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New IRTI Report Highlights How to Tap the Potential of Islamic Social Finance in the Maghreb
Jeddah, Kingdom of Saudi Arabia, 24 June 2020 – The Islamic Research and Training Institute (IRTI) today launched the Islamic Social Finance Report (ISFR) 2020 which focuses on the potential of Islamic social finance tools in reducing poverty levels and achieving other Sustainable Development Goals in the Maghreb. The report reveals that the Islamic social finance sector, comprising of zakah, awqaf (Islamic endowments), and Islamic microfinance, has huge potential that remains largely untapped in the region.
The new report is a result of IRTI’s multi-year flagship initiative to address the knowledge and information gap pertaining to the zakah, awqaf and other not-for-profit sectors in Member Countries of the Islamic Development Bank (IsDB). It covers the Islamic social finance sector in five north-west African countries, namely Algeria, Libya, Mauritania, Morocco, and Tunisia.
IRTI launched the maiden issue of ISFR in February 2014, as a pioneering initiative. At the time, “it was the first ever publication globally to use the term Islamic social finance to describe the Islamic philanthropy-based and not-for-profit sector,” said Dr. Sami Al-Suwailem, Acting Director General of IRTI. Since then, IRTI has issued three more ISFRs covering different regions across the globe.
Previous ISFRs brought to the fore some interesting facts, including that a small upward push in zakah and waqf mobilization in many countries could generate enough funds to meet the resources gap for poverty eradication. Such resource raising was a clear possibility in countries that were proactive in reforming their respective Islamic social finance sectors through creating enabling regulatory and policy environment and building capacity through network of supporting institutions.
These findings have once again been validated by the present study in the context of the five north-west African countries, according to Dr. Mohammed Obaidullah, Lead Research Economist at IRTI, who has been leading the ISFR project team since its inception.
Speaking during the launching of the report, organized by the IsDB Islamic Finance Community of Practice, Dr. Obaidullah underlined some key features of the zakah and awqaf sectors in the region and policy actions recommended for the countries to fully tap the potential of Islamic social finance.
The existence of dedicated laws of zakah and awqaf in countries like Algeria, Libya and Morocco has had significant positive impact on mainstreaming of the sectors. Similar action is called for in Mauritania as well as in Tunisia, where draft laws have already been prepared based on positive recommendations of numerous studies over the years.
Dedicated laws have helped create apex agencies and supporting infrastructure for Islamic social finance in the region. What is needed, however, is careful enforcement of the legal provisions and sound management of the Islamic social assets and funds by competent professionals. Almost none of the countries covered by the study reported the presence of learning and skill development programs in the field to address human resource needs of the sector. It was also observed that the Islamic financial service providers – including banks and insurance companies – by providing a Shari’ah-compliant payment mechanism, have a salutary effect on the zakah system.
Commenting on the report, Dr Rahmatina Kasri, head of the Islamic Economics Department at University of Indonesia, who also spoke during the launch event, underlined some good practices from the Indonesian zakah and awqaf sectors which can be emulated by other countries. The proactive periodic reforms in the laws and related infrastructure has enabled a steady growth of over 25 percent in Islamic social funds in the country. Indonesia, she noted further, is also home to many innovations in the awqaf sector, such as the Cash Waqf Linked Sukuk whose proceeds were used for financing infrastructure development.
Mr. Mazen Dakhili, an Islamic microfinance expert at IsDB, discussed the findings of the new report regarding the Islamic microfinance models and practices in the Maghreb region. He emphasized the need to use a more diversified range of Islamic finance contracts instead of the current practice of replacing conventional loans with deferred-payment-sale contracts. The presence of a microfinance culture in countries like Morocco can play a significant role in mainstreaming of Islamic finance in the country, he added.
The new report is the fourth in the series of ISFRs published by IRTI. The first report focused on the South and South-East Asia region, the second report on sub-Saharan African region, and the third on Central Asia, Balkans and the Russian Federation.
You can download the new report from IRTI website here.
The Islamic Research and Training Institute (IRTI) is a Member of the Islamic Development Bank (IsDB) Group dedicated to knowledge creation and dissemination in Islamic Economics and Finance. With a track record of nearly four decades of delivering cutting-edge research and capacity development programs, IRTI works to develop innovative knowledge-based solutions and enhance human capacity in Islamic Economics and Finance for the sustainable development of IsDB member countries and Muslim communities in non-member countries worldwide.
For more information on the IRTI Islamic Social Finance Report project, please contact Dr. Mohammed Obaidullah (email@example.com).