Mr. Eliott Harris Assistant Secretary-General for Economic Development and Chief Economist

Opening Remarks
at the Side event on “Innovative financing for the SDGs: The role of Islamic finance”

Honourable Ministers
Excellencies,
Distinguished guests,
Ladies and gentlemen,

It is a great pleasure to be here today for this side event on the first day of the 2018 ECOSOC Forum on Financing for Development follow-up.   I thank the co-hosts of today’s event for their kind invitation.

The side event will focus on an innovative—and frankly, exciting—resource for sustainable development: Islamic finance.  Our exchange of views today should allow us to build on some of the ideas advanced as part of the broader dialogue on mobilizing financing for the 2030 Agenda, including the discussions at the High-level Conference on Financing for Development and the Means of Implementation of the 2030 Agenda for Sustainable Development, which was held in Doha in November 2017.

Critically, today’s event underlines the fundamental commitment of the Addis Ababa Action Agenda to engage all partners in pursuit of the Sustainable Development Goals (SDGs), including by mobilizing the resources, knowledge and ingenuity of a diverse range of actors and approaches.

In recent years, Islamic finance has been among the fastest-growing segments in global finance and is increasingly considered by non-Muslim providers and users.  According to a joint report of the World Bank and Islamic Development Bank, global Islamic finance now represents almost $2 trillion in assets. This is expected to reach surpass $3 trillion by 2020.

It makes sense that the rising trend in Islamic finance coincides with the growing momentum around sustainable investment. Many of the principles that guide Islamic finance also underpins the 2030 Agenda. Experience has demonstrated its potential to support sustainable development.

First, Islamic financial products have played a critical role in providing financing resources for the poor and vulnerable.  Enhancement of human well-being and a commitment to “doing no harm” are two key underlying principles of Islamic finance mechanisms, such as “Zakat” and “Waqf”.   Clearly, this is fully consonant with the core objective of leaving no one behind.

Second, Islamic finance has shown its ability to promote inclusion and solidarity.  It provides customized financial services for those who might not engage with the conventional financial sector for religious reasons, and in the process, empowers its users.  And given that lack of access to finance is one of the primary barriers to overcoming poverty, here, too Islamic finance principles are similar to those at the heart of the 2030 Agenda.

Third, Islamic finance has proven its ability to be socially responsible and stable.  Studies have pointed to its particular resilience during economic and financial crises. In the wake of the most recent global financial crisis, growth in the Islamic banking sector was largely driven by its stability, which is attributable to its asset-backed nature and close linkages with the real economy.  Obviously, enhancing resilience is one of the 2030 Agenda, so here to, their commonality.

Ladies and gentlemen,

Despite these features of Islamic finance, its full potential has not been fulfilled.  In large part, this is due to unfamiliarity and a lack of understanding by conventional banks and other financial actors with Islamic finance structures.  Events such as this one is useful in bridging some of these awareness and information gaps.

Looking ahead, one area that could benefit from greater synergies between conventional and Islamic finance could be filling the enormous infrastructure financing gap at all levels.  This builds on a fourth strength of Islamic finance, which sees itself as a source of stability against over-leverage and short-termism, and as a predictable source of funding for longer-term engagement.

This could be considered a priority area for further work given the declining private investment in infrastructure and recent resurgence in global carbon emissions, which is discussed in the report of the Inter-agency Task Force.  Furthermore, infrastructure-related needs for the achievement of SDGs and targets in critical sectors such as energy and water and sanitation could benefit from such investment.  For example, “Sukuks” – often called Islamic bonds – can generate resources, as well as promote linkages between the financial sector and the real economy.

By building on its strong orientation towards risk-sharing and long-term thinking, Islamic finance could generate significant resources towards infrastructure investment in the years ahead.

Distinguished guests,
Ladies and gentlemen,

There is much to gain from opening ourselves to lessons of good principles and practices learned in different contexts.  Islamic finance, like other forms of faith-based financial flows, is driven by values and principles that are very similar to those that frame the 2030 Agenda for Sustainable Finance.  Our recent experience with sustainable finance shows that innovation is possible and can arise in a wide range of different situations.

I look forward to our discussion this afternoon and hearing more about specific examples where Islamic finance has been deployed in support of the 2030 Agenda, and future opportunities that could be grasped.

Today and the rest of this week, we have an important opportunity to learn more about this and other financing approaches and philosophies could unlock potential resources for sustainable development.

My colleagues and I at UN DESA – including our Financing for Sustainable Development Office – are committed to supporting you in this endeavor.

Thank you.

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