Bandar Hajjar, IDB president: ‘We will co-finance many projects [with AIIB] in the future. Africa needs . . . about $150bn a year to finance infrastructure’
The largest development organisation in the Muslim world, the Islamic Development Bank, is set to ramp up its fundraising activities and form a partnership with the China-led Asian Infrastructure Investment Bank to address a yawning infrastructure gap in African and other developing countries.
The plan to join forces with the AIIB to co-lend to projects in the Islamic world would boost the international footprint of the China-led development bank that was launched in spite of US opposition in 2015. “We will partner with the AIIB,” Bandar Hajjar, IDB president, said in an interview with the Financial Times. “We will co-finance many projects [with AIIB] in the future in Africa. Africa needs . . . about $150bn a year to finance infrastructure and there are about 650m people in Africa without access to electricity.”
Co-operation between the AIIB and the IDB, which are capitalized at $100bn and $150bn respectively, is set to create a new force in development finance for a swath of developing countries. Many of the IDB’s 57 member countries overlap with the AIIB’s approved membership of some 80 nations. Such co-operation would assist the AIIB in finding projects to broaden its loan portfolio.
The Chinese-led multilateral organisation approved $3.3bn in loans last year, up from $1.13bn in 2016, its first year of operation. Jin Liqun, AIIB president, has made no secret of bigger ambitions, including expanding the bank’s lending even further. China scored a diplomatic coup when the AIIB was established after the UK chose to join the initiative over Washington’s clear objections.
A host of other US allies quickly followed but Washington and Japan have yet to join the multilateral lending organisation. Nevertheless, the AIIB has been expanding its international ties, signing co-operation agreements with the World Bank, the Asian Development Bank and the European Bank for Reconstruction and Development.
In an indication of the IDB’s intent to ramp up its financing activities, the bank is planning to “soon” launch its largest single bond — a sukuk issue of $2.5bn — to support infrastructure, education, health and other projects within the bank’s 57 member nations, Mr Hajjar said. The move would follow a $1.25bn sukuk bond issued late last year.
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The IDB has approved finance of $12.2bn in more than 250 projects, according to IDB data. Turkey, Indonesia, Pakistan, Egypt and Turkmenistan are the bank’s top financing recipients, while sub-Saharan Africa has $3.1bn in funding approved.
In a separate development, the IDB plans to launch a $500m philanthropic fund to support science and technology start-ups in member countries, according to Hayat Sindi, the IDB’s adviser for science, technology and innovation. Funding is to be provided to those entrepreneurs selected by an international screening committee according to criteria such as innovative verve, sustainability and impact, Ms Sindi said. Thousands of potential applicants have already shown interest in applying for funding during an IDB roadshow undertaken in several countries, she added.
The aim of the fund was not to make a profit but to create jobs and inculcate a start-up culture in suitable parts of the Islamic world. In addition to the financing made available to entrepreneurs, the fund would also provide legal help, advice on business models and advice on protecting intellectual property, Ms Sindi said.