Tuesday, 7 August 2012

Comprehensive note or essay on the Islamic Development Bank

The Islamic development bank is an international financial institution established on October 20, 1975.


1. To foster economic development and social progress of member Muslim countries individually as well as jointly according the principle of Shariah.

2. To increase the cooperation and strengthen the economic ties among them.

3. To develop the interest free landing and borrowing.

Members Of Islamic Development Bank :-
The bank includes 41 members.

Sources Of Islamic Development Bank :-
Its source of funds are donations and contribution by member Islamic Countries.

Its functions are very similar to the world bank.

Difference Between Islamic Development bank and World Bank :-
The only difference in the functions of world bank and Islamic bank is that IDB activities involve Islamic Countries only. The operation of this bank is purely in Islamic principles.

Capital Of Th Bank :-
The authorized capital of the bank is 2,000 million Islamic Dinars. All the members countries have so far subscribed to its capital a total of 1,820.17 million Islamic Dinar.

Four major participants are the following :

Saudi Arabia       Islamic Dinar  = 506,370,000
Kuwait                Islamic Dinar  = 252,200,000
Libya                  Islamic Dinar  = 315,300,000
U.A.E                 Islamic Dinar  = 194,700,000

Islamic Dinar is calculated like SDR.


1. Provision Of Loan For Infrastructure :-
Bank provides interest free loans for different projects like, roads airports, etc. The bank charges a very little amount for the administrative expenses. Upto April 1982 forty two projects were completed in 28 countries.

2. Provision Of Technical Assistance :-
It also provides technical assistance to the member countries, to improve the economic condition of the member countries. Upto 1982 fifteen million Islamic Dinar (U.S $ 18 million ) were lended for this purpose.

3. Aid For Industrial Sector :-
On the basis of equity participation it provides finance for the industrial and agro industrial projects.

4. Financing On Leasing System :-
On leasing basis it also provides loan for the purchase of ships, railway, wagon, tractor and for the transfer of technology. In all cases ownership of the leased goods will revert after a certain period to the lessee.

5. Provision Of Profit Sharing :-
It also provides finance on the basis of shariah. An operation has been made in this form of financing covering a sum of 4.27 million Islamic Dinars ( U.S. 5 million ).

6. Foreign Trade Financing Operation :-
Bank likes to do the investment instead of depositing them in the foreign banks. The bank has utilized these funds in foreign trade financing for its member countries. The activity is welcomed by the member countries. This policy has the following benefits :

A. Investment In Member Countries :- Bank is using its funds in the member countries. So rate of investment in member countries has been increased.

B. Increase In The Rate Of Growth :- Islamic bank is providing loans to the member countries for the import of technology. So due to this reason the rate of economic development is increasing.

C. Promotion Of Trade :- By facilitating the finance to the member countries, the trade among the members has improved.

The bank accepts deposits from the various governments, institutions and from the individuals for investing them within the limits of shariah. The minimum amount of each deposit for a share in profit is six month from the date of deposit. Deposits of more than one million in dollar may be accepted on the basis of negotiation with the bank.


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