The Asian Development Bank has signed an agreement that will expedite the adoption of Islamic banking across Asia.
ADB signed an agreement with the Islamic Financial Services Board (IFSB) to help ADB-member countries adopt IFSB's prudential standards.
The five-year agreement will see ADB support its member countries in legal and regulatory aspects of meeting IFSB standards. The agreement will focus on Indonesia, Bangladesh, Pakistan, the Maldives, Afghanistan, Kazakhstan and the Philippines.
It includes encouraging these countries to align their infrastructure financing needs with Islamic finance, which could help meet Asia's enormous demand for infrastructure investments.
ADB provided its first fully sharia-compliant financing last May when it assisting the Jeddah-based Islamic Development Bank with two partial credit guarantees worth up to US$66 million for two wind farms in Pakistan.
IFSB guidelines are widely used in the Islamic finance industry, but are not mandatory. It is up to national regulators to decide whether to adopt them.
Based in Malaysia, IFSB is an international standard-setting organization that promotes and enhances the soundness and stability of the Islamic financial services industry by issuing global prudential standards and guiding principles for the industry.
It was officially inaugurated in 2002 and serves as an international standard-setting body of regulatory and supervisory agencies that have vested interest in ensuring the soundness and stability of the Islamic financial services industry, which is defined broadly to include banking, capital market and insurance.
As of March, the 187 IFSB members comprise 53 regulatory and supervisory authorities, eight international inter-governmental organizations and 126 market players, professional firms and industry associations operating in 43 jurisdictions.
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