The Asian Development Bank (ADB) and the Islamic Development Bank (IDB) agreed on Tuesday to set up Asia's first major multi-country Islamic infrastructure fund. The investment marks ADB's first Shariah-compliant fund.

The Islamic Infrastructure Fund, targeted at $500 million, will make Shariah-compliant equity investments in the 12 countries that are borrowing members of both development banks; currently Afghanistan, Azerbaijan, Bangladesh, Indonesia, Kazakhstan, Kyrgyz Republic, Malaysia, Maldives, Pakistan, Tajikistan, Turkmenistan, and Uzbekistan.

It may be pointed out that the most of Asia is in urgent need of additional spending on infrastructure but the conditions of infrastructure in the target countries are frequently worse than the Asian average. "In Indonesia only 39 per cent of urban dwellers have access to piped water, only 9.5 per cent of roads in Afghanistan are paved and only 42 per cent of Bangladesh's population has access to electricity," said Robert van Zwieten, Director of ADB's Capital Markets and Financial Sectors Division.  "Without added investment to change that, economic growth and poverty reduction will be held back", he added. "With increasing demand for Islamic finance by both investors and clients, we expect the Fund to attract capital not only from the Islamic world, notably the Middle East region, but from a wide range of institutional investors all over the world," said Walid Abdelwahab, Director of IDB's Country Operations Department (Asia).