Eurasian Development Bank Joins IFSB to Strengthen Global Islamic Finance

Imagine a financial alliance that drives economic growth and adheres to ethical principles rooted in inclusivity and fairness. That’s exactly what’s happening as the Eurasian Development Bank (EDB) joins the prestigious Islamic Financial Services Board (IFSB) as an Associate Member. Announced during the 45th Council Meeting in Djibouti on December 22, this milestone represents more than just a membership—it’s a bold step toward reshaping financial landscapes across member jurisdictions. By aligning its strategies with Islamic finance, one of the fastest-growing sectors in the global economy, the EDB is setting the stage for sustainable, equitable, and far-reaching financial progress. This move underscores a strong commitment to fostering ethical financial practices while fueling global development.

Related: EDB Spearheads Islamic Finance Development in Central Asia

A Strategic Move in Islamic Finance

The IFSB meeting, chaired by Ahmed Osman Ali, Governor of the Banque Centrale de Djibouti, underscored the importance of collaborative efforts to advance Islamic finance standards globally. As an Associate Member, the EDB joins an elite network including the Central Bank of the Republic of Uzbekistan and the Centrale Bank van Suriname. This membership not only highlights the EDB’s growing influence in the financial sector but also aligns with its mission to support sustainable economic growth across Eurasia.

Nikolai Podguzov, Chairman of the EDB Management Board, expressed optimism about the bank’s new role within the IFSB. “Our collaboration with the IFSB allows us to leverage our expertise to promote Islamic finance in the region and actively participate in the global Islamic banking network,” he said. “We look forward to contributing to the IFSB’s mission of fostering stability and resilience in the Islamic financial services industry through knowledge sharing and cooperative initiatives.”

The IFSB, headquartered in Kuala Lumpur, Malaysia, has been a cornerstone of the Islamic financial services industry since its establishment in 2002. The organization’s primary mission is to set international standards for regulatory and supervisory agencies, ensuring compliance with Sharî’ah principles across banking, capital markets, and insurance sectors. As of July 2024, the IFSB’s membership comprised 188 entities, including 81 regulatory and supervisory authorities, 10 international intergovernmental organizations, and 97 market participants spanning 58 jurisdictions.

One of the key outcomes of the Djibouti meeting was the establishment of a donor-funded account aimed at supporting capacity development programs within member jurisdictions. This initiative reflects the IFSB’s dedication to building a robust global infrastructure for Islamic financial services.

The EDB’s Role in Regional Development

With a charter capital of $7 billion, the EDB has been a driving force in promoting economic integration and sustainable development across Eurasia for over 18 years. The bank’s investment portfolio is heavily focused on Kazakhstan, which accounts for nearly 60% of its projects. These initiatives span critical sectors such as transportation, green energy, agriculture, digital systems, and manufacturing, all of which align with the United Nations Sustainable Development Goals (SDGs) and Environmental, Social, and Governance (ESG) principles.

The EDB’s decision to join the IFSB comes at a time when Islamic finance is experiencing significant growth globally. According to a report by the Islamic Corporation for the Development of the Private Sector (ICD) and Refinitiv, the Islamic finance industry reached a total value of $3.9 trillion in 2023, with an expected annual growth rate of 10%. This expansion is fueled by increasing demand for Sharî’ah-compliant financial products and services, particularly in emerging markets.

EDB’s membership in the IFSB represents a strategic move to deepen its involvement in Islamic finance. This partnership enables the bank to integrate Islamic financial principles into its development projects, particularly in regions where demand for Sharî’ah-compliant solutions is growing. With Islamic finance proving to be a resilient alternative during global economic uncertainties, EDB’s association with the IFSB positions it as a leading player in facilitating financial inclusion and economic resilience.

EDB’s focus on green finance and sustainability aligns seamlessly with the values of Islamic finance, which prohibits investments in industries that harm society. By channeling resources into renewable energy projects, eco-friendly infrastructure, and sustainable agriculture, EDB not only adheres to ESG principles but also addresses the ethical concerns of Sharî’ah-compliant investors.

Moreover, the EDB’s involvement in sustainable agriculture projects exemplifies its commitment to creating long-lasting economic solutions. Recent initiatives in Uzbekistan and Kyrgyzstan have highlighted the potential of Islamic finance in improving rural economies by offering microfinance solutions that adhere to Sharî’ah principles. These projects, targeting smallholder farmers, aim to boost agricultural output while maintaining environmental sustainability.

Strengthening Partnerships for a Sustainable Future

By becoming an Associate Member of the IFSB, the EDB aims to enhance its governance practices, adopt global standards, and contribute to the resilience of the Islamic financial ecosystem. This partnership also paves the way for greater knowledge-sharing and collaborative projects, particularly in capacity-building initiatives that support regulatory frameworks and supervisory systems.

The EDB’s membership comes at a crucial juncture as countries across Eurasia explore new avenues for economic growth. Islamic finance, with its emphasis on ethical and socially responsible practices, offers a unique opportunity to address regional development challenges. The EDB’s collaboration with the IFSB is expected to facilitate the adoption of Sharî’ah-compliant financial solutions in sectors such as infrastructure development, renewable energy, and digital innovation.

Islamic finance has emerged as a key driver of economic growth in many regions, including Eurasia. Kazakhstan, for instance, has been at the forefront of promoting Islamic finance within the Commonwealth of Independent States (CIS). In 2021, the country launched its first sovereign Sukuk (Islamic bond) on the Astana International Financial Centre (AIFC) platform, attracting significant interest from global investors.

Similarly, the EDB’s involvement in green finance initiatives aligns with the principles of Islamic finance, which prohibit investments in industries deemed harmful to society, such as gambling, alcohol, and speculative trading. By focusing on sustainable projects, the EDB is well-positioned to attract investment from ethical and Sharî’ah-compliant funds.

The bank has also started engaging with fintech companies to explore the potential of blockchain technology in Islamic finance. Blockchain, with its ability to enhance transparency and reduce transactional risks, has the potential to revolutionize Sharî’ah-compliant financial systems. By partnering with technology firms, the EDB aims to develop innovative financial products that meet the growing demand for ethical and efficient solutions.

Key Takeaways from the IFSB Council Meeting

The 45th IFSB Council Meeting in Djibouti was not only a platform for announcing new memberships but also a venue for addressing pressing issues in the Islamic financial services industry. The establishment of the donor-funded account for capacity development programs is expected to bolster regulatory and supervisory capabilities in member countries, fostering a more resilient global financial system.

Ahmed Osman Ali, the meeting’s chair, emphasized the importance of collective efforts to enhance the infrastructure of Islamic finance. “Our shared vision is to create a financial ecosystem that upholds Sharî’ah principles while addressing the economic needs of our communities,” he said.

The meeting also highlighted the importance of integrating Islamic finance into global economic recovery plans. As countries continue to recover from the economic impacts of the COVID-19 pandemic, the demand for ethical financial solutions has surged. Islamic finance, with its emphasis on risk-sharing and social equity, has proven to be a viable alternative to conventional financial systems.

Exploring New Opportunities

The EDB’s association with the IFSB opens doors to numerous opportunities for regional development. The bank’s investment in sectors such as digital transformation, transport logistics, and green energy demonstrates its commitment to creating sustainable economic ecosystems. These efforts not only align with the broader goals of Islamic finance but also contribute to the socio-economic upliftment of communities across Eurasia.

Moreover, the bank’s focus on fostering innovation in financial technology (fintech) could revolutionize the delivery of Islamic financial services. By integrating digital solutions, the EDB aims to improve access to Sharî’ah-compliant products and services, particularly for underserved populations.

Another area of focus for the EDB is capacity building. Through workshops, training sessions, and collaborations with educational institutions, the bank is actively working to increase awareness and expertise in Islamic finance. These initiatives are particularly important in regions where knowledge of Sharî’ah-compliant financial principles remains limited.

As the EDB integrates Islamic finance into its strategic objectives, its membership in the IFSB marks a significant milestone in its journey toward fostering economic integration and sustainable development. By leveraging its expertise and resources, the EDB is poised to play a pivotal role in shaping the future of Islamic finance in Eurasia and beyond.

The partnership between the EDB and the IFSB highlights the growing relevance of Islamic finance in addressing global economic challenges. As the industry continues to expand, collaborations like these will be instrumental in creating a more inclusive and resilient financial system.

The EDB’s commitment to promoting ethical and sustainable financial practices resonates with the broader goals of Islamic finance, offering a promising path for future growth and innovation. Through its membership in the IFSB, the EDB is set to contribute significantly to the evolution of Islamic financial services on a global scale.

Empowering a New Era of Financial Collaboration

The EDB’s partnership with the IFSB is more than a symbolic gesture; it represents a concerted effort to align the bank’s activities with global Islamic finance standards. This collaboration is expected to inspire other financial institutions in the region to explore the benefits of Sharî’ah-compliant finance.

As the demand for Islamic financial products and services grows, the EDB’s initiatives could serve as a model for integrating ethical and sustainable practices into mainstream financial systems. The bank’s efforts to foster regional cooperation and economic resilience underscore its commitment to creating long-term value for its stakeholders.

The Eurasian Development Bank’s (EDB) decision to join the Islamic Financial Services Board (IFSB) as an Associate Member is a testament to its commitment to driving the growth of Islamic finance in Eurasia and beyond. By aligning its operations with Sharî’ah principles and sustainability goals, the EDB is not only contributing to the ethical and equitable expansion of financial systems but also strengthening its position as a leader in fostering regional economic development.

This partnership with the IFSB marks a significant step toward creating a more resilient and inclusive financial ecosystem, with a focus on innovation, collaboration, and sustainable practices. As the demand for Sharî’ah-compliant solutions grows globally, the EDB’s proactive role in promoting Islamic finance ensures it will continue to play a transformative part in shaping the future of the financial landscape for communities and economies worldwide.