banking activities in Muslim countries to conform to the Shari ah and to develop Islamic finance as a competitive advantage. In fact, thanks to the role played by the IDB, the Islamic baking world has stepped up efforts to standardize regulation and supervision. The bank plays a key role in developing internationally acceptable standards and procedures and strengthening the sector s architecture in different countries. [16]
Operations and objectives
The purpose of the Islamic Development Bank since its foundation is to foster the economic development and social progress of member Muslim majority countries as well as Muslim communities in non-member countries individually as well as jointly in accord ance with the principles of Shari'ah. This is what distinguishes the IDB from other regional and international developmental institution; in fact it is obliged by its own charter to follow the Shari ah in all of its functions and operations. The Islamic prohibition of interest and the implications thereof have forced the IDB to have certain distinguishing conceptual and operational features. The IDB foresees different ways of financial involvement with its clientele from the ways of the conventional multinational development banks. The equity participation and profit sharing functions of the bank together with the Shari ah implied restrictions on the powers of the Bank in so far as accepting deposits, raising funds and suitably investing funds not needed in its operations are concerned, are some of the major issues that the bank had to consider in its planning stages. Among activities undertaken by IDB there are participation in equity capital of productive projects, investment in economic and social infrastructure projects, the promotion of foreign trade, primarily in capital goods and acceptance of deposits or the raising of funds in any other manner.other multilateral financial institutions, the IDB finances its operations through a number of modes of finance that are compatible with Shari ah. Loan financing is mainly intended for social, economic and infrastructure projects that are unlikely to be revenue generating and have a long implementation phase. These include schools, water supplies, health centers, hospitals, rural electrification, roads, ports, airports, irrigation schemes and land development. In addition, the IDB participates in the share capital of new or existing enterprises, through equity participation, even though a ruling of the Islamic Fiqh Academy prohibits equity participation with companies that use interest-based financing, therefore, the IDB has taken initiatives to assist successful companies in utilizing alternative Shari ah-compatible modes of financing in cl...
