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2 Islamic Solidarity Fund for Development (ISFD)
Table ofContentsLetter of Transmittal ____________________________________________________________________ 3Establishment of ISFD ___________________________________________________________________ 4ISFD Board of Directors___________________________________________________________________ 6The ISFD - Facts and Figures _____________________________________________________________ 8Chairman’s Message ____________________________________________________________________ 10
PART ONE ______________________________________________________________________________ 11The Burden of Poverty in IDB Member Countries
- Poverty in an unequal world- Efforts Made by IDB Members Countries in Fighting Poverty- Challenges of fighting poverty
PART TWO _____________________________________________________________________________ 17ISFD Five - Years Strategy (2008-2012)
- The Strategy- ISFD Special Programs
PART THREE ____________________________________________________________________________ 23Operations in 1430H
- programs/Projects Approvals- Sector Distribution of Approved Projects- Country Distribution- Terms & Conditions of Financing- Cofinancing- Partnerships for VOLIP and Microfinance- Looking Ahead
PART FOUR _____________________________________________________________________________ 29Corporate Aspects
- Activities of the ISFD Board of Governors- Activities of the ISFD Board of Directors- ISFD Memership
PART FIVE _____________________________________________________________________________ 33Financial Review
- Resources of the FUND- Operations Financing- Income- Management of Liquid Funds
PART SIX _______________________________________________________________________________ 37Challenges and Prospects
- Limited Resource Base of the ISFD- Enhancing Resource Mobilization Efforts
ANNEXES ______________________________________________________________________________ 41Annex I : ISFD Projects’ Profiles – 1430H (2009)Annex II : Contributions to ISFD Capital
AUDITED FINANCIAL STATEMENTS ______________________________________________________ 47
Annual Report 1430H -2009G 3
Letter ofTransmittal
In The Name of Allah, The Beneficent, The Merciful
The Chairman,
ISFD Board of Governors
Dear Mr. Chairman,
Assalam-O-Alaikum Warahmatullah Wabarakatuh
In accordance with the Regulations of the Islamic Solidarity Fund for Development I, on behalf of
the Board of Directors, have the honour to submit for the kind attention of the esteemed Board
of Governors, the Annual Report on the operations and activities of the Islamic Solidarity Fund for
Development in 1430H (2009G).
The Annual Report also includes the audited financial statements of the ISFD as prescribed in Article
18 of the Fund’s Regulations.
Please accept, Mr. Chairman, the assurances of my highest consideration.
Dr. Ahmed Mohamad Ali
President, IDB Group
Chairman of ISFD Board of Directors
4 Islamic Solidarity Fund for Development (ISFD)
Establishment ofISFDThe Third Extraordinary Session of the OIC Summit held in Makkah, Saudi Arabia, on 7-8 December, 2005 proclaimed the Makkah Declaration with a view to address poverty alleviation challenges in the OIC member states. The Summit underlined the need for cooperation in the fields of poverty alleviation, elimination of illiteracy, eradication of diseases and epidemics, human development, and the need to mobilize the necessary resources to this end by establishing a special fund within the IDB – the Islamic Solidarity Fund for Development (ISFD).
The establishment of the ISFD has, therefore, come about as a direct expression of the desire of the leaders of the OIC member states to strengthen the spirit of brotherhood and Islamic solidarity among the Ummah.
• EstablishmentoftheISFD: 6 D. Qadah 1426H (8 December 2005)
• LaunchingoftheFund: 12 Jumad-I, 1428H (29 May, 2007)
• LegalStatus: Special Waqf1 (Trust) Fund within the IDB and has separate accounts and records.
• Headquarters: Jeddah, Saudi Arabia
Official Launching of the ISFD
Following the completion of all the necessary preparatory activities to bring it to an implementation stage, the ISFD was officially launched during the 32nd Meeting of the IDB Board of Governors (BOG), held on 12-13 Jumad-I, 1428H (29-30 May, 2007) in Dakar, Senegal. The Fund has been established in the form of a Waqf (i.e. Trust), with a principal targeted capital of US$10.0 billion. All IDB member countries were called on to announce financial contributions to the Fund and extend technical and moral support to its operations.
ـــــــــــــــــــــــــــــــــــــــــــــــــــــــــــ
1The concept of Waqf (Trust) implies that only the income which will be made from the investments of the Fund’s resources will be available to finance its operations.
The Third Extraordinary Session of the OIC Sum
mit, M
akkah Al Mukarram
ah, 5-6 Dhul Q
adah 1426H (7-8 D
ecember 2005) w
here the decision to establish a Special Fund w
ithin the IDB G
roup was m
ade – the Islamic Solidarity Fund for D
evelopment (ISFD
).
6 Islamic Solidarity Fund for Development (ISFD)
Hon. Zeinhom Zahran
Dr. Ahmad Mohamed AliChairman
Hon. Ibrahim MohamedAl-Mofleh
Hon. Bader AbdullahS. Abuaziza
Hon. Ismail Omar Al Dafa
Hon. Dato Junaidi bin Pehin Dato Haji Hashim
Hon. Khamdan H. Tagaimurodov
ISFD Board ofDirectors
Annual Report 1430H -2009G 7
Hon. Abdul Aziz AbdullahAl-Zaabi
Hon. Dr. Selim Cafer Karatas
Hon. Nailane MhadjiHon. Yerima Mashoud AmadouHon. Hassan Hashem Abdul Hussain Al Haidary
Hon. Faisal Abdul Aziz Al-Zamil
Hon. Dr. Seyed Hamid Pour Mohammadi
Hon. Aissa Abdellaoui
Hon. Sibtain Fazal Halim
8 Islamic Solidarity Fund for Development (ISFD)
The Islamic Solidarity Fund for Development (ISFD)
Highlights (Figures as at the end of 1430H (2009G)
• FirstISFDFive-YearStrategy(2008-2012): Estimated total cost of programs/projects under the strategy is US$13.5 billion, with an envisaged
ISFD contribution of US$2.0 billion to this amount, i.e. a targeted leverage of 1:6.
• Operations- Approvals in1430H (2009): 22 operations, valued at US$234.414 million in 17 member
countries.
- Cumulativeapprovals1429-30H(2008-09G): US$554.8 million for 48 projects..
- Disbursements: Disbursements are expected to start in 1431H (2010G)
• ResourcesoftheFund:- TargetedInitialCapital: US$10.0 billion.
- Pledges: US$2.629 billion contributed by 37 member countries2 (US$1.629 billion) and IDB (US$1.0 billion). Eleven countries paid their contributions in full, 12 partially, and 14 are yet to commence payments. Eighteen IDB member countries are yet to announce their contributions to the Fund.
- Paid-inContributionsasatend-1430H(2009G): US$1.061 billion
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238 member countries at the end of April 2010, with Kazakhistan paying US$1.0 million towards the ISFD Capital.
Annual Report 1430H -2009G 9
- Operatingincomein1430H(2009G): US$11.23 million
- Netincomein1430H(2009G): US$2.991 million
Small businesses: an ISFD tool for poverty alleviation.
Definition of Poverty
The IDB accepts the now established view that poverty is multi-dimensional. It defines poverty
as encompassing not only low income and consumption, but also low achievement in education,
nutrition, primary health services, water and sanitation, housing, crisis-coping capacity, insecurity,
and all other forms of human development.
10 Islamic Solidarity Fund for Development (ISFD)
Chairman’sMessageIt gives me great pleasure to present the second Annual Report of the ISFD which describes the activities and financial results of the Fund during the year 1430H (2009).
The thrust of the IDB Policy on Poverty Reduction, which guides the Fund’s operations, emphasizes the need for the Fund to achieve a distinct role; one that is closer to its member countries, more in harmony with their thinking, more a partnership between brothers, and more effective in its support of poverty reduction. This approach has constituted the basis of the 22 projects and programs which were approved under the umbrella of the Fund in 1430H (2009). These operations were valued at US$234.54 million, bringing the cumulative ISFD approvals since operationalization of the Fund in 1429H (2008G) to US$554.8 million.
Central to the achievement of the ISFD mission is the success to raise the US$10.0 billion targeted capital of the Fund. As at the end of 1430H (2009G), US$2.629 billion have been pledged to the Fund, consisting of US$1.629 billion pledged by 37 of the 56 IDB member countries and US$1.0 billion committed by the IDB. Of these contributions, US$1,060.65 million was received by the Fund as at the end of 1430H (2009G), consisting of US$860.65 million paid by member countries and US$200.0 million paid by the IDB. Clearly, this level of contribution falls far short of the targeted capital amount of US$10.0 billion after more than three years of the establishment of the Fund. It is therefore important that member countries make their level best to implement the resolutions of the OIC Summit, 25th COMCEC Session, and the IDB Board of Governors calling on member countries which have announced their commitments to pay their contributions and those which have not yet made commitments to do so, in order that the Fund can mobilise its approved capital of US$10.0 billion.
During the year, the Fund’s management continued its consultations with the ISFD Governors and Board of Directors on the technical, financial and operational aspects relating to the ISFD. I take this opportunity to express my gratitude for their ongoing support and guidance.
I also take this opportunity to confirm our commitment, as ever, to aim high for better results and I look forward to a successful year for all IDB member countries and the ISFD in 1431H (2010G).
Dr. Ahmed Mohamad Ali President, IDB Group Chairman of the ISFD Board of Directors
12 Islamic Solidarity Fund for Development (ISFD)
1.1Povertyinanunequalworld
The world has deep poverty amid plenty. Of the world’s 6 billion people, 2.8 billion –almost half – live on less than US$2 a day3, and one billion – a fifth – live on less than US$1 a day, with 44 percent living in South Asia. In rich countries less than 1 child in 100 does not reach its fifth birthday, while in the poorest countries as many as a fifth of the children do not. In rich countries less than 5 percent of all the children under five are malnourished, while in poor countries as many as 50 percent suffer from this problem. This situation persists even though human conditions have improved more in the past century than in the rest of history - global wealth, global connections, and technological capabilities have never been greater. Nevertheless, the distribution of these global gains is extraordinarily unequal. The average income in the richest 20 countries is 37 times the average in the poorest 20 - a gap that has doubled in the past 40 years4.
Despite their vast collective wealth in IDB member countries, presently it is estimated that 400 million of the world’s one billion people who live on less than US$1 a day, live in these countries. In absolute figures, 5 countries accounted for 250 million of this 400 million (Bangladesh, Indonesia, Nigeria, Pakistan and Sudan). This is a worrisome figure, considering that the population of the IDB member countries constitutes only 22% of the world’s total population.
1.2 Efforts Made by IDB Member Countries in Fighting Poverty
Although many IDB member countries have made visible achievements in their fight against poverty, overall progress has been slow. Many countries still face great challenges in addressing issues related to education, health, water and sanitation, gender, employment, and social safety nets. At the current
PART ONEThe Burden of Poverty inIDB Member Countries
3ILO World Employment Report 2004-20054World Development Report, World Bank, 2000/2001
Annual Report 1430H -2009G 13
trends, many countries are likely to miss some vital Millennium Development Goals (MDGs) targets to be met by 2015, including those for infant mortality, prevalence of infectious diseases and access to water and sanitation. In fact, some countries are at risk of failing to reach even two-thirds of the targets, and in sub-Saharan Africa the situation is worse as compared to other regions.
Overall, Asia region is making much better progress in fighting poverty. However, in terms of absolute numbers, the scale of poverty faced by this region is large. Among IDB member countries, this region includes Indonesia, Pakistan and Bangladesh, three of the world’s seven most populous countries. As a result, although the prevalence of economic and social poverty is often lower than in sub-Saharan Africa, these three countries together, and sometimes individually, account for much larger absolute numbers of deprived people in the IDB member countries suffering from many attributes of poverty, such as population living in rural areas
without access to water and sanitation, number of underweight children, and population living on less than a dollar a day. This region also includes Afghanistan, whose performance in terms of progress towards the MDGs and poverty reduction is as weak.
In Africa, despite the constraint of reliable statistics for monitoring and reporting of progress toward poverty reduction and MDGs, there is little doubt that the recent global economic slowdown has had an adverse impact on these economies and presents a new challenge to achieving the MDGs in the region. Nonetheless, reports confirm that progress has been made on some MDGs’ indicators, as primary school enrolment, gender parity, women’s empowerment, and access to improved sanitation and safe water.
Sadly, of concern for many African countries is the rising income inequality, and the fact that progress remains uneven across goals and sub-regions. Similarly, progress on the health MDGs remains poor, particularly for child and maternal mortality rates. However, immunization coverage is approaching universality and is thus reducing infant mortality rates significantly in many countries. Reduction in the prevalence of HIV/ AIDS is also being achieved, but not at a rate to reverse the spread of the disease. Also, the incidence and prevalence of tuberculosis is increasing in many countries.
14 Islamic Solidarity Fund for Development (ISFD)
Thus, at halfway point in the path to reach the MDGs, there is an urgent need to make a major, sustained commitment to strengthening health systems in LDMCs and sustainable improvements that benefit across disease areas and health programs. Attention needs to be given to the diseases which are often a symptom of poverty and the disadvantaged people living in remote rural areas, urban poor, or in conflict zones. Control of these diseases will have a direct impact on alleviating poverty for large populations, and could strengthen some components of health systems in Africa and some parts of Asia. It is also important to recognize that the fight against these diseases should be accorded a higher profile in the national public health care priorities as well as increased flexible funding by the international community.
1.3 Challenges of fighting poverty
Skewed distribution of the benefits of growth and impact of inflation: There are a number of key challenges which are faced by the IDB member countries, particularly LDMCs, in addressing poverty. For example, despite the efforts made, there is a growing evidence of widening disparities in social indicators, implying that progress has in many cases by-passed the poor segments of the society. This may be mainly due to the lack of proper distribution of the benefits of growth which needs to be “pro-poor” to have a discernable impact on poverty.
High inflation, especially due to rising commodity prices, is threatening to undermine the progress made in reducing poverty. The sharply increased deficits on the public accounts are also putting a squeeze on the available fiscal space for public spending targeting poverty reduction and attainment of the MDGs. Moreover, the dan gers of the decelerating world economy and the adverse impact of the global financial and energy crisis on these efforts cannot be ignored.
The recent rise in food prices is also putting great pressure on LDMCs and is threatening to reverse the progress made in fighting hunger and malnutrition. However, it also offers a window of opportu nity to increase the needed expenditure on agri culture and to encourage the developed countries to remove barriers to an open trading system in agricultural commodities aimed at benefiting the less developed countries.
Annual Report 1430H -2009G 15
Climatechangeandinsecurityrisks: The challenge of fighting poverty in LDMCs, particularly African countries, is compounded by the grave long-term risk that climate change poses. Extreme drought is increasing as higher temperatures cause a higher rate of evaporation and more drought in some areas of the IDB member countries. Models predict that sea level may rise as much as 59 cm (23 inches) during the 21st Century, threatening coastal communities, wetlands, and coral reefs5. Moreover, warmer temperatures affect human health which also adds to the incidence of poverty, particularly in the LDMCs. Therefore, these countries require additional resources for adapta tion since they are particularly vulnerable to the effects of climate change and the growing risk of natural disasters. These additional resources will be needed to strengthen the resilience of the poor communities to the effects of natural disasters.
Evidence also shows that security and development go hand in hand and stabilizing post-conflict countries to prevent the emergence of new conflicts is essential for avoiding reversing the development gains made over the pat two decades. As a significant proportion of poverty in IDB member countries exists in conflict and post-conflict areas, effective support for peace building and longer-term development should be viewed as key ele ment of strategies to achieve this goal.
ResourceRequirementstofightPoverty: In order to achieve the MDGs and make significant progress in the fight against poverty, perhaps the biggest challenge which faces the IDB member countries is the huge level of the estimated resources which are needed to address this problem. Recent studies by the UN Millennium Project show that a sustained investment of US$110 billion annually over a long period (say, 7-10 years) may effectively tackle poverty in many of its manifestations. Moreover, such investments must be done in an integrated manner that combines agricultural (food) production, affordable and locally available production technologies, infrastructure development, water supply, health care, and access to markets. The UN Project claims that such interventions benefit as high as 90% of the vulnerable, especially women.
Other estimates of the financial resources required to implement the MDG-framework range from US$130 billion per year, at least by the year 2010, to US$180 billion a year. On the basis of previous trends of aid flows to developing countries, the IDB member countries account for roughly 35-40 percent of the total aid flows. This works out to US$45-72 billion of aid a year, if the above estimates are taken as benchmarks.
5UN Intergovernmental Panel on Climate Change (IPCC), Fourth Assessment Report on Climate Change, 2007.
16 Islamic Solidarity Fund for Development (ISFD)
6Strengthening the Global Partnership for Development in Times of Crisis, MDG Gap Task Force Report, 2009.
Estimates were also made on the basis of the total investments needed to bring the population living below the poverty line to the US$1 per day. Barring income redistribution, and assuming an incremental capital-output ratio of 4:1, total additional investment of US$250 billion would be needed to attain this target. Under a more ambitious scenario, where all the population below the poverty line will have an additional income of US$1 per day, the corresponding amount of investment would be US$626 billion. To achieve a US$2 per day target, considerably more resources would be required.
Given these estimates, it is clear that there is a great need for foreign assistance if IDB LDMCs, and developing countries in general, are to achieve appropriate levels of poverty reduction and meet the MDGs targets. Indeed, the international accord on MDGs calls for global cooperation through official development assistance (ODA), debt sustainability, and international trade. So far, and despite the increase in the volume of aid, only few countries had lived up to the developed countries’ pledge that ODA should constitute at least 0.7 per cent of their gross national income.
According to some reports, although development assistance rose to record levels in 2008, donors are falling short by US$35 billion per year on the 2005 pledge on annual aid flows made by the Group of Eight in Gleneagles, and by US$20 billion a year on aid to Africa6. The importance of international trade is also recognized by the MDGs, particularly Goal 8 which calls for decent and productive work for the youth. It is a fact that some free access has been achieved by LDMCs, but their share of world trade has continued to decline. It is therefore important that the developed countries live up to their commitments, even during times of financial crisis, to enable the developing countries to implement their programs in the area of poverty reduction.
It is also important that IDB member countries should lay out practical steps, strategies and well-designed programmes to address poverty effectively and attain the MDGs. Where possible, countries may draw on the private sector as an engine of innovation and growth to complement governments in designing, delivering and financing interventions to provid e sustainable incomes for rural and urban popula tions. The private sector is also a source of organizational and management exper tise that can increase the effectiveness of service delivery to the poor.
18 Islamic Solidarity Fund for Development (ISFD)
PART TWOISFD Five-Year Strategy(2008-2012)
2.1 The Strategy
A five-year strategy has been
developed to guide the operations
of the ISFD during the period 2008-
2012. The Strategy emphasises
poverty reduction as an overarching
objective of the IDB Group, with
ISFD as an important leverage to the
various windows and instruments of
the Group for achieving this objective.
In line with this theme, and the need
for urgent actions to speed up achievement of the MDGs as core commitments for the international
development community, the strategy has been aimed to position the IDB Group en route to becoming
the premier institution for fighting poverty in its member countries. It also supports the IDB’s Special
Programme for the Development of Africa in line with the OIC Ten-Year Programme of Action for the
Ummah. The strategy was approved by the ISFD Board of Directors in February 2008.
To achieve the ISFD objectives, the strategy emphasized human development, especially improvements
in health care and education, and providing financial support to enhance the productive capacity and
sustainable means of income for the poor, including financing employment opportunities, providing
market outlets especially for the rural poor and improving basic rural and pre-urban infrastructure.
It also identified agriculture and rural development, human development, basic infrastructure and
micro-enterprises as sector priorities. Capacity-building, programs supporting women and environment
Annual Report 1430H -2009G 19
protection have also been identified as
cross cutting issues in the Fund’s projects
and programs.
The Strategy emphasizes that poverty
reduction projects require a greater range of
partners, partly as a reflection of its typical
multi-sectoral components and partly to
reflect their community-based design. To
optimize its impact, therefore, the Fund looks
for opportunities to forge partnerships with
governments, development institutions,
private sector, NGOs, local communities,
and other stakeholders who could add
value to its projects/programmes. Private
sector participants can be either ‘for-profit’ companies operating under a privatisation agreement and
providing a service to a Government agreed standard (e.g. managing hospitals, supplying schools etc.),
or not-for-profit entities providing a service directly to the poor.
The total cost of the programs and projects envisaged by the strategy was estimated at US$13.5 billion,
composed of multi-sector programs, thematic programs and individual projects. The ISFD contributes
US$2.0 billion as concessional financing towards the total cost of the Strategy projects and programs.
This implies a targeted leverage of 1:6 for
ISFD financing to implement the Strategy.
2.2 ISFD Special Programs
The strategy emphasized two thematic
programs as part of its main components:
• Vocational Literacy Program (VOLIP), and
• MicrofinanceSupportProgram(MFSP)
20 Islamic Solidarity Fund for Development (ISFD)
These programs have been developed
by the Fund for implementation starting
1429H (2008G). The total cost of each of
them is estimated at US$500 million, to
which the ISFD will contribute US$100.0
million over the Strategy period. Given the
catalyst/facilitator role of the ISFD, the
programs are expected to attract resources
from other development partners and
stakeholders with a leverage of 1:4.
Adding value by processing commodities at the producer level is one of the targets of the ISFD to enhance the poor incomes.
An IDB/ISFD mission consulting with the representatives of a local community in Indonesia.
Annual Report 1430H -2009G 21
Poverty Reduction as an Overarching Mission of the IDB
The IDB 1440 Vision, entitled ‘A Vision for Human Dignity,’ stresses key aspects of poverty reduction in five of the Bank’s eight main priorities, namely: alleviate poverty, promote health, universalise education, prosper the people and empower women.
Two overarching themes define this focus:
- The need to improve and enhance the income of the poor through creating jobs and employment opportunities and ensuring that they reach the target groups of poor and disadvantaged people; and
- To promote the development of human capital by boosting education, training and health care services.
In light of this vision, poverty reduction has become the overarching objective and underlying theme of the IDB’s interventions in member countries.
Operationalization of the ISFD
Guided by the IDB Group Policy for Poverty Reduction, the ISFD programs are tailored to:
- Promote pro-poor growth with particular concerns for equitable distribution of the benefits.- Address the barriers and issues faced by women in economic development.- Emphasize human development; especially improvements in health care and education.- Provide social safety nets for the poor.- Promote good governance and access to public service delivery by the poor.- Foster and harness full ownership and commitment by member countries.
The policy underscores the need to provide financial support to enhance the productive capacity and sustainable means of income for the poor (including financing employment opportunities, providing market outlets especially for the rural poor, improving basic rural and pre-urban infrastructure, such as the supply of drinking water, roads and electric power).
Objectives of the ISFD
The Islamic Solidarity Fund for Development is a special Fund within the IDB dedicated to reducing poverty in its member countries by promoting pro-poor growth, emphasizing human development, especially improvements in health care and education, and providing financial support to enhance the productive capacity and sustainable means of income for the poor, including financing employment opportunities, providing market outlets especially for the rural poor and improving basic rural and pre-urban infrastructure.
22 Islamic Solidarity Fund for Development (ISFD)
IDB Group Policy on Poverty Reduction
Overall, the IDB Group Policy on Poverty Reduction emphasizes the following:
- Operations under the Fund will be well selected, innovative and support the most basic and productive activities that have immediate impact on the lives of the poor people.
- The fight against poverty requires partnership and joint action among the key players: bilateral and multilateral development agencies, local development financing institutions, UN agencies, civil society and non-governmental organizations etc.
- Economic growth must be accompanied by “pro-poor” redistributive policies, which requires the Fund to ensure that the design of its programs/projects and their expected growth impact will favour the poor segments of the population.
- To the maximum extent possible, the interventions will be community-based, to supplement Governments’ efforts in the area of poverty reduction. Wherever possible, NGOs and other civil society organizations will be utilized to implement such interventions.
- Though a larger share of the Fund’s resources would go into “basic needs,” such as water supply, primary and secondary education, primary health care, agricultural development and food security, higher education and science & technology would also be considered – basically for two reasons: (a) as drivers for productivity and growth; and (b) as “enhancers” of a country’s competitive edge in the global economy.
- While the Fund will benefit the poor segments or vulnerable groups in the society in all member countries, topmost priority will be given to the least developed member countries, especially Sub-Saharan African countries, as well as countries affected by conflicts.
- The Fund shall play a catalytic and facilitator role in mobilizing additional resources for financing its programs from all potential partners, including national, regional and international funding institutions and banks, as well as from the private sector.
Selection of Pro-poor Projects
A project/program is considered pro-poor if it benefits poor people in absolute terms. If these beneficiaries support and sustain the local economy, then this will create a direct link between economic growth and poverty reduction. It also implies that the projects/programmes which will be targeted by the Fund must have clear and direct impact on the poor. This broad-based pro-poor growth approach will constitute the basis of the Fund’s intervention in member countries with a view to achieve the following:
- Help the poor to break away from poverty with a special focus on the absolute poor.
- Achieve sustainability in the poverty reduction activities of the Fund with a view not only to help member countries achieve the MDGs, but also to create opportunities for growth and employment for the poor.
24 Islamic Solidarity Fund for Development (ISFD)
PART THREEOperations in 1430HIn line with the IDB Group Policy on Poverty Reduction, and the ISFD Five-Year Strategy (2008-2012),
the main objective of all the projects approved in 1430H was to contribute to the efforts of combating
poverty in the countries in which they will be implemented. This required targeting interventions in the
areas of social and human development such as basic education, health services, enhancing capabilities,
particularly for women and children, and providing the poor with means of sustainable income to break
away from poverty.
3.1 Programs’/Projects’ Approvals
In 1430H (2009G), 22 operations amounting to US$234.414 million were approved under the umbrella
of the ISFD, compared to 26 projects amounting to US$320.26 million approved in 1429H (2008G).
Given the limited resources available, the Fund has been selective in picking up these projects and
formulating them in such a way as to achieve the maximum possible impact. This is reflected in the
sector priorities, geographical focus, as well as the targeted direct beneficiaries of the projects.
3.2 Sector Distribution of Approved Projects – 1430H (2009G)
The sector distribution of the approved projects has been as follows:
Sector No. of Projects Value (US$m) %Agriculture 5 53.51 22.8Transport 4 53.30 22.8Education 4 37.21 15.8Microfinance 4 27.70 11.8Energy 2 33.31 14.2Water 2 23.13 9.9Health 1 6.38 2.7Total 22 234.41 100%
Annual Report 1430H -2009G 25
The large share of agriculture and transport in total approvals (22.8% each), was due to the critical importance accorded to these sectors in the IDB Policy for Poverty Reduction as well as the national development plans of member countries. These two sectors in general have the capacity to boost pro-poor growth and thus help in addressing the root causes of poverty in the rural areas. Consistent with the Fund’s operational principles, due consideration was also given to environmental and women issues in all the approved operations.
Three operations (two microfinance and one VOLIP) were approved in the area of thematic programs during the year. In implementing these programs, the catalyst/facilitator role is considered essential in view of the wide gap between the available resources from the Fund and the financing requirements of these programs.
3.3 Country Distribution
According to the IDB policy on poverty reduction, the Least Developed Member Countries (LDMCs) will be the main beneficiaries of the ISFD operations. The basic criteria of eligibility to have access to the Fund resources is absolute poverty (i.e. at least 20% of the population, or more are classified as living below the poverty line), stage of achievement in reducing poverty as defined in the policy, need for resources, and absorptive capacity of the recipient country. Eighty percent of the annual financing would be directed towards the LDMCs, and 20% to be allocated to non-LDMCs.
In 1430H (2009G), 15 out of the 17 countries which benefited from ISFD financing were LDMCs7, most of which (9) are in sub-Saharan Africa, as can be seen in the ISFD Approved Projects’ Portfolio in Annex I. This is consistent with the IDB policy to give special consideration for the African countries as reflected in the Special Program for the Development of Africa (SPDA) and Jeddah Declaration. All these initiatives are aimed to address short- and long-term economic development of Africa. Moreover, the IDB has decided that the programs supported by the IDB Group, SPDA, Jeddah Declaration, and the ISFD, should be implemented in tandem so as to supplement the amount of resources available from the Fund to member countries and give more incentive to other partners to contribute to these programs.
23%3%
12%
14% 14%
16%
23% Transport
Education
Water Resources
Energy
Microfinance
Health
Agriculture
7The LDMCs include 25 IDB member countries, namely Afghanistan, Bangladesh, Benin, Burkina Faso, Chad, Comoros, Djibouti, The Gambia, Guinea, Guinea-Bissau, Kyrgyzstan Republic, Maldives, Mali, Mauritania, Mozambique, Niger, Senegal, Sierra Leone, Somalia, Sudan, Tajikistan , Togo, Uganda, Yemen. As a special case, the State of Palestine is given the same terms and conditions as LDMCs.
Sector Distribution of Approvals - 1430H
26 Islamic Solidarity Fund for Development (ISFD)
3.4 Terms & Conditions of Financing
The terms and conditions of the approved operations in 1430H (2009G) have all been financed on
concessional terms, i.e. ranging from 0.75% to 2.0% for service charges, 7 to 10 years for grace periods,
and 20 to 30 years for repayment periods. This was in line with the approved ISFD loans terms and
conditions.
ISFD Terms and Conditions of Financing
Loan Type Percentage Allocation
LDMCs/Low-Income Countries
Middle-Income Countries
High Income Countries
High Poverty Content 20%
Service fee up to 0.75% per annum with 30 years repayment period including 10 years of grace period.
N/A N/A
Ordinary Loans for Poverty related programs/projects
80%
service fee up to 2.0% per annum with 25 years repayment period including 7 years of grace period.
Service fee up to 2.0% with 20 years repayment period including 5 years of grace period.
Service fee up to 2.0% with 15 years repayment period including 4 years of grace period.
80% 15% 5%
3.5 Co-financing
The ISFD actively promotes co-financing
to increases the total amount of funding
available and maximize its impact. In
1430H (2009G), the total cost of the
approved projects was US$899.47
million, whereas the ISFD contributed
US$234.54 million – representing 26.1
– percent and the remaining cost was
covered by other partners including the
IDB, national Governments, multilateral
institutions and bilateral donors.
3.6 Partnerships for VOLIP and Microfinance
Forming partnerships is one of the key objectives of the ISFD Five-Year Strategy (2008 – 2012), and
one of the best ways of leveraging the Funds resources and scaling up its programs. Consequently,
ISFD
Other Financers
26.1%
73.9%
ISFD Co- financing
Annual Report 1430H -2009G 27
a number of partnerships were developed with other institutions to assist in the effective implementation
of the ISFD Vocational Literacy (VOLIP) and Microfinance Support Programs (MFSP). Some of these
partnerships are briefly highlighted below.
- ISFD-GrameenSocialBusinessProgramInitiative:
The ISFD has started exploring
and developing a Social Business
program in collaboration with
Grameen Bank in Bangladesh
that was proposed by Professor
Mohammed Yunus, Managing
Director of Grameen Bank, in
November 2008. The ISFD is
considering providing a US$10.0
million to support this initiative
and also exploring the possibility
of implementing this initiative with
potential partners in other IDB
Member Countries.
- International Islamic Charitable Organization (IICO):
The ISFD is working in collaboration
with the International Islamic
Charitable Organization (IICO),
based in Kuwait, on a program for
the support of the needy women in
several countries, such as Uganda,
Sudan, Egypt, Jordan, Bahrain, Pakistan and Bangladesh. The initial cost of the program is
estimated at US$15.0 million, to which IICO will provide US$4.0 million and the ISFD US$5.0
million. In addition, the Fund and IICO are coordinating together to mobilize resources from
other sources to cover the remaining amount. The ISFD financing will be used for microfinance to
productive activities that aim to provide employment opportunities for the needy communities
and improve their living conditions.
IDB/ISFD mission to Grameen Bank in Dhaka, Bangladesh, to discuss the Social Business Initiative (SBI)
28 Islamic Solidarity Fund for Development (ISFD)
- Prince Salman Centre for Disability Research (PSCDR) and the Saudi Credit andSavingBank(KingdomofSaudiArabia):
These parties, together with ISFD, signed a tripartite Framework Agreement in which the Saudi Credit and Saving Bank has committed SR150.0 million (US$40.0 million) to the program, which will mostly be used for training the disabled and providing them with microfinance for small and very small enterprises.
- OtherPartnerships:
The ISFD is also in the process of entering into partnership with many organizations, such as the World Bank (MENA Region), African Development Bank, UN agencies, The Carter Centre, Qatar Charity Organization, Earth Institute (Millennium Villages Project), etc, to implement poverty related projects.
3.7 Looking Ahead
To further enhance its operations, and in view of the limited capital resources, the ISFD plans to:
• InitiateSpecialProgramsandTrustFunds,includingPublic-PrivateandIndividualPartnershipsacross countries, regionally and internationally, and develop programs for a new group of countries on communicable diseases – Malaria and HIV/AIDS in particular.
• Participate in the IDB Group Jeddah Declaration Program and the Special Program for theDevelopment of Africa (SPDA) which aim to contribute to the efforts of addressing food crisis in member countries.
• DevelopCountryPovertyAssessments(CPAs)inLDMCs,withaviewtocoverallofthemby1433Hand provide inputs into the Member Country Partnership Strategies (MCPSs) in collaboration with other entities of the IDB. This will enable the Fund to achieve its goal of moving gradually from individual project’s financing to program financing.
• Implement Community Driven Development (CDD) projects/programs with special focus onwomen/gender issues and organise regional workshops on poverty and the CDD approach.
• Undertake a “mid-term” review of the ISFD Five-Year Strategy (2008-2012) to evaluateimplementation against expectations, lessons learnt and how to strengthen implementation of the plan, particularly leveraging.
30 Islamic Solidarity Fund for Development (ISFD)
4.1 Activities of the ISFD Board of Governors
The supreme authority of the ISFD is vested
in the Board of Governors. The 2nd Meeting
of the ISFD BOG was held in Ashgabat in
Turkmenistan on 9 Jumad-I, 1430H (2 June,
2009), coinciding with the 34th IDB Group
Annual Meeting of the BOG,
The BOG adopted the ISFD Annual Report
and Audited Financial Statements -
1429H (2008G). It also deliberated on the
progress of the Fund during 1429H and
expressed concerns about the low levels of
contributions to the capital of the ISFD. The
Board emphasized the importance of resource mobilization for implementation of the ISFD programs
and asked the ISFD management to continue consultations with the ISFD Governors with a view to
come up with an appropriate criteria for guiding member countries’ contributions to the Fund.
The BOG decided that the 3rd Annual Meeting of the ISFD BOG would be held in Baku in Azerbaijan on
12 Rajab 1431H (24 June 2010). It also approved Messrs Deloitte & Touche and Bakr Abulkhair & Co.
as auditors of the ISFD Financial Accounts in 1430H (2009G).
4.2 Activities of the ISFD Board of Directors
As per the regulations of the ISFD, the Board of Executive Directors of the IDB has been appointed as
the Board of Directors of the ISFD (BOD) to provide strategic guidance and take decisions regarding
PART FOURCorporate Aspects
President of Turkmenistan receiving IDB Group President on the occasion of the 34th IDB Group Annual Meeting in Ashgabat, Turkmenistan
Annual Report 1430H -2009G 31
all forms of financing, as well as the resources, operational procedures and policies, and rules and
regulations of the Fund. The BOD members perform their duties under the powers delegated to them
by the Board of Governors. The IDB President is ex-officio chairperson of the BOD.
During 1430H, the BOD continued to closely monitor implementation of the ISFD’s poverty reduction
mandate. It held 8 meetings during which it considered a number of items related to projects financing
and policy issues. Eight ISFD Progress Reports were considered by the BOD, highlighting the various
activities carried out by the Fund as well as areas for further actions and improvement.
The Board approved 21 operations amounting to US$223.52 million for poverty reduction projects/
programs in 17 IDB member countries. It also considered one operation approved by the President of
the IDB, under the authority delegated to him by the BOD, amounting to US$10.89 million. The BOD
also approved the terms and conditions of the loans extended under the umbrella of the ISFD as well
as the new policy to treat IDB financing through the ISFD as “co-financing” with the ISFD.
Inaugural Session of the 34th IDB Group Annual Meeting of the BOG in Ashgabat, Turkmenistan, on 9 Jumad-I, 1430H (2 June, 2009)
32 Islamic Solidarity Fund for Development (ISFD)
The BOD approved the participation of the new members of the ISFD who announced their contributions
after the approval of the Regulations of the Fund. It also approved the terms of payment of contributions
to the ISFD as follows:
a. Contributions below US$1.0 million, to be paid in one instalment.
b. Contributions exceeding US$1.0 million, to be paid in three equal annual instalments.
c. These terms of payment shall be applicable for payments of contributions to the ISFD that have
already been announced, and/or that will be announced in the future.
The ISFD BOD also approved the realignment of the ISFD structure as part of the IDB reform program
launched in July 2009 in order to respond more efficiently to the challenges of poverty reduction in
member countries. Two divisions have been created within the Fund: Advocacy and Special Programs
Division and Program Management Division. The Fund’s staff complement has also been strengthened
as part of the restructuring exercise. As usual, all ISFD projects/programs have continued to be
implemented through the IDB country/sector departments.
4.3 ISFD Membership
So far, 38 IDB member countries8 and the IDB have announced their contributions to the Fund (see Annex
II). Of the countries which have announced their contributions, 11 have fully paid their contributions,
13 countries made partial payment, and 14 have not yet started paying their contributions. Eighteen
IDB member countries are yet to announce their contributions to the capital of the Fund.
837 IDB member countries at the end of 1430H (2009G).
34 Islamic Solidarity Fund for Development (ISFD)
PART FIVEFinancial Review5.1 Resources of the FUND
The initial targeted capital of the Fund is US$10.0 billion consisting of contributions by member countries
of the IDB, and the IDB. Total pledges as at the end of 1430H stood at US$2.629 billion, composed of
US$1.629 billion committed by 37 IDB member countries, and US$1.0 billion committed by the IDB.
As can be seen in Annex I, the biggest pledges were made by Saudi Arabia (US$1.0 billion), Kuwait
(US$300.0 million), and Iran (US$100.0 million).
Paid-in capital was US$1,060.66 million as at the end of 1430H (2009G), compared to US$538.2 million
in 1429H (2008G). Out of this, US$860.656 million was paid by member countries and US$200.0 million
by the IDB. Net profit for the year was US$2.568 million, compared to US$21.881 million in the year
before.
The Fund has separate accounts and records of its capital resources and operations. All operations and
investments activities of the Fund are conducted in conformity with Shariah (Islamic law) governing
Islamic Awqaf (Trusts). Although the accounts of the Fund are kept in US dollar, the ISFD Regulations
stipulate that they can be kept in any currency, currencies, or unit of account that the Board of Directors
may deem appropriate. As an interim measure, the BOD decided to use the US dollar as a unit of
account of the Fund since its capital is denominated in US dollars. The Fund’s accounts are kept by the
IDB Finance Department.
5.2 Operations Financing
The ISFD approvals in 1430H (2009G) amounted to US$234.41 million, for 22 operations in 17 IDB
member countries. These operations were partly financed from the IDB allocations for concessionary
financing under the umbrella of ISFD. It is expected that commencement of disbursements for these
projects will start in 1431H (2010G).
Annual Report 1430H -2009G 35
The applied terms and conditions to the Fund’s operations were set in a manner which would ensure
that financing would be provided on concessional terms to the member countries while also ensuring
the long-term sustainability of the Fund.
5.3 Income
The ISFD liquid funds are composed of paid-in contributions from member countries and the IDB.
During the year, these funds were invested in Murabaha and short-term Shariah compatible placements.
In doing so, these investments were guided by the generally accepted sound investment principles and
paramount consideration was given to the preservation of the value of the Fund’s principal resources.
All investments during 1430H (2009G) were made in US dollar and Euro.
ISFD operating income in 1430H (2009G) was US$11.23 million, composed of income from commodity
placements (US$8.76 million), murabah (US$2.12 million) and syndication (US$0.35 million). This is
equivalent to an average annual rate of return of 1.35 percent, compared to an income of US$21.881
million - equivalent to an average annual rate of return of 2.30 percent - achieved in the year before.
Net income was US$2.568 million, having made a provision of US$7.75 million for non- performing
sukuk (bonds) investments which were made in a company during the year. The low income was also due
to the low margins on investment of the ISFD capital resources during the year which were a reflection
of the impact of the financial crisis and deceleration of the world economy in 2009. As disbursements
of ISFD projects have not yet been started, no accrued income was made on the Fund’s operations
during the year. Regarding the impact of exchange rates movements, although there were fluctuations
in the value of the currency of denomination of the Fund (US dollar) during the year, the net impact was
positive as the Fund registered a net currency gain of US$0.835 million, compared to a currency loss of
US$1.656 million which was registered in 1429H (2008G).
5.4ManagementofLiquidFunds
ISFD is required to invest its resources which will not be immediately required for financing its operations.
As a waqf (i.e. Trust), paid-in capital would not be available for utilization in the Fund’s operational
activities. Therefore, to maximise the income of the Fund, liquidity would be maintained only to the
extent that can meet the Fund’s current cash requirements and undisbursed commitments.
36 Islamic Solidarity Fund for Development (ISFD)
The ISFD liquid assets are invested based on guidelines which are issued with the IDB Risk Management
Department. In the meantime, the ISFD is in the process of developing an Investment Policy to guide
the short- and long-term investment of its capital resources.
Key Financial Indicators (in US$m) 1429H 1430H
Capital Contributions: Commitment 2,610.0 2,629.0
Capital Contributions: Payments 538.2 1,060.7
Operating Income 23.54 11.23
Net Income 21.88 2.568
38 Islamic Solidarity Fund for Development (ISFD)
PART SIXChallenges and Prospects6.1 Limited Resource Base of the ISFD
As per the desire of the Makkah Summit, the Fund has been established on the basis of “voluntary
contributions from member countries” to illustrate “Islamic solidarity and brotherhood” among them.
Hence, all member countries are expected to contribute to the Fund’s core capital. However, major
contributions are expected to come from the group classified as high income member countries.
Generous contributions by this group of countries will offset the potentially small contributions from
the least developed member countries (LDMCs).
Considering that the ultimate success of the ISFD depends upon the financial and material support
to be provided by member countries, especially the richer ones, the IDB has undertaken a resource
mobilization drive with the assistance of the OIC Chairman as well the successive Chairmen of the
ISFD Board of Governors. Several countries in North Africa, the Gulf and Asia have been visited to raise
awareness about the ISFD and the need to make appropriate contributions to its capital.
So far, 38 member countries9 have announced their contributions, which together with the IDB, have
amounted to US$2.629 billion. The biggest commitments have come from the Kingdom of Saudi
Arabia (US$1 billion), the State of Kuwait (US$300 million), Islamic Republic of Iran (US$100 million),
the State of Qatar (US$50 million), and Algeria (US$50 million). Many of the least developed member
countries in Africa have also made pledges. The IDB itself has committed US$1.0 billion to be paid over
10 years. The amount announced both by the member countries and the IDB represents 26.3 percent
of the principal targeted capital of the Fund (US$ 10.0 billion). The IDB is fully aware that extra efforts
need to be exerted to mobilize additional resources for the Fund.
937 IDB member countries at the end of 1430H (2009G).
Annual Report 1430H -2009G 39
Criteria for Contributions:
Basically, the contribution to the Fund is voluntary. However, with the view to help those in most need,
the more economically able countries are expected to contribute more than the less able ones. Towards
this end, the ISFD has developed several criteria that may be used to guide member countries on their
contributions. These criteria are based on:
• Shareofacountry’srealGDP(say,0.2%over3-4years,whichisfarlessthantheinternational
benchmark of 0.7%).
• Shareoftheannualtotalmerchandiseexports
• Ashareofacountry’sforeignexchangereserves
• Aweightedcombinationoftheabovecriteria
• Aproportionateshareofeachmembercountry’ssubscribedorpaid-incapitaltotheIDB
The success of the Fund in fulfilling its objective of fighting poverty in the IDB member countries
depends mainly on the financial support it receives from these countries. Despite the progress made
in 1430H (2009), the current amounts of committed and paid-in capital are too small to enable the
Fund to implement its programs as envisaged by its Five-Year Strategy (2008-2012). Hence, the issue of
resource mobilization remains the most compelling challenge for the IDB in 1431H.
The IDB, therefore, looks forward for member countries who did not contribute so far to the Fund’s
resources to do that at the soonest possible and those member countries who made initial contribution
to increase it further to enable the Fund to play its noble role. The Fund looks forward with optimism
that member countries will implement the resolutions of the OIC Summit, COMCEC Summit and IDB
Board of Governors in this regard, as it is only through such strong commitment that the ISFD will be
able to contribute significant amounts to its projects/programs and attract strong partners to assist in
the fight against poverty in the member countries, particularly the least developed ones.
In addition to the commitments of the member countries, the management of the ISFD will exert
effort to tap the waqf/Zakat and private sector funds to augment the Fund’s resources. The ISFD will
40 Islamic Solidarity Fund for Development (ISFD)
also launch an initiative to administer special funds, as desired by the contributors to these funds to be
applied to particular poverty-related program/project, and build strong partnerships and co-financing
arrangements with development partners.
6.2 Enhancing Resource Mobilization Efforts
The ISFD will launch a resource mobilization campaign through various activities, including:
- Mounting high-level missions to member countries to sensitize the authorities in these countries
about the need to commit resources to the Fund.
- Contracting a reputable public relations firm which could assist in promoting the activities of the
fund as well as advise on various alternatives of ways and means for resource mobilization.
- Building network – partnering with UN agencies, regional banks, foundations, private businesses,
and civil society organizations.
- Organizing conferences at a regional level for private sector, awqaf (Trusts) and Zakat institutions
and charitable organizations to build up partnerships and augment ISFD resources.
- Establishing specific poverty-related Trust Funds.
- Enhancing the ISFD staff capacity for better program’s/project’s formulation, design and timely
implementation, as well as in the area of marketing and building of partnership skills.
The Fund will also constitute the ISFD High-Level Advisory Board, as called for in the ISFD Regulations,
which will assist in the campaign for resource mobilization.
IDB/ISFD mission consulting with local communities in Indonesia.
42 Islamic Solidarity Fund for Development (ISFD)
S/N
o.Co
untr
yPr
ojec
tTo
tal C
ost
ISFD
Con
trib
utio
nAp
prov
al
Dat
eD
escr
iptio
n &
Obj
ectiv
es o
f the
Pro
ject
1Af
ghan
ista
nD
oshi
-Pol
-E-K
hum
ri Ro
ad P
roje
ctU
S$ 9
0.94
mill
ion
US$
10.2
0 m
illio
n5/
07/0
9
Supp
lem
enta
ry
finan
cing
to
re
stor
e ro
ad
conn
ectio
n be
twee
n Ka
bul
and
nort
hern
pro
vinc
es a
s w
ell
as I
DB
mem
ber
coun
trie
s al
ong
Afgh
anis
tan
nort
hern
bo
rder
, N
amel
y: T
ajik
ista
n, U
zbek
ista
n an
d Tu
rkm
enis
tan.
The
road
w
ill p
rom
ote
regi
onal
eco
nom
ic i
nteg
ratio
n an
d fa
cilit
ate
trad
e, d
eliv
ery
of h
uman
itaria
n ai
d, a
nd r
econ
stru
ctio
n ef
fort
s in
Afg
hani
stan
.
2Al
bani
aRe
cons
truc
tion
of
Seco
ndar
y an
d Lo
cal R
oads
Pro
ject
US$
44.
0 m
illio
nU
S$10
.0 m
illio
n18
/10/
09
Reco
nstr
uctio
n of
173
km
of
road
s, w
hich
com
pris
e th
e po
rtio
n fin
ance
d by
the
ISF
D/I
DB
out
of a
mul
ti-do
nor
finan
ced
prog
ram
for
the
ove
rall
impr
ovem
ent
of 1
500k
m
of s
econ
dary
and
rur
al r
oads
in
the
coun
try.
The
pro
ject
w
ill im
prov
e th
e liv
ing
stan
dard
s of
the
pop
ulat
ion
in t
he
hint
erla
nd b
y pr
ovid
ing
them
with
acc
ess
to e
ssen
tial
serv
ices
and
eco
nom
ic o
ppor
tuni
ties.
3Ba
ngla
desh
Stre
ngth
enin
g of
Qua
lity
Seed
s Su
pply
Pro
ject
US$
43.
68 m
illio
nU
S$10
.0 m
illio
n31
/05/
09
Enha
nce
the
capa
city
of
th
ree
agric
ultu
re
inst
itutio
ns,
nam
ely:
Ba
ngla
desh
Ri
ce
Rese
arch
In
stitu
te
(BRR
I),
Bang
lade
sh
Agric
ultu
re
Rese
arch
In
stitu
te
(BAR
I),
and
Bang
lade
sh A
gric
ultu
re D
evel
opm
ent
Corp
orat
ion
(BAD
C),
to in
crea
se th
e su
pply
of q
ualit
y se
eds
to fa
rmer
s.
4Be
nin
Smal
l Irr
igat
ed
Perim
eter
s D
evel
opm
ent
Proj
ect
US$
16.
85 m
illio
nU
S$ 5
.90
mill
ion
31/0
5/09
The
proj
ect
com
pris
es o
f (i)
dev
elop
men
t of
low
lan
ds,
smal
l irr
igat
ed p
erim
eter
s, w
ater
rete
ntio
n da
ms,
and
wid
e di
amet
er
wel
ls,
(ii)
cons
truc
tion
of
rura
l in
frast
ruct
ure,
(ii
i) pr
ovis
ion
of
agric
ultu
ral
equi
pmen
t an
d ve
hicl
es,
(ix)
agric
ultu
ral
inpu
ts,
and
(x)
supp
ort
rese
arch
an
d de
velo
pmen
t. It
will
impr
ove
food
secu
rity
and
cont
ribut
e to
al
levi
atin
g po
vert
y of
the
rura
l pop
ulat
ion.
5Bu
rkin
a Fa
so
Cons
truc
tion
and
Equi
ppin
g of
a
Hos
tel f
or th
e St
uden
ts o
f the
U
nive
rsity
of B
obo-
Dio
ulas
so
US$
13.
58 m
illio
nU
S$ 3
.12
mill
ion
18/1
0/09
Cons
truc
ting
and
equi
ppin
g a
stud
ent h
oste
l for
552
stud
ents
of
the
Poly
tech
nic
Uni
vers
ity o
f Bob
o-D
ioul
asso
. The
pro
ject
w
ill a
ssis
t in
redu
cing
the
stu
dent
s’ d
ropo
ut c
ause
d by
the
di
fficu
lt liv
ing
cond
ition
s an
d he
lp i
n in
crea
sing
the
pas
s ra
te o
f stu
dent
s, pa
rtic
ular
ly g
irls.
Anne
x I
ISFD
Pro
ject
s’ P
rofil
es* –
143
0H (2
009)
Annual Report 1430H -2009G 43
6Ca
mer
oon
Sang
mel
ima-
Oue
sso
Rod
Proj
ect
Euro
89.
28 m
illio
n(U
S$12
7.94
mill
ion)
Euro
7.8
6 m
illio
n(U
S$11
.17
mill
ion)
18/0
8/09
Cons
truc
tion
of 1
03 k
m ro
ad li
nkin
g Sa
ngm
elim
a to
Djo
um
in so
uthe
rn C
amer
oon.
The
pro
ject
aim
s to
faci
litat
e na
tiona
l in
tegr
atio
n th
roug
h im
prov
ing
the
tran
sfer
of
good
s an
d se
rvic
es b
etw
een
rura
l are
as a
nd e
cono
mic
cen
ters
in t
he
proj
ect i
nflue
nce
area
s.
7Ch
adM
alar
ia P
reve
ntio
n an
d Co
ntro
l Pro
ject
US$
6.8
mill
ion
US$
6.38
4 m
illio
n8/
02/0
9
Proj
ect’
s sc
ope
incl
udes
: m
alar
ia p
reve
ntio
n, c
onst
ruct
ion
of o
ffice
s fo
r the
Nat
iona
l Mal
aria
Con
trol
Pro
gram
, des
ign
and
supe
rvis
ion,
equ
ipm
ent
and
furn
iture
, tr
aini
ng,
and
supp
ort t
o th
e pr
ojec
t’s m
anag
emen
t. Th
e pr
ojec
t is p
art o
f th
e na
tiona
l pro
gram
sup
port
ed b
y de
velo
pmen
t pa
rtne
rs
whi
ch a
ims a
t red
ucin
g by
50%
the
mor
bidi
ty a
nd m
orta
lity
rate
s du
e to
mal
aria
in C
had
by 2
012.
8Ky
rgyz
Re
publ
icM
icro
finan
ce
Proj
ect
US$
10.0
5 m
illio
nU
S$5.
0 m
illio
n 5/
07/0
9
Enha
nce
the
exis
ting
mic
rofin
ance
sch
emes
in
redu
cing
po
vert
y an
d pr
ovid
ing
incr
easi
ng a
cces
s of
the
poo
r to
m
icro
finan
ce i
n th
ree
targ
eted
are
as,
nam
ely:
Chu
i, O
sh,
and
Gre
ater
Bis
hkek
are
a.
9M
oroc
co
Expa
nsio
n of
W
ater
Sup
ply
for
Fes
City
& R
ural
Co
mm
uniti
es in
Ta
za P
rovi
nce
US$
61.4
1 m
illio
nU
S$10
.53
mill
ion
18/0
8/09
Incr
ease
wat
er s
uppl
y to
the
urb
an a
reas
in t
he s
outh
ern
dist
ricts
of
Fes
City
fro
m t
he e
xist
ing
Ain
Nok
bi W
ater
Tr
eatm
ent
Plan
t an
d th
e ru
ral p
opul
atio
n in
Taz
a Pr
ovin
ce
from
the
tra
nsm
issi
on li
ne o
f Ba
b Lo
uta
Dam
and
Asf
alou
D
am.
10M
ozam
biqu
e
Nia
ssa
Prov
ince
Ru
ral E
lect
rifica
tion
Proj
ect
US$
11.4
2 m
illio
nU
S$10
.31
mill
ion
31/0
5/09
Cont
ribut
e to
im
prov
ing
the
livin
g co
nditi
ons
of
the
popu
latio
n an
d su
ppor
ting
the
econ
omic
dev
elop
men
t of
th
e N
iass
a Pr
ovin
ce in
the
Nor
ther
n re
gion
of M
ozam
biqu
e by
sup
plyi
ng l
ow c
ost
elec
tric
ity t
o ru
ral
com
mun
ities
in
thre
e m
ain
loca
litie
s (M
arru
pa, N
ipep
e, a
nd la
go.
11N
iger
Spec
ial P
rogr
am
for F
ood
Secu
rity
(Pha
se II
)U
S$18
.93
mill
ion
US$
15.9
1 m
illio
n18
/08/
09
Cont
ribut
e to
str
engt
heni
ng f
ood
secu
rity
by i
ncre
asin
g th
e pr
oduc
tion
and
prod
uctiv
ity o
f ag
ricul
ture
, liv
esto
ck
and
fishi
ng
thro
ugh
inte
nsifi
catio
n an
d di
vers
ifica
tion
of p
rodu
ctio
n, h
ydro
-agr
icul
tura
l la
nd d
evel
opm
ent
and
supp
ort t
o fa
rmer
s ass
ocia
tions
. It a
lso in
volv
es m
icro
finan
ce
capa
city
bui
ldin
g su
ppor
t.
12N
iger
ia
Cons
truc
tion
and
Equi
ppin
g of
Fou
r Sc
ienc
e Se
cond
ary
Scho
ols
in K
adun
a St
ate
US$
21.1
3 m
illio
nU
S$17
.32
mill
ion
18/0
8/09
Cons
truc
ting
and
equi
ppin
g fo
ur s
cien
ce s
econ
dary
sch
ools
with
the
aim
to
incr
ease
the
num
ber
of s
cien
ce g
radu
ates
fr
om s
enio
r se
cond
ary
scho
ols
in
Kadu
na S
tate
so
as t
o pr
oduc
e th
e ne
cess
ary
man
pow
er t
hat
will
be
requ
ired
for
the
futu
re d
evel
opm
ent o
f the
Sta
te.
44 Islamic Solidarity Fund for Development (ISFD)
S/N
o.Co
untr
yPr
ojec
tTo
tal C
ost
ISFD
Con
trib
utio
nAp
prov
al
Dat
eD
escr
iptio
n &
Obj
ectiv
es o
f the
Pro
ject
13Su
dan
Wat
er H
arve
stin
g Pr
ojec
t for
Ag
ro-P
asto
ral
Dev
elop
men
t in
Al-G
adar
if St
ate
US$
14.0
2 m
illio
nU
S$12
.6 m
illio
n8/
02/0
9
Proj
ects
scop
e in
clud
es: c
onst
ruct
ion
of 3
dam
s, 3
rese
rvoi
rs,
eart
h m
ovin
g m
achi
nery
, er
osio
n co
ntro
l fa
cilit
ies
and
fore
stry
act
iviti
es, v
eter
inar
y se
rvic
es, c
onsu
ltanc
y se
rvic
es,
PIU
, st
art-
up w
orks
hop
and
proj
ect
audi
ting.
It
aim
s to
se
cure
, th
roug
h w
ater
ha
rves
ting
tech
niqu
es,
enou
gh
wat
er d
urin
g th
e dr
y se
ason
for
bot
h hu
man
and
live
stoc
k co
nsum
ptio
n.
14Su
dan
Dev
elop
men
t of
the
Facu
lty o
f En
gine
erin
g of
th
e U
nive
rsity
of
Khar
toum
Pro
ject
US$
19.2
3 m
illio
nU
S$5.
88 m
illio
n18
/08/
09
Prod
ucin
g qu
alifi
ed
engi
neer
ing
grad
uate
s, eq
uipp
ed
with
the
nee
ded
skill
s to
sup
port
eco
nom
ic d
evel
opm
ent.
The
proj
ect
will
inc
lude
civ
il an
d el
ectr
omec
hani
cal w
orks
fo
r up
grad
ing
the
facu
lty f
acili
ties,
qual
ity e
nhan
cem
ent
com
pone
nt, e
stab
lishm
ent
of a
n ou
trea
ch p
rogr
am a
s w
ell
as a
man
agem
ent s
uppo
rt u
nit.
15Su
dan
Mic
rofin
ance
Su
ppor
t Pro
gram
US$
62.5
mill
ion
US$
3.0
mill
ion
13/1
2/09
Proj
ect’
s sc
ope
incl
udes
: Es
tabl
ishi
ng
mic
roen
terp
rises
, ca
paci
ty b
uild
ing
to se
t-up
mic
rofin
ance
shar
ia’a
com
patib
le
syst
em,
voca
tiona
l tr
aini
ng,
PMU
, au
dit
and
supe
rvis
ion.
It
aim
s at
im
prov
ing
the
livel
ihoo
ds l
ow-in
com
e pe
ople
th
roug
h im
prov
ing
thei
r ac
cess
to
mic
rofin
ance
ser
vice
s, vo
catio
nal t
rain
ing
and
busi
ness
opp
ortu
nitie
s.
16Ta
jikis
tan
Cons
truc
tion
of
Kuly
ab-K
alai
khum
Ro
ad P
roje
ctU
S$ 9
2.9
mill
ion
US$
20.0
mill
ion
5/07
/09
Prov
ide
Year
-roun
d, re
liabl
e an
d di
rect
land
tran
spor
t ser
vice
be
twee
n th
e w
este
rn p
art
of T
ajik
ista
n an
d th
e ea
ster
n re
gion
Gor
no-B
adak
hsha
n. It
will
also
link
Taj
ikis
tan
with
the
stra
tegi
c Ka
rako
rum
hig
hway
in C
hina
and
pro
vide
acc
ess t
o Ka
rach
i sea
por
t in
Paki
stan
.
17Ta
jikis
tan
Mic
rofin
ance
for
Rura
l Are
as P
roje
ctU
S$ 2
0.08
mill
ion
US$
10.0
mill
ion
5/07
/09
Supp
ort
and
com
plem
ent
the
Gov
ernm
ent>
s ef
fort
s to
ac
hiev
e ec
onom
ic g
row
th a
nd a
llevi
ate
pove
rty
by in
crea
sing
th
e ac
cess
of
rura
l and
urb
an p
oor,
part
icul
arly
wom
en, t
o ap
prop
riate
, rel
iabl
e an
d af
ford
able
mic
rofin
ance
ser
vice
s.
18To
goBa
ssar
–
Katc
ham
ba R
oad
Proj
ect
Euro
31.
86 m
illio
n(U
S$44
.92
mill
ion)
Euro
8.5
4 m
illio
n(U
S$12
.0 m
illio
n)31
/05/
09
Upg
radi
ng a
nd s
urfa
cing
90.
5 km
of
exis
ting
eart
h ro
ad
linki
ng t
he lo
calit
ies
of B
assa
r to
Katc
ham
ba. C
ompr
ises
of
(i) c
ivil
wor
ks, (
ii) c
onsu
ltanc
y se
rvic
es, (
iii)
envi
ronm
enta
l an
d so
cial
mea
sure
s, an
d (ix
) m
anag
emen
t un
it fo
r th
e pr
ojec
t.
Annual Report 1430H -2009G 45
19U
gand
a
Rura
l Inc
ome
and
Empl
oym
ent
Enha
ncem
ent
Proj
ect
US$
27.
66 m
illio
nU
S$9.
70 m
illio
n31
/05/
09
Faci
litat
e ac
cess
to
affo
rdab
le, s
usta
inab
le a
nd c
onve
nien
t fin
anci
al a
nd b
usin
ess
deve
lopm
ent
serv
ices
by
activ
e an
d pr
oduc
tive
Uga
ndan
s w
ithin
the
fram
ewor
k of
(i)
revo
lvin
g lin
e of
mic
rofin
ance
, an
d (ii
) in
stitu
tiona
l an
d bu
sine
ss
deve
lopm
ent s
ervi
ces
for m
icro
finan
ce s
uppo
rt in
stitu
tions
.
20Ye
men
Abya
n Ag
ricul
tura
l D
evel
opm
ent
Proj
ect
US$
12.8
5 m
illio
nU
S$11
.5 m
illio
n29
/03/
09
Proj
ect’
s sc
ope
incl
udes
con
stru
ctio
n of
a d
am,
wat
er
rete
ntio
n ba
rrie
rs,
bore
hole
s, m
icro
finan
ce
faci
lity,
ag
ricul
tura
l and
vet
erin
ary
exte
nsio
n se
rvic
es, a
gric
ultu
ral
rese
arch
, con
sulta
ncy
serv
ices
, PM
U, m
onito
ring
wor
ksho
ps
and
finan
cial
au
dit.
It
aim
s at
im
prov
ing
agric
ultu
ral
prod
uctiv
ity a
nd s
mal
lhol
der i
ncom
e in
Aby
an G
over
nora
te
thro
ugh
deve
lopi
ng s
usta
inab
le w
ater
reso
urce
s.
21Ye
men
Rura
l Ele
ctrifi
catio
n Pr
ojec
t U
S$11
7.0
mill
ion
US$
23.
0 m
illio
n31
/05/
09
Impr
ovin
g ac
cess
to
elec
tric
ity i
n th
e pr
ojec
t ar
ea b
y pr
ovid
ing
elec
tric
ity t
o 20
0,00
0 ho
useh
olds
as
wel
l as
su
ppor
ting
the
Gov
ernm
ent
of
Yem
en
in
rais
ing
the
elec
tric
ity c
over
age
in ru
ral a
reas
by
10%
from
the
grid
and
of
f-gr
id p
ower
sou
rces
.
22Ye
men
Voca
tiona
l Lite
racy
fo
r Pov
erty
Re
duct
ion
Prog
ram
US$
21.5
8 m
illio
nU
S$10
.89
mill
ion
15/1
2/09
Proj
ect’
s sc
ope
incl
udes
: Ac
cess
to
non-
form
al e
duca
tion,
yo
uth
voca
tiona
l tr
aini
ng,
trai
ning
for
wom
en w
orke
rs,
acce
ss t
o m
icro
finan
ce, c
apac
ity b
uild
ing,
PM
U, a
nd a
udit
serv
ices
. It a
ims t
o re
duce
rura
l pov
erty
in th
ree
gove
rnor
ates
in
Yem
en b
y em
pow
erin
g po
or r
ural
fam
ilies
with
lite
racy
pr
ofici
ency
, mar
ket
orie
nted
voc
atio
nal t
rain
ing
and
acce
ss
to m
icro
finan
ce.
TOTA
L U
S$m
899.
4723
4.41
4
*In
addi
tion
to th
is li
st, t
here
are
two
roll-
over
pro
ject
s whi
ch w
ere
appr
oved
in 1
429H
(200
8) b
ut h
ad b
een
part
ly c
omm
itted
aga
inst
the
ISFD
Ope
ratio
nal
Budg
et in
143
0H (2
009)
as
follo
ws:
-
Rec
onst
ruct
ion
Prog
ram
for t
he C
entr
e-N
orth
-Wes
t Zon
e, C
ote
d’Iv
oire
(US$
9.40
mill
ion)
.
-
Con
stru
ctio
n of
Tao
ussa
Dam
Mal
i, (U
S$10
.0 m
illio
n).
Also
, of
the
tota
l app
rove
d am
ount
of
US$
23.0
mill
ion
for t
he “
Rura
l Ele
ctrifi
catio
n Pr
ojec
t”, Y
emen
, US$
13. 0
mill
ion
wer
e co
mm
itted
in 1
430H
and
the
re
mai
ning
am
ount
(US$
10.0
mill
ion)
will
be
com
mitt
ed a
gain
st th
e O
pera
tiona
l Bud
get i
n 14
31H
. The
pro
ject
was
app
rove
d in
143
0H (2
009G
).
46 Islamic Solidarity Fund for Development (ISFD)
Annex IIContributions to ISFD Capital Resources
(As at End-1430H (2009)* - “In Thousands of USD”
*Since then, Kazakhitan has paid US$1.0 million towards the ISFD capital resources.
No. Country Contribution Payments OutstandingPayments
1 Algeria 50,000 34,768 15,2322 Azerbaijan 300 324 03 Brunei 2000 2000 04 Bangladesh 1000 1000 05 Burkina Faso 2200 758 14426 Bahrain 2000 - 20007 Benin 12,500 - 12,2508 Cameroon 2000 - 20009 Chad 2000 - 2000
10 Cote d’Ivoire 5000 - 500011 Gabon 2000 2000 012 Guinea 2000 2000 013 Iran 100,000 65,000 35,00014 Iraq 1000 1000 015 Jordan 3000 3000 016 Kuwait 300,000 - 300,00017 Lebanon 1000 1000 018 Malaysia 20,000 10,500 950019 Mali 4000 - 400020 Mauritania 5000 - 500021 Morocco 5000 3333 166722 Niger 2000 - 200023 Nigeria 2000 1332 66824 Oman 5000 5000 025 Pakistan 10,000 5116 488426 Palestine 500 186 31427 Qatar 50,000 50,000 028 Senegal 10,000 - 10,00029 Sudan 15,000 - 15,00030 Saudi Arabia 1,000,000 666,667 333,33331 Suriname 500 500 032 Syria 2000 2000 033 Sierra-Leone 1000 - 100034 Togo 1000 - 100035 Turkey 5000 - 500036 Uzbekistan 300 200 10037 Yemen 3000 2972 28
IDB 1,000,000 200,000 800,000
48 Islamic Solidarity Fund for Development (ISFD)
AUDITORS’ REPORT
Your Excellencies the Chairman and Members of the Board of GovernorsIslamic Development Bank
Scope of Audit
We have audited the accompanying statement of financial position of Islamic Development Bank - Islamic Solidarity Fund For Development (the “Fund”) as of Dhul Hijjah 30, 1430H and the related statements of activities, cash flows and changes in net assets for the year then ended, and a summary of significant accounting policies and other explanatory notes as prepared by the management and presented to us with all the necessary information and explanations. These financial statements are the responsibility of the management. Our responsibility is toexpress an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as it evaluating the overall financial statement presentation.We believe that our audit provides a reasonable basis for our opinion.
Unqualified Opinion
In our opinion, financial statements referred above present fairly, in all material respects the financial position of the Fund as of Dhul Hijjah 30, 1430, and the results of its operations and its cash flows for the year then ended inconformity with the significant accounting policies as mentioned in (note 2).
Deloitte & ToucheBakr Abulkhair & Co.
Al-Mutahhar Y. HamiduddinLicense No. 29628 Rabi’ I, 1431March 14, 2010
Annual Report 1430H -2009G 49
ISLAMIC DEVELOPMENT BANKISLAMIC SOLIDARITY FUND FOR DEVELOPMENT
STATEMENT OF FINANCIAL POSITIONAS OF DHUL HIJJAH 30, 1430H
(In Thousands of USD)
Notes 1430 1429
NET ASSETS
ASSETS
Cash and cash equivalents 3 385,137 109,577Short term commodity placements with banks 613,375 449,428Investment in Murabaha 4 21,018 8,299Investment in Sukuk, net 5 67,311 -Accrued income 1,737 2,696
TOTAL ASSETS 1,088,578 570,000
LIABILITIES
Payable to Islamic Development Bank – Ordinary Capital Resources - OCR 6 3,473 9,895
TOTAL LIABILITES 3,473 9,895
NET ASSETS 1,085,105 560,105
REPRESENTEDBY:
Fund Resources 1 1,060,656 538,224Retained earnings 24,449 21,881
1,085,105 560,105
The financial statements were authorized for issue in accordance with a resolution of the Board of Executive Directors on 28 Rabi’ I, 1431H (March 14, 2010).
The attached notes from 1 to 7 form an integral part of these financial statements.
50 Islamic Solidarity Fund for Development (ISFD)
ISLAMIC DEVELOPMENT BANKISLAMIC SOLIDARITY FUND FOR DEVELOPMENT
STATEMENT OF ACTIVITIES FOR THE YEAR ENDED DHUL HIJJAH 30, 1430H
(In Thousands of USD)
1430
PERIOD FROM 13 JUMAD AWWAL
1428H (INCEPTION) TO 30 DHUL HIJJAH
1429H
Income:
Commodity placements with banks 8,762 23,063Investment in Murabaha 349 424Investment in Sukuk 2,121 -Proceeds from call accounts - 50
11,232 23,537Expenditure:
Salaries and benefits (1,131) -General administrative expenses (199) -Exchange gain / (loss) 835 (1,656)Provision for impairment of assets (7,745) -Others (424) -
Surplus of income over expenditure 2,568 21,881
The attached notes from 1 to 7 form an integral part of these financial statements.
Annual Report 1430H -2009G 51
ISLAMIC DEVELOPMENT BANKISLAMIC SOLIDARITY FUND FOR DEVELOPMENT
STATEMENT OF CASH FLOWSFOR THE YEAR ENDED DHUL HIJJAH 30, 1430H
(In Thousands of USD)
Note 1430
PERIOD FROM 13 JUMAD
AWWAL 1428H (INCEPTION) TO 30 DHUL
HIJJAH 1429H
OPERATING ACTIVITIES
Excess of income over expenditure for the year / period 2,568 21,881Adjustments to reconcile net income to net cash from operating activities: Provision for impairment of assets 7,745 -
Changes in assets and liabilities:Accrued income 959 (2,696)Payable to IDB – OCR (6,422} 9,895
Net cash from operating activities 4,850 29,080
INVESTING ACTIVITIES
Short term placements (163,947) (449,428)Investment in Murabaha (12,719) (8,299}Investment in Sukuk (75,056) -
Net cash used in investing activities (251,722) (457,727)
FINANCING ACTIVITIES
Contributions received 522,432 538,224
Net cash from financing activities 522,432 538,224
Netmovementincashandcashequivalents 275,560 109,577
Cashandcashequivalentsatthebeginningoftheyear/period 109,577 -
Cashandcashequivalentsattheendoftheyear/period 3 385,137 109,577
The attached notes from 1 to 7 form an integral part of these financial statements.
52 Islamic Solidarity Fund for Development (ISFD)
ISLAMIC DEVELOPMENT BANKISLAMIC SOLIDARITY FUND FOR DEVELOPMENT
STATEMENT OF CHANGES IN NET ASSETSFOR THE YEAR ENDED DHUL HIJJAH 30, 1430H
(In Thousands of USD)
Fundresources
Retained earnings Total
Contributions received during the period 538,224 - 538,224
Surplus of income over expenditure for the period - 21,881 21,881
Balance at 30 Dhul Hijjah 1429 538,224 21,881 560,105
Contributions received during the year 522,432 - 522,432
Surplus of income over expenditure for the year - 2,568 2,568
Balance at 30 Dhul Hijjah 1430 1,060,656 24,449 1,085,105
The attached notes from 1 to 7 form an integral part of these financial statements.
Annual Report 1430H -2009G 53
ISLAMIC DEVELOPMENT BANKISLAMIC SOLIDARITY FUND FOR DEVELOPMENT
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED DHUL HIJJAH 30, 1430H
(In Thousands of USD)
1. INCORPORATION AND ACTIVITIES
The Islamic Solidarity Fund for Development (“the Fund”) was established pursuant to the decision taken at the Third Extraordinary session of the OIC Islamic Summit conference in Makkah in December 2005 (Dhul Qadah 1426H).
The purpose of the Fund is to finance different productive and service projects and programs that help in reducing poverty in member countries of the Organization of Islamic Conference in accordance with its Regulations. The ISFD was officially launched during the 32nd meeting of the IDB Board of Governors, held on 12-13 Jumad Awwal 1428H (29-30 May 2007) , in Dakar, Senegal through adoption of the BoG resolution no. BG/5-428.
The target principal amount of the Fund is US$ 10 billion. The principal amount shall consist of contributions from IDB and institutions of member countries. IDB has committed to contribute US$ 1 billion, payable in 10 annual installments of US$ 100 million each.
The Fund shall be administered by a Board of Directors. The President of IDB shall be ex-offico Chairman of the Board of Directors.
The resources of the fund available for utilization in its activities shall consist of: 1. Income from the Waqf; 2. Fund derived from operations or otherwise accruing to the Fund; 3. Others resources received by the Fund.
All dealings and activities of the Fund shall be in conformity with Islamic Shariah. The financial statements of the Fund are expressed in thousands of United States Dollars (USD).
The Fund’s financial year is the lunar Hijra year.
As a Fund of the Bank, which is an international institution, the ISFD is not subject to an external regulatory authority.
54 Islamic Solidarity Fund for Development (ISFD)
2. SIGNIFICANT ACCOUNTING POLICIES
a) Basis of preparation The financial statements have been prepared in accordance with the following significant
accounting policies. The financial statements are prepared under the historical cost convention on the accrual basis of accounting.
b) Murabaha financing Murabaha is an agreement whereby the Fund sells to a customer a commodity or an asset, which
the Fund has purchased and acquired based on a promise received from the customer to buy. The selling price comprises the cost plus an agreed profit margin.
c) Investments in Sukuk Investments in Sukuk are held to maturity and stated at cost, except if there is an impairment of
value other than temporary in those investments. In such situation, investments at statement of financial position date are re-measured at their fair value and the difference is recognized in the statement of income.
d) Impairment of financial assets The Fund determines the provision for impairment losses based on an assessment of incurred losses.
An assessment is made at each financial position date to determine whether there is objective evidence that a financial asset or a group of financial assets may be impaired. The impairment loss results from the difference between the carrying amount of the asset and the net present value of the expected future cash flows discounted at the implicit rate of return from the financial asset. The impairment provision is periodically adjusted based on a review of the prevailing circumstances
Impairment losses are adjusted through the use of an allowance account. When a financial asset is not considered recoverable, it is written off against the allowance account. Subsequent recoveries of amounts previously written-off are credited to the statement of income.
e) Translation of currencies Transactions in currencies other than the US dollar are recorded at the exchange rates prevailing
at the dates of the respective transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated the US dollar on the basis of rate prevailing in the market at the date of the statement of financial position. Foreign currency exchange gains and losses are included in the statement of activities.
Annual Report 1430H -2009G 55
f) Cash and cash equivalents Cash and cash equivalents comprise bank balances, fixed deposits and placements with banks with
original maturity of three months or less at the date of acquisition.
g) Revenue recognition Return on short term placement with banks is accrued evenly over the period of the deposits. The
rate of return approximates the prevailing market rates.
Any income from cash and cash equivalents and other investments, which is considered by management as forbidden by Shari’ah, is not included in the Fund’s statement of income but is transferred to Special Account Resources Waqf Fund (an affiliate).
Income from Murabaha financing is accrued on a time apportionment basis over the period from the date of the actual disbursement of funds to the scheduled repayment date of installments.
Income from investments in Sukuk is accrued on a time apportionment basis using the rate of return advised by the issuing entities.
3. CASH AND CASH EQUIVALENTS Cash and cash equivalents at the end of Dhul Hijjah comprise the following:
(In Thousands of USD)1430 1429
Cash at banks 5,537 4,704Short term commodity placements with banks 379,600 104,873
385,137 109,577
Short term placements with banks comprise those placements with original maturities of ninety days or less.
4. INVESTMENT IN MURABAHA This represents the following:
(In Thousands of USD)1430 1429
Gross amounts receivables 21,307 8,307Less: Unearned income (289) (8)
21,018 8,299
56 Islamic Solidarity Fund for Development (ISFD)
All goods purchased for resale under Murabaha financing are made on the basis of specific purchase for resale to the subsequent customer. The promise of the customer is considered to be binding. Consequently, any loss suffered by the Fund as a result of default by the customer prior to the sale of goods would be made good by the customer. The Fund’s foreign trade operations are being managed by the ITFC for which the ITFC charges a Mudarib fee. The Mudarib fee for the year ended 30 Dhul Hijjah 1430H was USD 9 thousands (1429: USD 5 Thousands) which has been netted off from the income from Murabaha financing.
5. INVESTMENT IN SUKUK
This represents the following:
(In Thousands of USD)1430 1429
Investment in sukuk 75,056 -Less: Provision for impairment (7,745) -
67,311 -
6. RELATED PARTY TRANSACTIONS
During the ordinary course of its business, the Fund has certain transactions with IDB – OCR and ITFC relating to investments and realization of investments made through the inter-fund account between the Fund, IDB and ITFC. The balance due to IDB-OCR as at Dhul Hijjah 30, 1430H was USD 3,473 thousands (1429H: USD 9,895 thousands).
7. ZAKAT AND TAX TREATMENT
The Fund is considered a part of Baitul Mal (public money) and it is not subject to zakat or tax.