The Islamic Development Bank (IsDB) Group has published a preliminary report highlighting the actions taken to help member countries to tackle the crisis triggered by the Covid-19 pandemic.
Coordinated by the Working Group to Study the Impact of the Covid-19 Pandemic on the Islamic Finance Industry, the report is a discussion draft released for the purpose of obtaining feedback to improve content and recommendations.
Following the outbreak of Covid-19 and the resultant impact on IsDB member countries, the H.E. Dr. Bandar Hajjar, President of the Islamic Development Bank (IsDB) Group, formed the Working Group to assess the effects of the pandemic on the Islamic finance industry and showcase the IsDB Group’s response to support member countries.
The Report is in two sections. The first section addresses the Covid-19 pandemic from an Islamic-finance perspective, highlighting the extent of resilience and exposure of the Islamic finance industry to the crisis. The second section details the key response actions taken by the IsDB Group to help Member countries deal with the Covid-19 crisis.
Dr. Sami Al-Suwailem, IRTI Acting Director-General and chairman of the Working Group, commented: “We are delighted that this Discussion Draft Report is now ready for feedback from our stakeholders. We hope to benefit from the comments of stakeholders and our member countries to help the Islamic finance industry to strengthen its performance and enhance the contribution of the IsDB Group to the development and prosperity of our societies.”
The Report highlights that the IsDB Group responded to the Covid-19 crisis through the ‘Respond, Restore and Restart’ program, the US$ 2.3billion Strategic Preparedness and Response Program for Covid-19 that aims to support Member Country efforts to fight the pandemic and to address the adverse effects on their economies.
The ‘Respond’ track proposes immediate and fast disbursing actions to assist the countries’ response and mitigate the adverse impact of the Covid-19 pandemic. The ‘Restore’ track addresses medium-term actions to strengthen the health and economic systems to overcome the pandemic’s peak. The ‘Restart’ track supports long-term actions to kick start the economy on a solid and resilient foundation and catalyze private investment.
Another response initiative is the immediate joint action of the IsDB Group Private Sector Entities through financing, trade facilitation and providing insurance.
To provide funding globally to the Covid-19 related expenditure in general, the IsDB Group’s Islamic Research and Training Institute (IRTI) advanced a proposal for a SDG-Cryptocurrency to support sustainable development goals in Member countries.
The Report notes that the comprehensive response shows the ability of the IsDB Group to lead Islamic finance by planned and coordinated activities across the 57 Member countries.
With regard to the Islamic finance industry, the Report notes the principles of Islamic finance help ward off endogenously generated crises, like the Global Financial Crisis, and provide a strong safety net against exogenously induced cycles, like the Covid-19 crisis. However, a spectrum of well-functioning institutions is required, but lacking at present, to translate these principles into tangible real-world impact.
“The Islamic financial industry, as it stands today, is still lacking many essential components of this spectrum. The crisis should be an opportunity to fill in the gaps and enhance the diversity of the industry,” the Report added.
The Report also highlights the impact of the Covid-19 pandemic on organizations, individuals, economies, and societies; and the challenges faced by the private sector and the global economy in the wake of the pandemic.
It concludes that a “new paradigm is needed to respond to repeated crises and to the pandemic-induced stagnation of the global economy. In particular, institutionalized risk-sharing can help the global economy to resiliently absorb shocks and stimulate stagnated demand.”