such as qard hasan, zakt, sadaqt, waqf are rooted in redistribution and philanthropy, making it a potential weapon to alleviate poverty.

The first Global Report on Islamic Finance published recently details the prospects for the global Islamic finance industry and potential to help reduce worldwide income inequality, enhance sharing prosperity, and achieve the Sustainable Development Goals.

The report found that tapping into the potential of the institutions like zakt and waqf, the resource needs for the most deprived in most countries in South and Southeast Asia and Sub-Saharan Africa could be met.

The report made a case for the Islamic finance industry to expand beyond banking, which is currently a dominant component of Islamic finance, accounting for more than three-quarters of the industry’s assets.

It recommends creating an enabling regulatory and supervisory environment that addresses systemic risk across jurisdictions; introducing innovative risk-sharing products and services, rather than replicating conventional risktransfer products; unifying crosscountry shar‘ah rulings on Islamic finance; enhancing access to Islamic finance; and bolstering Islamic finance human capital and literacy.