The first annual report (1429H-2008) of the newly formed Islamic Solidarity Fund for Development (ISFD) was made available at a press conference at the Islamic Development Bank (IDB) headquarters here on Monday. According to Dr. Ahmed Mohammed Ali, Bank president, it was a year of laying down the basic foundation for the Fund – drawing up new policies for poverty reduction, deciding the strategic thrust and priority sectors for maximizing the impact on poverty reduction, developing guidelines under which the Fund would operate, and setting procedures for effectively carrying out its mandate. Fighting poverty is the most daunting challenge facing the IDB, and the context within which the ISFD is conceived and operates is one in which a number of the member countries are disproportionately affected by poverty and its negative consequences – poor health quality, limited access to education, and the lack of basic services for a large segment of the population. The population of the IDB member countries constitutes 22 percent of the world population but accounts for 43 percent of the world's absolute poor. Hunger and malnutrition – the immediate manifestations of absolute poverty – are widespread in many member countries. The unfolding global economic downturn and the financial crisis that precipitated it, on top of last year's food crisis, has adversely affected this segment of society. A dedicated Unit for Poverty Reduction has been set up to coordinate and oversee the administrative and operational activities of the Fund that will be transformed into a full-fledged department within the new IDB Group Organizational Structure. To strengthen its impact, a new IDB policy for poverty reduction has been developed to guide the operations of the Fund. The thrust of this policy is impact maximization and partnering. It takes into account not only the immediate needs of the marginalized and vulnerable groups in society, but also the need to set up programs and projects that will boost economic growth and provide jobs and sustainable income for the poor. The ISFD Five-Year Strategy emphasizes two thematic programs – Vocational Literacy Program (VOLIP), and Microfinance Support Program (MFSP). The total cost of each is estimated at $500 million, to which the Fund will contribute $100m over the strategy period. The total cost of approved projects in 1429H (2008) was $948.32m, of which the Fund contributed $320.26m – representing 33.8 percent. The remaining was covered by other partners including the IDB, national governments, the Saudi Fund, the African Development Fund, and some bilateral donors. Plans are underway to launch other targeted programs in 2009 as the Fund seeks to build broader and effective partnerships to meet its strategic objectives, which include efforts to enhance productive capacities of member countries; reduce illiteracy; eradicate diseases and epidemics, particularly malaria, TB, and HIV/AIDS; and develop basic infrastructure. The initial target capital of the Fund is $10 billion consisting mainly of contributions by IDB member countries and the Bank itself. At the end of 1429H (2008), the total pledges stood at $2.61b – $1.61b committed by 36 member countries and $1b committed by the IDB. Saudi Arabia led with $1b, followed by Kuwait ($300m), and Iran ($100m). In the same period, the paid up capital was $538.2m, of which $438.2m was paid by member countries and $100m by the IDB. Retained earnings were $21.881m. Approvals during the period under review amounted to $320.26m, for 26 operations in 18 countries. Of the total, 16 were Least Developed Member Countries (LDMCs), most of which are in sub-Saharan Africa. As for income, the mobilized liquid funds, composed mainly of paid-up contributions from member countries and the IDB, were invested in murabaha and short-term Shariah-compatible placements. All the investments were made in US dollars and EUR, which yielded a return of $23.54m – equivalent to an average annual rate of return of 4.37 percent.
