Functions of Islamic Development Bank.The Islamic Development Bank was established in pursuance of the declaration issued by a conference of finance ministers of Muslim Countries held in Jeddah (Saudi Arabia) in ZilQadah 1393 H (December 1973) and the bank formally opened on 15thShawal 1395 H (20th October 1975).
10 Functions of Islamic Development Bank.
HEAD OFFICE: •
The Bank’s head office is located in Jeddah in the kingdom of Saudi Arabia and the bank is authorized to establish agencies or branch offices elsewhere.
MEMBERSHIP:
At present 57 Islamic countries are the members of IDB. The condition for membership is that the country must be already a member of OIC (Organization of Islamic Countries).
CAPITAL:
The authorized capital was 6 billion Islamic Dinars at the time of establishment, which was divided into 600,000 shares of 10,000 Islamic Dinars each. The subscribed capital is 4 billion Islamic Dinars. In November 2013, the board of governors of the bank decided to increase the authorized capital up to 100 billion Islamic Dinars and paid up capital up to 50 billion Islamic Dinars. It must be noted that one Islamic Dinars is equivalent to 1 *SDR (Special Drawing Right) of IMF.
MANAGEMENT:
Management of IDB consists of board of governors whose authorities are exercised by board of Executive Directors consisting of eleven directors including a chairman.
FUNCTIONS:
- It provides finance and loans to member Muslim countries.
- It makes investments in capital projects of different countries.
- It provides a channel for the foreign trade among member Muslim
countries.
- It actively helps all other bodies or institutions that have been established for the well being of Muslim countries.
- It conducts research work and aimed at bringing banking system according to the principles of Islam.
*SDR (Special drawing rights) [Paper gold]
SDR is a new kind of reserve currency basically designed to provide liquidity to ever-growing world trade.
The amount of SDRs available to each member will depend on its quota. For example the member whose quota is 5% of the total quota will receive 5% of the total SDRs that are allocated.
Use of SDR: They can be used in three ways. First they can be held in the same way as governments hold gold and exchange reserves. Secondly they can be used by central banks of different countries to settle their debts and thirdly central banks can use them through IMF.
Final Reccomendation;Functions of Islamic Development Bank
The Islamic Development Bank (IDB) is an international financial institution that aims to promote economic development and social progress in its member countries. Here are some of the functions of the Islamic Development Bank:
- Providing financial assistance: The IDB provides financial assistance to member countries through a variety of financing instruments, such as loans, equity investments, and guarantees. This assistance is provided to support various sectors, including infrastructure, agriculture, education, health, and energy.
- Mobilizing resources: The IDB mobilizes resources from various sources, including its member countries, international financial institutions, and capital markets, to support its financing activities.
- Promoting trade and investment: The IDB aims to promote trade and investment among its member countries by providing financing and technical assistance for trade-related activities and by establishing partnerships with other international organizations.
- Supporting poverty reduction: The IDB supports poverty reduction efforts in its member countries through financing of projects and programs that aim to improve access to basic services and increase income-generating activities.
- Providing technical assistance: The IDB provides technical assistance to its member countries in various areas, such as project preparation, capacity building, and institutional strengthening.
- Fostering cooperation and integration: The IDB fosters cooperation and integration among its member countries through various initiatives, such as the establishment of regional development banks, the promotion of intra-regional trade, and the development of regional infrastructure projects.
