Dec 2 Islamic banks are gradually embracing
socially responsible finance, from renewable energy to
microfinance efforts, helping unlock new funding sources for
environmentally-friendly projects, an industry survey shows.
The two sectors have developed separately from each other,
but green projects could benefit from tapping Islamic banks in
countries like the United Arab Emirates and Malaysia, where they
now hold a quarter of total banking assets.
Around two-thirds of financing in Saudi Arabia follows
Islamic principles, which forbid investing in gambling, tobacco
and alcohol. This resembles the screening methodology used by
ethical funds in Western markets.
Commonalities could help converge two fast-growing bond
markets: Moody's Investors Service estimates issuance of Islamic
bonds, or sukuk, will reach $70 billion this year, compared to
over $80 billion for green bonds.
Green finance is increasingly important for Islamic banks
seeking to differentiate themselves from their conventional
peers, the Bahrain-based General Council for Islamic Banks and
Financial Institutions (CIBAFI) said in a report.
Islamic banks want to improve their contribution to local
economies with job creation, infrastructure and SME financing as
top priorities, a survey conducted by CIBAFI between May and
The survey drew input from 86 Islamic finance institutions
across 29 countries mainly from the Middle East and Southeast
Asia, as well as Africa.
Around a third of small Islamic banks cited a moderate
exposure to the green and renewable energy sectors, compared to
15.5 percent for large Islamic banks.
In Malaysia a local lender has introduced green mortgages to
facilitate installation of solar systems, while an Islamic bank
in Jordan is developing alternatives to medium-term loans to
fund energy efficient and renewable energy projects.
(Editing by Simon Cameron-Moore)