Investing with Faith

The Asian Development Bank and the Islamic Development Bank (IDB) are setting up Asia’s first major multicountry Islamic Infrastructure Fund.

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

Sharia’ah-compliant instruments 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 both 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 Walid Abdelwahab, director of IDB’s Country Operations Department (Asia). “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.”

The sovereign wealth funds in the Gulf Cooperation Council countries are estimated to have totaled $1.2 trillion at the end of 2008.

The two development banks announced the plan during the 34th Annual Meeting of the IDB Board of Governors in Ashgabat, Turkmenistan in June. •