The Jeddah-based Islamic Development Bank is all set to launch in Gujarat in a bid to promote Islamic finance for homegrown startups and fund Indian exports to African and central Asian Muslim nations. The headway was made after an agreement was signed between India's state-owned Exim Bank and the Islamic Corporation for the Development of the Private Sector. The latter is a private-sector arm of the IDB group, a multilateral lender with an authorised capital of $100 billion.
Open to non-Muslims as well, the India operations of the bank will be headed by well-known local Gujarati businessman Zafar Sareshwala who is also the chancellor of the Maulana Azad National Urdu University. Addressing the media in an interview, Sareshwala was all praises for the prime minister. He said, "Modi is a very pragmatic man. He is keen on investment, infrastructure, trade and economic growth."
The agreement in Jeddah was signed by Exim Bank regional head Tarun Sharma and ICD CEO Khaled Al Aboodi in the presence of Ahmad Javed, India's ambassador to Saudi Arabia. Slated to be based in Ahmedabad, the bank will offer interest-free capital to business startups, including small and medium enterprises within India, marking the entry of the so-called Islamic banking, also known as participatory banking, into country. In a statement released by Exim, the IDB will enjoy a bigger hand in the $100 million credit line it pledged "with the aim of facilitating the export of goods and services from India to ICD's member countries."
"The ICD will be open for business to all Indians, regardless of religious background. In Malaysia, the KFC chain runs on ICD finance although it is owned by a Chinese firm. Some people have this unnecessary issue with Islamic banking, which is actually known as participatory banking across the globe now,” said Sareshwala. The IDB has also promised $55m for a state-of-the-art rural mobile medical network, the first leg of which will be launched in Gujarat.
Islamic Banking is a finance system based on the principle of not charging interest, which is prohibited under the religion. Instead of charging interest, the lender shares a part of the profit or the loss with the borrower.
