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Abstract
This comprehensive assessment examines the Islamic Development Bank (IDB) as an innovative approach to multilateral development financing during its early years of operation in the late 1970s and early 1980s. The article explores the conceptual foundations of the IDB's Sharia-compliant financing model and analyzes how it differs from conventional multilateral development banks. The research investigates the IDB's institutional structure, membership composition, and governance mechanisms, assessing how these reflect Islamic principles of economic cooperation. The study examines the bank's financing instruments including profit-sharing arrangements, interest-free loans, leasing mechanisms, and technical assistance programs. The article assesses the IDB's development impact across member states, analyzing project financing in sectors including infrastructure, agriculture, industry, and social services. The research also evaluates the bank's role in promoting economic cooperation among Muslim countries and its contribution to broader Islamic economic integration. Furthermore, the analysis considers the IDB's potential for expanding development financing in the Muslim world and addressing pressing economic challenges.
Full Text
The Islamic Development Bank represented a significant innovation in multilateral development financing, with this article providing a comprehensive assessment of its approach and impact during the early 1980s. The research begins by examining the historical context of the IDB's establishment, analyzing how the organization emerged from broader Islamic revival movements and economic cooperation initiatives among Muslim countries. The analysis explores the philosophical foundations of the IDB's financing model, examining how Islamic principles including prohibition of riba (interest), emphasis on profit-sharing, and requirements for ethical investment shape its operations. The article investigates the IDB's institutional architecture, analyzing its governance structure, membership criteria, capital base, and operational procedures that distinguish it from conventional development banks. The study examines the bank's financing instruments in detail, assessing how mudaraba (profit-sharing), musharaka (joint venture), murabaha (cost-plus financing), and ijara (leasing) arrangements are adapted for development purposes. The research evaluates the IDB's project portfolio, analyzing sectoral distribution, geographical allocation, and development impact across member states with different economic characteristics and needs. Based on the comprehensive assessment, the article identifies both achievements and challenges in the IDB's early operations and analyzes the factors that will determine its long-term development effectiveness. The findings provide valuable insights into how alternative financing models can address development challenges and contribute to understanding the potential for value-based approaches in international economic cooperation.