ICD to launch clean-energy fund in Central Asia and to explore the potential of Islamic Finance in Africa.
BL: How does ICD intend to build capacity to support the international development of Islamic finance?
Khaled Mohammed Al- Aboodi: In my keynote speech at the opening of the World Islamic Banking Conference in 2012, I stressed the importance of building the capacity of the Islamic banking industry and supporting its international development.
The international development of Islamic finance sector has provided the economy with numerous benefits in key markets. We need to focus on capacity building to support the international development of Islamic finance and the major schemes that will enhance the supervisory Islamic finance architecture in order to facilitate the management of cross-border linkages and the international development of Islamic finance.
BL: What are the key challenges for international financial reform in improving the required infrastructure of the Islamic financial institutions?
Khaled Mohammed Al- Aboodi: ICD has supported the building of key international financial infrastructure institutions that have been important for the orderly global development of Islamic finance and for safeguarding international financial stability.
There is a fundamental relationship between the growth of the financial sector and the real economy although the exact relationship is not well understood in current macroeconomic models. This creates a potential challenge for policymakers to determine the point at which growth of the financial sector may be outstripping the demands and the potential of the real economy. This issue has become even more pronounced with greater regional and global financial integration and in countries that are also international financial centers. To the extent that corporate and personal income growth is driven by financial transactions rather than by an increase in production or employment growth, economies become potentially more vulnerable to the consequences of financial system stress.
BL: What are the opportunities, priorities and challenges for the international Islamic finance industry?
Khaled Mohammed Al- Aboodi: Amidst an evolving age that is full of revolutions and economic changes, the growth of the Islamic finance industry over the past years has been remarkable in the GCC countries, Sudan and Egypt. However, there are vast opportunities for the industry to grow in Maghreb countries, North Africa and Sub-Saharan Africa where ICD have launched various projects. The most recent one was in Tunisia. ICD is very keen to explore further potential markets such as Africa. ICD is keen to help poor countries in projects that are in accordance with Sharia’a.
I believe that there are a variety of challenges facing the Islamic finance industry specifically in facilitating cross-border financial flows, particularly between the emerging economies and finding the proper means to increase international participation in Islamic financial markets. Additionally, it is vital to hit upon the next generation of Islamic finance solutions.
BL: What are the critical success factors that drive the growth of Islamic finance?
Khaled Mohammed Al- Aboodi: The banking sector will witness considerable local and international regulatory changes. The global Islamic financial services industry continues to experience double digit growth, with recent estimates indicating that global Sharia’a-compliant assets now stand between USD 1.1 – 1.3 trillion. Islamic finance should grow further by working within new potential markets and through financing development projects in both emerging and developed markets.
BL: Is it possible to build unified global standards for the Islamic finance industry? How should this be done?
Khaled Mohammed Al- Aboodi: It is very difficult to build unified global standards for the Islamic finance industry because cultures and principles vary from country to another. Even, the exact jurisdiction of courts varies from country to country.
BL: How are leading institutions are adapting to the new dynamics of international finance?
Khaled Mohammed Al- Aboodi: Leading institutions are adapting to the new dynamics of international finance by realizing that the global financial meltdown has had substantial real economy effects. The world is still working its way out of the crisis—particularly in Europe. The financial markets are forever changed and therefore the leading financial institutions have to realize that we are emerging with a better understanding of globalized finance. The financial landscape has become more interrelated and boundaries between financial business institutions have been swept away. It is my belief that Islamic finance will emerge even stronger given the limits of conventional finance that the meltdown has
The need for establishing strong governance remains .
BL: How do you set your targets and plans when deciding on having a new venture in certain country? What are the priorities and incentives that push you to go forward with your plan?
Khaled Mohammed Al- Aboodi: The Islamic Corporation for the Development of the Private Sector is pioneering the field of Sharia’a-compliant financing and we are creating new employment opportunities especially in new emerging markets. ICD has plans to spur the development of SMEs in Sub-Saharan Africa. More than 50 percent of the population in Africa is Muslims. ICD has long had an ambitious series of projects, applying Islamic finance principles to African infrastructure needs.
BL: What about your recent involvement in Africa? Is it a potential market for ICD?
Khaled Mohammed Al- Aboodi: Presently, there are two new Islamic banks which will be opened by ICD. The openings are scheduled for 2013. The initiative is part of the efforts to expand the industry's consumer base in Africa. The development of Islamic banking in Africa is more important in terms of supplying Islamic financial facilities than in terms of the potentially massive demand. The Islamic Corporation for the Development of the Private Sector further plans to establish Islamic financial institutions including banks and takaful insurers in Africa. For sure, Africa is a massive potential market for ICD. Africa critically needs to achieve its development goals by implementing more infrastructure investment, roads, housing, schools and hospitals.ICD sees Islamic finance as a powerful tool to achieve these objectives
BL: Are there certain prerequisites and objectives for ICD to accept a new member country?
Khaled Mohammed Al- Aboodi: Yes . Any new country wishing to be member country needs first to be member of the OIC then applies for IDB Group membership.
BL: What are your plans for the year 2013?
Khaled Mohammed Al- Aboodi: The launch of a new home finance company in Saudi Arabia with committed shareholders is a major new strategy. The brand name of the company will be Bidaya. Also, ICD will start a fund aiming to finance renewable- energy projects in Central Asia and plans another one in the MENA region. The first one will be capitalized at about $35 million and will operate from Kazakhstan. The renewables ventures aims to decrease the dependence on fuel.
BL: Are you satisfied with the accomplishments that you achieved during the year 2012? What are these achievements?
Khaled Mohammed Al- Aboodi: ICD gained much ground in the CIS countries over the last two years. We made remarkable progress in Tunis and we are looking into Algeria. ICD is very satisfied with its achievements. Afriland First Bank and ICD have signed an agreement to shortly launch Islamic banking products in Cameroon. Some 10 African countries received financing approvals from ICD between 2010-2012, with the largest beneficiaries being Mauritania, Sudan, Gabon and Gambia. Also ICD set up the first Ijara Company in Kazakhstan.
BL: How does ICD help in decreasing the level of unemployment in its member countries? What about the Kingdom of Saudi Arabia?
Khaled Mohammed Al- Aboodi: ICD puts great efforts to become responsive to the emerging challenges in member countries by creating new employment opportunities. Employment growth, which is positively and significantly associated with GDP growth, is a vital mechanism for improving income distribution and a sustainable reduction in poverty. We are focusing on the SME sector and not on the mega projects in Saudi Arabia in order to create job opportunities.
BL: What are the important projects that ICD is working on presently in Saudi Arabia and abroad?
Khaled Mohammed Al- Aboodi: The mandate of ICD is to support the economic development of its member countries through provision of finance to private sector projects in accordance with the principles of the Sharia’a. ICD finances projects that are specifically geared to creating employment opportunities and boosting exports, especially in the SME sector of Saudi Arabia.
BL: Did the revolutions and riots that took or are taking place in certain Arab countries affect your business? If so how?
Khaled Mohammed Al- Aboodi: In fact, the past and the present Arab revolutions did not deter our plans and projects ICD‘s task and our challenges are to help countries facing obstacles and economic uncertainties.
BL: What is the size of ICD?
Khaled Mohammed Al- Aboodi: The total assets of ICD as of 1432 H (2011 G) are USD 845 million. The corporation is going through a capital increase and it is expected that within the next year the total assets will reach USD 1 billon.
