Cairo/Islamabad: In a policy paper titled, ‘Targeting Underdevelopment and Poverty Reduction in Muslim World: Role of Islamic Finance’ presented at the 4th Think Tanks Forum of the OIC Countries which concluded in Cairo on 28 March, Khalid Rahman, director general, Institute of Policy Studies (IPS), Islamabad stressed the need to translate the growth of Islamic finance into visible development initiatives for poverty reduction in the Muslim world by institutionalizing the vast, but mostly unorganized, potential of charity giving in the Muslim societies.
The 4th Think Tanks Forum of the OIC Countries themed “Economic Integration in the OIC Countries: Prospects and Challenges” was held under the auspices of the Egyptian Cabinet Information and Decision Support Center (IDSC) and the Turkish Asian Center for Strategic Studies (TASAM). The forum was attended by around 300 participants from across the Muslim world.
Some of the specific policy suggestions DG-IPS elaborated at the forum to be considered at OIC’s multilateral level as well as at the level of individual member countries, included developing a well-thought-out, consensus driven OIC agenda and framework aiming for developing Islamic finance; considering the possibility of Islamic Central Bank; research awareness and motivation; setting up of specialized institutions such as Sadaqah banks; encouraging resourceful Muslims and Diaspora to contribute in the form of deposits; channelization of spontaneous and unorganized charity; and utilizing microcredit for micro economic activity and employment generation.
Highlighting the economic issues faced by a majority of the population of Muslim countries across the world he said that despite having enormous potential and possessing immense resources, the harsh reality of the present day Muslim world was that most of the countries were at a lower level of development, leaving a few, mostly natural-resources-rich, exceptions. Besides, a major chunk of the global Muslim population continues to languish in abject poverty. Sizable numbers of populace in Muslim countries with large populations live below the internationally defined poverty line and in some cases the ratio was as high as 60 and 70 per cent. Though some improvements have been recorded, imbalances and inequalities between and within the countries, also, are obvious.
Quoting the Annual Economic Report on the OIC Countries 2012 he revealed that, “having accounted for 22.8 per cent of the world total population, the 57 OIC member countries produced only 10.9 per cent of the world total GDP.”
He further told that the report also highlights that the average GDP per capita in the OIC countries increased continuously and reached $5,507 in 2011, compared to $4,724 in 2007. However, the point of concern, he added, was that the gap between the average per capita GDP levels of the OIC member countries and other developing countries has widened further.
Presenting specific policy suggestions, to be considered at OIC’s multilateral level as well as at the level of individual member countries, Khalid Rahman stressed the need for a three pronged policy framework.
The first proposed element of this desired framework being strengthening of the existing trends of Islamic finance particularly charity through awareness, motivation, education and enabling environment on part of the governments of the Muslim states. Citing the example of Akhuwwat, a Pakistani organization, He said the institution of mosque provides an unmatched infrastructure for the Muslim societies for awareness and motivation as well as to minimize overheads in case of small and medium scale microfinance initiatives. Regarding awareness, the role of think-tanks becomes important, he said further, and called for efforts to share knowledge and best practices in this field, ideally creating a centrally located and managed data bank of Islamic finance.
Secondly, he suggested, it was needed to have a self sustaining institutional base for proper channelization and maximum exploitation of ‘giving’ within OIC countries and societies. While spontaneous charity also has its significance in certain circumstances such as natural calamities, institutionalizing the random and widespread charity initiatives would be more useful, and for this purpose, specific institutions need to be established and regulation ensured.
Third requirement of such a desired policy framework, he further advised, was formulating proper guidelines and roadmaps for the institutions which were based on Islamic finance and charity, as to what dimensions and priority areas do such institutions need to focus upon.
He suggested that the conceptual framework being available the need was to move ahead practically at strategic, institutional and operational levels.
It may be mentioned that as a continuation of the previous forums, the 4th forum aimed at gathering think tanks from the OIC member countries to develop creative dialogues about present and future common political, socio-cultural, and economic challenges faced by the region and to assess collective knowledge and developmental efforts.