MUMBAI: Saudi-based Islamic Development Bank (IDB) Group will approach the Reserve Bank of India to highlight the benefits of Islamic finance in India.
This came ahead of Indian Prime Minister Narendra Modi’s visit to the Kingdom of Saudi Arabia in April. Khaled M Al-Aboodi, CEO of the Islamic Corporation for the Development of Private Sector (ICD) — an arm of the IDB, said that he would discuss with the RBI how Islamic finance could complement the existing banking activity.
Highlighting the advantage of Islamic finance, Al-Aboodi said that there was no excess leveraging in such assets and banks would always have some security. According to Al-Aboodi, in terms of distress Islamic finance worked well as the financier operated as a partner with the businessman. “During the 2008 global financial crisis, Islamic finance banks had been affected at a much lesser level,” he said.
IDB has advised other countries that have managed to enable interest-free financing. One of the regulations is facilitation of leasing and buyback of assets by financiers.
Al-Aboodi, who was in India ahead of Modi’s visit to Saudi Arabia, said that although IDB lends only to 56 member countries, it worked together with India in getting Indian vendors for projects in developing markets in Africa. “We play a role similar to the Exim Bank’s, by financing Indian imports among member countries,” said Al-Aboodi.
In India, the IDB is engaged in social development initiatives. One such initiative likely to be signed during the PM’s visit is a $50-million financing of mobile medical units in the country. The financing will be through a non-government organization which has been identified for the purpose.
The IDB Group has been present in India since 1983, when it started a scholarship programme under which 4,190 students have benefited, he said, adding it has also helped 250 other projects in the country.