To make Shari’ah - compliant equity investments:

ADB and IDB to set up Islamic Infrastructure Fund

The Asian Development Bank (ADB) and the Islamic Development Bank (IDB) have agreed to set up Asia’s first major multi-country Islamic infrastructure fund.

The Islamic Infrastructure Fund, targeted at $500 million, will make Shari’ah-compliant equity investments in the 12 countries that are borrowing members of both development banks; currently Afghanistan, Azerbaijan, Bangladesh, Indonesia, Kazakhstan, Kyrgyz Republic, Malaysia, Maldives, Pakistan, Tajikistan, Turkmenistan and Uzbekistan.

Most of Asia is in urgent need of additional spending on infrastructure but the conditions of infrastructure in the target countries are frequently worse than the Asian average.

“In Indonesia, only 39 percent of urban dwellers have access to piped water, only 9.5 percent of roads in Afghanistan are paved and only 42 percent of Bangladesh’s population has access to electricity,” said Director of ADB’s Capital Markets and Financial Sectors Division Robert Van Zwieten.

“Without added investment to change that economic growth and poverty reduction will be held back.”

The investment marks ADB’s first Sharia’ah-compliant fund. Such instruments are structured to comply with Islamic law, which bars investment in interest-bearing securities or in forbidden activities such as gambling.

“With increasing demand for Islamic finance by investors and clients, we expect the Fund to attract capital not only from the Islamic world, notably the Middle East region, but also from a wide range of institutional investors all over the world,” said Director of IDB’s Country Operations Department (Asia) Walid Abdelwahab.

“Despite the tightening liquidity around the world, there is still a substantial amount of wealth and many investors are increasingly interested in putting their money to work in a way that complies with their faith.”