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Islamic Development Bank (IDB), Foreign Aid and the Challenges for Sustainable
Development in Africa
MUSTAFA Daud
Ph.D Fellow, Department of Economics Universiti Utara Malaysia (UUM),
and Graduate Assistant, Kolej Universiti Insaniah (KUIN), Malaysia.
E-mail: mdaud27h@yahoo.com
ABDUL-RAZAK Nor Azam (PhD)
Senior Lecturer, Department of Economics Universiti Utara Malaysia (UUM), Malaysia.
E-mail: azam@uum.edu.my
Abstract
Foreign aid/development assistance involves the transfer of resources in whatever form from the developed
countries or multilateral financial institutions like World Bank, IMF, Islamic Development Bank (IDB) etc. to less
developed or developing countries for the purpose of promoting and stimulating their economies for growth and
development. Unfortunately, most of these countries, especially the African countries are characterized by
multiple problems such as bad leadership and governance, mismanagement and corruption, debt crisis,
insufficient and poor infrastructure, chronic poverty etc.; and all these problems have continued to make
nonsense of foreign aid’s judicious and optimal utilization and impact on their economies. However, considering
the position and role of IDB over the years in the global economic development; this paper examined the
developmental activities of IDB in Africa and some of the challenges for sustainable development. In line with the
Financial Two Gap Model (Double Deficit Model) and also the Islamic economic principle of Wide Circulation of
Wealth, this paper therefore argues that there are a lot of challenges confronting the continent, which the Bank
could assist in resolving through its development assistance, especially in the Muslim populated countries i.e.
African Muslim Countries (AMCs). Challenges like Human capital development (HCD), poverty alleviation,
corruption and mismanagement, infrastructural development, and good governance among others have enormous
implications for sustainable development in the continent. And hence, this paper recommends that IDB should
give more attention and priority to growth promoting types of foreign aid like program aid, sectoral aid, technical
assistance etc. rather than financial aid, which is often squander. Doing this would facilitate the development
process and by extension the desire for sustainability in the continent.
Key Words: IDB, Foreign Aid, Challenges, Sustainable Development, Africa
1.0 Introduction
Islamic Development Bank (IDB) is a multilateral development and financial institution established in pursuance
of the Declaration of Intent issued by the first Conference of Finance Ministers of Muslim Countries held in
Jeddah (1393H/1973). Sequel to this, the Bank was formally declared open for operations in 1975. The three
strategic objectives of the Bank are: Promotion of Islamic financial industry and institutions, poverty alleviation
and promotion of co-operation among member countries (IDB, 2004 & 2008a, p. 1). The Bank is made up of 56
member countries cutting across the continents of Africa, Asia, Europe and Latin America. The main
shareholders of the Bank are: Saudi Arabia, Kuwait, Libya, Egypt, UAE, Turkey and Iran. Thus, the central
purpose of the Bank is to foster the economic development and social progress of member countries and Muslim
communities individually as well as collectively in accordance with the principles and dictates of Shari’ah i.e.
Islamic Law (IDB, 2005, p. 18; & INCEIF, 2006, p. 85).
It is worthy of note that in the last 35 years, the Bank has been contributing to the development of the Muslim
world and Africa in particular has been one of the major beneficiaries of its development assistance. This is in
view of the multiple developmental challenges confronting the continent, more especially the African Muslim
Countries (AMCs). However, for Africa development process to be further facilitated and accelerated, there is the
need for more foreign aid in the form of a “big push”, especially if the continent is to achieve the MDGs, the IDB
Vision 1440H and most importantly Sustainable development. In this vein, Aznan (2008) notes: “…many of our
African member countries are behind on the achievement of the IDB 1440H Vision targets and the Millennium
Development Goals”. Against this background IDB (2009, p. 5) posits:
The IDB development assistance is geared to achieve targets of the Millennium
Development Goals (MDGs) and the IDB 1440H Vision.
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In particular, the overriding purpose of development assistance is to alleviate
poverty and achieve comprehensive human development
The submission of Salisu (2007, p. 24) restates the need for foreign aid when he submits: “Realistically, in the
midst of the current efforts to achieve Millennium Development Goals (MDGs) in a majority of sub-Saharan
African (SSA) countries, the need for foreign assistance is inevitable”. In the same vein, Thiele, Nunnenkamp and
Dreher (2006) argue that donors should target their aid, especially to Africa, for the achievement of specific MDG
goals, if poor countries are to achieve MDGs. They specifically stress education and health as areas where aid
could be very effective in achieving the MDGs (cited by Gyimah-Brempong & Asiedu, 2008). Even though, it is
pretty clear that hopes have been dashed for a continent in which economic growth, good governance, financial
prudency and discipline, respect for human dignity and sustainable development are not firmly rooted. However,
if the development partners like IDB are interested in real development and more still its sustainability, all hands
must be on deck to squarely confront the challenges for sustainable development in the continent. Therefore, to
meet economic growth targets like the Millennium Development Goals (MDGs), IDB Vision 1440H and more so
for sustainability, Africa must maximize the opportunities available to it such as the prudent and judicious
utilization of the development assistance from IDB and other donors. To this end, this paper is divided into four
major sections. Section one introduces the paper while section two presents literature review and the theoretical
framework. Section three discusses the critical challenges for sustainable development in Africa and the last
section concludes the paper.
2.0 Literature Review
2.1 Historical Overview of African Economic Growth Process
The 1960s witnessed the dawn of African independence, which was characterized by excitement and jubilations
all over because the continent was assumed to be free from colonial imperialism, exploitation and appropriation.
In fact, seven countries among the fifty-three countries in the continent were predicted and identified has having
the potentials to reach or surpass “a 7 percent” growth in not too distant period. Unfortunately, these hopes were
dashed and shattered due to multiple problems and challenges; which include: bad governance, resulting in
mismanagement (corruption), political instability and conflicts, economic retardation and pervasive poverty
(Agubuzu, 2004; & Easterly & Levine, 1997). According to the African Development Report (2004, p.15), sequel
to these problems, Africa lags behind most other regions of the World on most indicators of growth and
development; yet, it is regarded as the most endowed in terms of natural and human resources. Similarly, it has
fared quite poorly in its international trade performance over the last two decades. Also, its share in World export
has declined to 2 percent in 2003 compared to 3 percent in 1990 and to 6 percent in 1980.
By 1990, the total external debt of African countries was in excess of US$270 billion, leading to a crushing debt-
service burden and further aggravating Africa’s development challenges. Also, the continent contains the largest
number of backward and least developed countries, while almost half of its population lives in poverty. In the
same vein, the 2007/2008 Human Development Report published by UNDP revealed that 22 countries suffer from
low human development and that 11 African member countries of IDB are affected. Thus, the bulk of African
countries occupy the lowest rank on the standard of international comparisons such as income per capita, level of
extreme poverty (less than $1 a day), literacy, life expectancy, infant mortality and a host of others. The continent
also suffers from a high level of growth deficits over the last four decades (Agubuzu, 2004; Gambari, 2004; IDB,
2007; Kasekende, 2008; & Sowell, 2005). All these indications and many others lend credence to the position of
Easterly and Levine (1997), Easterly (2003 & 2005), and Sowell (2005)), which described Africa as a continent
suffering from economic growth tragedy. The words of Easterly and Levine (1997, p. 1) put this position in a
proper perspective:
Africa’s economic history since 1960 fits the classical definition of tragedy;
potential unfulfilled, with disastrous consequences. In the 1960s, a leading
development textbook ranked Africa’s growth potential ahead of East Asia’s and the
World Bank’s chief economist listed seven African countries that “clearly have the
potential to reach or surpass” a 7 percent growth rate. Yet, these hopes went awry.
On average, real per capita GDP did not grow in Africa over the 1965-1990 period,
while in East Asia and the Pacific, per capita GDP growth was over five percent and
Latin America grew at almost two percent per year. Much of Africa has even
suffered negative per capita growth rate since 1960, and the seven promising
countries identified by the World Bank’s chief economist were among those with
negative growth.
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