by Francine Pickup, Deputy Country Director, UNDP Indonesia

1. Potential contribution of
Islamic finance to SDGs
Francine Pickup, UNDP Deputy Country Director
Regional Knowledge Exchange: Supporting Policy Coherence for Accelerating
Progress Towards the 2030 Agenda
Manila, September 4 2017

2. Private resources are key to achieving the SDGs
The shift to private resources was highlighted by the UN SG in the GA in Sept.
“We can choose to bemoan the lack of financing
for the 2030 Agenda in a world awash with so
much unproductive and unrewarding finance.
Or we can grasp the opportunity to reshape
finance according to our urgent, collective
needs.”

3. Mobilising the right scale & mix of finance is essential
0
100
200
300
400
500
600
700
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
US$Billions
Domestic public
Domestic private
International private
International public
Rapid growth in finance highlights potential to drive SDGs across ASEAN
Source: UNDP, using constant 2015 USD prices

5. Domestic private finance has grown to become largest source in Indonesia
Domestic public
Domestic private
International public
International private
Source: DI calculations based
on multiple sources
The SDG challenge remains huge with low govt revenues,
decreasing ODA & lagging international private finance

6. Why Islamic finance for SDGs?
• Source of finance: Assets expected to exceed $3 trillion by 2020;
• Growth potential: Islamic finance industry has expanded rapidly over
past decade, growing at 10-12% annually;
• Underlying philosophy: Embodies socially responsible development
Networks and partnerships: Religion as a force of change in the world
and engaging w religious organisations is crucial for peace,
development and promoting tolerance.
Islamic finance has tremendous potential to contribute to SDGs but
largely untapped and overlooked.

8. Zakat: greater potential for humanitarian and
development impact
• Potential in countries with large Muslim populations & high poverty
• Typically zakat is given informally, individually from person to person
• Approx. ¼ contributions channeled thru formal certified orgs
• Focus on act of giving, not development impact or rights of recipients
• Shift needed from charity to programme with professional mgmt
• Giving to higher level causes, not individuals, for greater impact
• Longer term, sustainable impact needs capacity devt thru formal orgs.

9. Faith (hifdh-ul-iman) : SDG goals 1,2,3,6,
and 10 focuses on reducing vulnerability
which in turn is believed to help strengthen
their faith.
Life (hifdh-ul-nafs) : Zakat aligns with Goals
2,3,6,8, and 11 in ensuring healthy lives and
promoting well-being for sustainable
development.
Progeny (hifdh-ul-nasl) : Zakat that helps
people escape the poverty trap, promoting
peace, and protecting the environment such
as goals 3,5,7,11,12,13,14,15, and 16 is
consistent with human progeny.
Intellect (hifdh-ul-aqal) : Zakat’s alignment
with SDG 1,2, and 9 facilitates access to
healthy nourishment, quality education, and
make children more productive in the
future.
Wealth (hifdh-ul-maal) : Zakat has inbuilt
wealth transfer (SDG 10) which can help
generate economic activity (SDG 8) and a
social safety net (SDG 1 and 3).
Overlap between Zakat and SDGs

10. Indonesia’s National Zakat Body, BAZNAS,
extends first contribution to support SDGs

12. Similarities between Islamic Finance &
Impact Investment
• Value-based, with moral purpose to do good;
• Understanding of relationship btw business & society based on well-
being: beneficial social / env impact alongside financial return;
• Build inclusive financial systems integrating ppl excluded from formal
financial sectors.
• Islamic finance based impact investing can support SDGs.
• Value-add for Impact investing: new sources of finance & markets,
enlarging tools
• Value-add Islamic finance: from negative screening to positive impact,
expanding reach & recognition

15. • Provides support to governments to integrate SDGs into their national
development plans and policies; convene with array of different partners
and localise SDGs at the sub-national level

16. • Innovating new financing models and instruments for channeling Islamic
finance, documenting and sharing learning from experiences

19. • Helps strengthen institutions responsible for delivering services. UNDP
can help Islamic organisations address poverty and vulnerability.

20. • UNDP can support Islamic organisations to align with the SDGs, monitor,
report and communicate development impact

21. Recommendations for Linking Islamic Finance & SDGs
• Build on Islamic orgs’devt experience & networks, incl. Islamic principles re.
financial inclusion & social solidarity;
• Research, consult & raise awareness on SDGs and their relevance; obtain buy-in
from clerics, Islamic groups;
• Support zakat institutions to create incentives for ppl to contribute thru formal
channels, incl. financial inclusion, e-services, transparency, M&E.
• Collaborate w Islamic institutions to identify innovative financing instruments to
channel Islamic finance to SDGs
• Coordinate w Government; set-up system that tracks Islamic Finance’s
contribution to SDGs.