The Indonesian government has increased its shares in the Islamic Development Bank (IsDB), making it the third-largest shareholder in the institution after Saudi Arabia and Libya, according to a statement released on Sunday (14/5).
Previously, Indonesia had proposed to increase its share in IsDB from the 12th position (with a capital contribution of US$ 1.511 million or 2.25 percent) to the 3rd position (with an increase up to 8.43 percent).
The announcement follows the IsDB’s 48th Annual Session in Jeddah, Saudi Arabia, held from May 10-13, 2023, where the board of governors unanimously approved the proposal to increase Indonesia’s stake.
With the approval, Indonesia’s stake now is above that of Iran, Nigeria, Qatar, Egypt, Kuwait, the United Arab Emirates (UAE), and Turkey.
“The global community, and Muslims in particular, need to rebuild better and stronger cooperation, especially in facing various challenges to the world economy today. This is what Indonesia will do following Indonesia’s rising share ownership in IsDB,” Indonesia’s Finance Minister Sri Mulyani said at the annual meeting, as quoted from the ministry’s press release.
A step towards global development
IsDB is an international financial institution established by the first conference of finance ministers of the Organization of the Islamic Conference (OIC) member countries in December 1973 in Jeddah, Saudi Arabia. With 57 shareholding member countries, including Indonesia as one of the founding members since 1974, IsDB applies Islamic economics and finance principles to provide solutions for crises and economic recovery.
With its newly acquired position as the third-largest shareholder, Indonesia can now have a greater say in global development, actively participate in the bank’s operations, and contribute to poverty reduction in its member countries.
According to Sri Mulyani, the IsDB, with the help of Indonesia, can optimize its capacity and expand its influence in global development, help poor member countries, and empower Muslims around the world.
Indonesia also aims to ensure the affordability and effectiveness of IsDB’s Sharia-based funding instruments to provide optimal impact and benefits for member countries, including support for South-South Cooperation development.
Strategic and economic benefits for Indonesia
Besides its influence and contribution in global development, Sri Mulyani further explained that Indonesia’s rising shares in IsDB could provide strategic and economic benefits for the country, including increasing Indonesia’s bargaining position within IsDB and increasing IsDB’s financing potential to Indonesia by 3.5 to 4 times.
As of December 2022, IsDB has been a significant contributor to Indonesia’s development with a total investment of US$6.3 billion in various sectors, such as agriculture, education, industry, and mining.
Last year, under the Member Country Partnership Strategy (MCPS) scheme for 2022-2025, IsDB provided Indonesia with loans worth US$2.34 billion or approximately IDR 35.1 trillion. This included US$1.25 billion worth of Islamic Development Bank-Ordinary Capital Resources (IsDB-OCR), US$500 million for private sector development under the Islamic Trade Finance Corporation (ITFC), and US$400 million for investment insurance financing under the Islamic Corporation for the Insurance and Export Credit (ICIED).
Additionally, IsDB has allocated IDR 7.3 trillion in loans for 11 construction projects for state Islamic universities, including Alauddin State Islamic University (UIN) in Makassar, Sunan Gunung Jati State Islamic University in Cirebon, Raden Patah State Islamic University in Palembang, Wali Songo State Islamic University in Semarang, Mataram State Islamic University, Sunan Ampel State Islamic University in Surabaya, Raden Intan Institute of Islamic Studies (IAIN) in Lampung, Sultan Thaha Institute of Islamic Studies in Jambi, Antasari Institute of Islamic Studies in Banjarmasin, Imam Bonjol Institute of Islamic Studies in Padang, and Sultan Maulana Hasanuddin Institute of Islamic Studies in Banten.
