Tokyo: A good news has emerged for the Muslim Asian countries willing to improve Islamic Finance structure as the Asian Development Bank (ADB) has announced that it will help Afghanistan, Bangladesh, Indonesia, and Pakistan to have stronger access to the Islamic finance with a technical assistance grant of $750,000.
According to the announcement made by ADB, in response to requests for assistance from the governments of the four countries, the grant will be used, amongst others, to develop an e-module platform to build capacities of officials in those countries on prudential standards developed by the Islamic Finances Services Board (IFSB).
The Manila-based lender said in a press release that Bank Negara Malaysia has agreed to share their experience in implementing standards to assist their regional peers.
“Islamic finance can provide access to the unbanked and promote financial stability through development of an alternative asset class. This can help diversify the finance sector in developing Asia,” said Sani Ismail, ADB’s Financial Sector Economist.
An action plan will also be drawn up to develop Islamic capital markets in participating developing countries, the ADB said, adding that the plan will focus on harmonizing disclosure requirements of Islamic capital markets products, developing Islamic collective investment schemes and recommending tax treatment of Islamic capital market products.
It marks ADB’s first technical assistance provided to support Islamic finance following the recent signing of a Memorandum of Understanding between the ADB and the IFSB in October.
Islamic finance refers to financial transactions that are consistent with Shariah (Islamic law), resting on principles such as the materiality of transactions and mutual risk sharing. It includes banking, Takaful (Islamic insurance) and Sukuk (Islamic financial certificate).
Interest in Islamic finance has grown steadily, despite the downturn in the global financial crisis, with estimates that Islamic banking assets globally will reach $1.1 trillion in 2012, according to the ADB.
The ADB is a multilateral development finance institution dedicated to reducing poverty in Asia and the Pacific. Established in 1966, it has now owned by 67 members, mostly from the region, as well as the US, the UK and Germany. The Kuala Lumpur-based IFSB is an international standard-setting organization that promotes and enhances the soundness and stability of the Islamic financial services industry.
As of March, the 187 members of the IFSB comprise 53 regulatory and supervisory authorities, eight international inter-governmental organizations and 126 market players, professional firms and industry associations.
Kuwait's Central Bank and seven other financial institutions, including Kuwait Finance House and Boubyan Bank, are its members.