Indonesia and the Islamic Development Bank (IDB) have agreed to cooperate further in infrastructure and sharia financing system development by creating a better role for private entities.

The commitment will be cemented in a memorandum of understanding (MoU) for the Member Country Partnership Strategy for 2016-2020, to be signed on the sidelines of the 41st IDB annual meeting in Jakarta from May 15 to 19.

“It is IDB’s commitment to helping and encouraging Indonesia’s development, which has been discussed intensively by both the government and private entities,” said a macroeconomic and international finance expert staff member at the Finance Ministry, Andin Hadiyanto, on Wednesday.

The MoU focuses on infrastructure development, human resources capacity building, sharia financing, increasing the role of the private sector and a reverse linkage program, he said. He declined to specify the value of the project.

As a country with the world’s largest Muslim population, Andin expressed belief that Indonesia would benefit from the upcoming IDB meeting in Jakarta as it would be able to increase its capacity as a center of Islamic economic development in the region.

About 2,700 participants from 56 member countries are scheduled to attend the meeting, consisting of top leaders, ministers, senior officials and business players. The event will focus on six major topics, IDB Indonesia country director Ibrahim Shoukry said.

The topics are coordination and technical cooperation for development among IDB members; the development of economic resilience for member countries; advancing sharia investment to achieve sustainable development goals; sharia innovative financing for poverty reduction; micro sharia market for inclusive finance; and a sharia approach in infrastructure funding.

“IDB has been operating in Indonesia and has worked in several important areas such as infrastructure, higher education and community-based development worth US$4 billion in recent years,” Ibrahim said.

IDB secretary and chairman Ghassan al-Baba highlighted the universality of sharia financing, despite its strict principle in accordance with Islamic principles, such as forbidding sharia-based financing to be disbursed to liquor, casino and pork-related business.

"Islamic financing has become an alternative financing tool, but it is not restricted to a specific religion. It can be referred also as ethical financing," he said, adding that Islamic loans provided prudent measures as they had to be backed by real assets.(sha/ags)