This is a joint report of the Islamic Development Bank Group and the World Bank Group. The report attempts to address the question of what are the key impediments to attracting funds for long-term investments. It reveals that the development community is facing the challenge of mobilizing financing for long term investments needed to eradicate poverty, provide education, access to clean water, and fight climate change.
The report proposes incentivizing “risk sharing” and asset-backed finance as the potential mechanism to attract financing for long-term investments. One of the major features of risk-sharing finance is that all participants have ‘skin-in-the-game’ resulting in alignment of interests. By its very nature, Islamic finance based on the principles of risk sharing (equity and asset-backed financing) offers the right ingredients to mobilize long-term financing provided an enabling legal, regulatory, and financial ecosystem is developed. Therefore, Islamic finance can and should occupy this space to make a difference.