UNDP Indonesia’s work on Islamic finance is part of a broader focus on how new forms of capital can be channeled to support the SDGs through the Innovative Financing Lab. Islamic finance is considered one of the most rapid industries with a 10-12% annual expansion. Moreover, Islamic finance embodies socially responsible and sustainable development, which is in line with the SDGs. Since its establishment, the Lab has made notable achievements in innovative Islamic financing through three main approaches: harnessing, catalyzing, and convening. Indonesia is among the leading countries in adopting the Sustainable Development Goals (SDGs) agenda, illustrated by the Presidential Decree on the SDGs. Domestic private finance is the most significant potential source of financing for the SDGs in Indonesia, comprising almost half of aggregate financing in Indonesia. Islamic finance is an essential component of that domestic private financing, with Indonesia now viewed as an up-and-coming force in Islamic finance in Southeast Asia.

Islamic finance embodies socially responsible and sustainable development, which is in line with the SDGs.

Our Works
in Faith Based Finance

Zakat for SDGs

UNDP and the National Zakat Board (BAZNAS) join forces to harness the full potential of zakat to achieve the SDGs in Indonesia, which was formalized in the signing of the MoU in April 2017. It was followed by the launch of a joint (UNDP-BAZNAZ) report on The Role of Zakat in Supporting the SDGs in June 2017. BAZNAS contributed zakat funds ($350,000) to implementing a micro-hydropower plant project in four districts in the Jambi Province of Sumatra, which we believe is the first time a zakat organization has committed to supporting the SDGs anywhere in the world. The provincial state-owned Bank Jambi has also contributed to the partnership through CSR funds ($281,357). The micro-hydro initiatives are part of a bigger Global Environment Facility (GEF) project to support renewable energy in Indonesia. To date, five installations have been in operation in five villages and have been completed and inaugurated by the Ministry of National Development Planning, benefiting more than 4000 beneficiaries.

The partnership has been extended to a broader synergy in disaster recovery in quake-hit West Nusa Tenggara and Central Sulawesi. BAZNAS contributed $142,000 in zakat funds. New partners have joined forces, along with BAZNAS (i.e., Principal Asset Management with its Islamic Philanthropy Fund and Ammana Fintek Syariah), to scale up MSMEs through the sharia fintech platform. The disaster recovery program benefitted almost 10,000 people in Sambik Elen village in Lombok and Tuva village in Central Sulawesi. UNDP knows that COVID-19 brings multiple burdens to people in disaster-affected areas. This new initiative falls under the Local Economic Development for Resilience Community (LEDRC) project, covering Jambi, West Nusa Tenggara, and Central Sulawesi.