The Road to the SDGs

METHOD X The overall aim of this Report is to take stock of the global disruptive trends and propose forward-looking new approaches to bring about a fairer, more stable and more sustainable financial industry: – Through the development of better policy tools and instruments, and of a more conducive institutional and regulatory framework to achieve socially optimal outcomes – Through faster and greater technology adoption by the financial industry to improve its efficiency, customer experience, inclusion and fairness. X The objectives of IsDB’s new programming framework are to: – Design a financial framework conducive to Islamic and ethical finance institutions to better respond to modern needs and threats and redefine the developmental role of finance by rechannelling resources towards economic sectors and segments with the highest potential for sustainable value creation – Set in motion transformational trends and practices which will transform the way finance- sensitive government policies operate and broaden the policy toolbox to develop a productivity- focused financial industry capable of helping MCs attain their developmental aspirations – Achieve financial deepening and promote equality and environment-friendly and development-focused FIs that are agile, efficient and ready to integrate Industry 4.0 technologies to solve MCs’ challenges. POTENTIAL IMPACTS X If IsDB is to help unlock the potential of finance for delivering the ‘Industry 4.0 revolution’ and to bridge the financing gap in the key economic sectors of our MCs, economic policy needs to be geared towards achieving greener and fairer economic growth. X The government policy apparatus, including taxation, spending and regulations (especially those related to the financial institutional and regulatory environment, monetary policy and social policy) must improve social and environmental outcomes. X IsDB invites its MCs to help develop innovative fiscal and monetary policies that will enable a better alignment with the welfare objectives of the economy. The proposed policies will be based on the shared universal objectives of prosperity, stability and fairness and will be tailored to the circumstances and aspirations of participating countries. X A Welfare Economy Policy Toolkit will serve as a starting point that will help countries further adapt and enhance in order to inform national policies. X IsDB will invite MCs to work together on piloting policy recommendations in order to generate evidence that can support the mainstreaming of such policies more widely. X The new framework advocates more strategic deployment of public funds through innovative financial instruments (such as tokenisation and crowdfunding) and mechanisms (including blending and de-risking). X It divides countries into three categories in terms of their strategic orientation to the financial system: high readiness, medium readiness and low readiness. It suggests that: – Countries in the high-readiness category should focus on digitisation, moving towards sustainable finance and setting guiding principles for others to follow – Countries in the medium- readiness category should focus on financial inclusion and capitalise on existing resources to improve economic diversification and build the needed human capital – Countries in the low-readiness group should focus on improving governance and build trust in the system through education and reforms. X Another prospect explored by the Report is the potential to form an Islamic merchant organisation, which could: – Enable fairer and more controlled risk distribution in the economy – Leverage emerging AI and blockchain technology to remove some of the barriers preventing participative banking – Use low-cost, high-efficiency tools to considerably lower information asymmetry and transaction costs from non-debt- based transactions. INVESTMENT X IsDB has increased its allocation towards the new business model to 40% of the total annual work programme financing envelope and will gradually increase it to 80%. S T R O N G T R E N D S I N F I N A N C E SDG financing needs, climate emergency and mounting inequality will drive the financial sector to reconsider its prioritisation and allocative mechanisms [ 221 ] T H E R O A D T O T H E S D G s | P R O G R E S S A N D A C H I E V E M E N T S