Monday, March 31, 2014

Islamic finance finds a niche in funding educational projects

IFN Indonesia Forum 2014
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Monday 31st March 2014
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GLOBAL: Education is an area of social development that the IDB has targeted with particular focus, with over US$30 million in funding approved and allocated for educational projects since December. The Hyderabad Institute of Excellence, an Indian school recently established with aid from the IDB, is an example of the education funding of the bank in practice, as government and commercial interest in the use of Islamic finance for education projects grows.

Since December, the IDB has approved over US$1.5 billion in new financing. Off this, US$32.3 million has been earmarked for use in educational development in countries such as Bosnia Herzegovina, Guyana, Thailand and the US. Of the US$4.7 million allocated by the IDB as aid for Syrian refugees, US$700,000 was flagged as funding for education. In February this year, US$9 million was approved for 'Basic Education Support Project in Priority Areas' in Cameroon and this month, the bank announced the allocation of US$17.8 million, encompassing US$7.5 million for a project in Burkina Faso and US$10.27 million for another in Suriname.

In the commercial space, two high profile instances saw the use of Sukuk to fund the building of schools in 2013: the US$200 million GEMS Education Sukuk issued in November and, in October, the first Nigerian Sukuk Ijarah from Osun State for NGN10 billion (US$59.88 million). Last year, Islamic Bank of Britain also provided funding of GBP400,000 (US$652,276) for the completion and refinancing of development works on the premises of Al-Meezan, a non-profit organization providing a center for the promotion and development of Islamic learning in Glasgow, Scotland.

Given the importance of education, especially in emerging economies, it is a positive sign that Islamic financing of educational projects continues to grow. Kunrat Wirasubrata, the head of the IDB regional office in Kuala Lumpur, outlined to Islamic Finance news the bank’s commitment to continue in its support: “The appetite to use Islamic financial products is increasing, so it’s a matter for the IDB and others who are active in Islamic finance, to capture the opportunity and work out how to formulate a suitable product to provide financing to the growing educational sector. We are committed to continue financing and we are interested to work with partners.”

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