Malaysia pushes for $10 billion Islamic bond fund

Malaysia's Second Finance Minister unveiled a plan on Friday to ask the Islamic Development Bank (IDB) to start a $10-billion Islamic bond fund to invest in infrastructure to narrow the gap between rich and poor Muslim nations. Malaysia, which hosts next week's annual IDB meeting and also chairs the Islamic world's main political grouping, said the bank's 55 member nations should divert some of their reserves locked in US dollar bonds and Treasury bills to the new fund.
Nor Mohamed Yakcop told Reuters in a interview ahead of the June 23-24 meeting, "We can have some form of cross-investment ... from the richer to the poorer countries maybe by way of this infrastructure bond fund perhaps."
"Then we can really reduce poverty, increase income level and help the poor, developing countries to reach a higher level of income," he said.
"Ideally, it (the fund) should start with $10 billion and it should grow," he added.
The Jeddah-based IDB is the financial arm of the 57-nation Organisation of Islamic Conference (OIC), a political grouping that says it speaks for 1.2 billion people. Malaysia currently chairs the OIC.
IDB operates in line with the principles of Shariah Law - which forbids the payment of interest - and its financing instruments are mainly asset-backed.
"We must give a business and economic face to these organisations," Nor Mohamed said, adding economic integration was an increasingly important aim of the Islamic world, whose peoples spanned some of the poorest countries in Africa and Asia.
Muslim nations, some rich in oil and gas and other natural resources, should also beef up trade, including between themselves, Nor Mohamed said.
OIC countries account for only a small percentage of total world trade, but represent 15 percent of the world's population and more than 60 percent of its natural resources, he added.
IDB officials have said the meeting may approve the creation of an international Islamic trade financing firm, with an initial paid-up capital of $1 billion, to spur intra-IDB trade. Trade within the IDB, which groups nations ranging from Saudi Arabia to Malaysia and Chad, accounts for just 11 percent of global trade, IDB representative for Malaysia Ahmed Hariri said.