BUSINESS & ECONOMY

From Dependence on Fossil Fuels to Dependence on Critical Raw Materials

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10 months ago

July 11, 2023

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By Christophe Nivelle

The conflict in Ukraine was a rude awakening for Europe. Europe became aware of its vulnerabilities in the energy sector. Dependence on Russian gas had a profound impact on the economies of European countries, with energy costs beginning to soar in 2021. This trend was amplified by the outbreak of war in Ukraine. Sanctions against Russia had an important economic and social impact, but Europe could find alternative sources of gas supply, in particular American LNG.

However, another far more serious type of dependence is around the corner. Critical raw materials (CRMs) are not only essential to our daily lives but also to our national security and defense. They are critical owing to :

– their economic importance in strategic sectors

– their supply chain risks

– great complexity to substitute them

What’s more, their recycling rate is sometimes very low, especially for rare earths. Geographical constraints have to be taken into account too. Indeed, the oil and gas markets are determined by their plurality and diversity of players. For example, OPEC has 13 member countries, to which must be added 10 other OPEC+ member countries. However, the situation is completely different for critical raw materials. In fact, the CRM market is characterized by the small number of producing players, leading to quasi-monopolies or even monopolies for some of them. Thus, in the event of shortages or export restrictions, CRM supply could prove complex due to the small number of players involved.

In its 2023 report, the European Commission states that China is the main supplier of 21 CRMs, in particular rare earths, gallium, natural graphite, germanium… It implies that there are sometimes no other supplier countries than China, even though these materials are essential to the energy transition and to sectors such as national defense. These CRMs take on a strategic character when they are destined for the defense, digital or renewable energy sectors. The geopolitical factor could pose a threat in the event of serious tensions or conflict with Beijing. It’s worth remembering that in September 2010, during a dispute with Japan in the China Sea, China suspended its exports of rare earths to the latter in order to put pressure and to obtain the release of a trawler captain. Europe, handicapped by its low CRM production, is not immune to Chinese retaliatory measures, and may be the collateral victim of the trade war between the United States and China. On July 3, 2023, China decided to impose restrictions on gallium and germanium exports from August onwards. This is clearly a retaliatory measure against Washington’s policy of blacklisting numerous Chinese companies in order to restrict semiconductor exports to China and prevent it from gaining access to American technologies. Europe will be impacted by China’s decision, as both minerals are considered critical by the European Union.

Access to CRMs is already crucial in a context of energy transition, whereas their need is expected to increase sharply. For example, the need for natural graphite is set to increase 25-fold by 2040. Graphite is essential to the manufacture of lithium-ion batteries, as it is a vital component of the battery anode. The same applies, to varying degrees, to all CRMs. Will global production be able to increase sufficiently to meet the growing needs of the energy transition? Will Europe be able to catch up and avoid even greater dependence on renewable energies?

The main threat in the CRM field is Chinese. Beijing recognized the importance of CRMs very early and built a long-term strategy around them. It has gradually built up an ecosystem around critical raw materials and rare earths, and now controls the entire CRM value chain.

The criticality of CRMs is not only linked to whether or not countries have mining resources. However essential it may be to have these ressources, it is not enough to control the entire value chain for critical minerals. Mastery of the various mineral processing technologies is also essential. With the possible depletion of resources combined with a sharp rise in demand for CRMs, competition for access to mines and mastery of the various refining and processing stages will be crucial issues in the future. This is an additional problem for Europe. Not only does Europe have few mining and production sites, but it is also completely dominated by China when it comes to processing and refining.

What’s more, long before Europe, China realized that it was essential to secure its CRM supplies, as it could not produce all the materials it needed. So, some twenty years ago, it began to implement a investment policy in foreign countries. This strategy was reinforced in 2015 with the introduction of the Made in China 2025 plan, which aimed to make China a manufacturing superpower in ten industrial sectors, including batteries for electric cars, thereby boosting Chinese international investment, particularly (but not only) in cobalt and lithium mines. Thus, the South African Institute of International Affairs estimates that China invested around $58 billion between 2005 and 2017 in the mining and energy sectors alone in Sub-Saharan Africa.

China’s strategy revolves around acquisitions, taking stakes in mines or providing infrastructure in exchange for exploiting raw materials. This has enabled Beijing to secure its supply of minerals essential to new technologies, and give it an even more dominant position in the world market. To assert its dominance in CRMs, China uses state-owned or private companies close to the Chinese Communist Party. In addition, China has relocated its processing industries, which in just a few decades has enabled the country to go from being a simple rare earths producer to become the world’s leading supplier of permanent magnets.

Cobalt and lithium are perfect examples of China’s strategy. Firstly, cobalt is indispensable in the manufacture of rechargeable batteries of all kinds. It improves the performance of batteries used in smartphones, connected objects and laptops, and plays an important role in electric vehicles. The Democratic Republic of Congo, the world’s leading cobalt producer, has been the target of Chinese investment in the country’s mining sector, and 15 of the country’s 19 cobalt-producing mines are now owned by Chinese companies. China’s strategy has proved successful, in particular with the purchase in 2016 of US group Freeport-Mc Moran’s shares in the Tenke Fungurume cobalt and copper mine by China Molybdenum Company (CMOC) for $2.65 billion. China also has a stranglehold on cobalt refining. It has doubled its refining capacity to 140,000 tons by 2022, compared with just 40,000 tons in the rest of the world. What is more, despite a number of disputes with the Congolese state, CMOC is set to begin cobalt production in the Kisanfu mine, which is expected to become the world’s largest cobalt mine, with an announced output of 30,000 tons a year.

China’s dominance also extends to lithium. Beijing now refines 60% of the world’s lithium on its own soil, and controls 60% of global battery component manufacturing. Moreover, of the 200 mega-battery factories planned worldwide by 2030, some will be in Europe and the USA, but 148 will be in China. The paradox is that China produces only 16% of the world’s lithium, but refines two-thirds of the world’s production on its own territory, enabling it to produce 75% of the world’s lithium batteries. To do so, it uses its acquisitions or stakes in mines in Chile, Bolivia, Australia and, more recently, Argentina. Two Chinese companies, Tianqi and Ganfeng, control a third of lithium’s world production. Several African countries, in particular Zimbabwe and more recently Mali, have also been targeted by Beijing. This strengthening of China’s position in lithium will enable Beijing to become a hegemonic player in the production of batteries and electric cars, to the detriment of Europe, which is lagging far behind but has nonetheless woken up.

European countries cannot compete on equal terms with China in the field of CRMs. China is not bound by European environmental standards, which hinder the opening of mines for the extraction and production of CRMS. It should be remembered that activities linked to rare earths and other critical materials, mainly the extraction, separation and production stages, have an extremely negative impact on the environment due to the pollution generated and the high consumption of water and energy. The problem of social acceptability is therefore extremely serious and needs to be taken into account. There are plans to open mines in Sweden, Portugal and France, but will they see the light of day, or will they be abandoned in the face of the emergence of increasingly violent environmental movements? In other countries, such as China, there is little debate about environmental standards. As a reminder, in the 80s, France refined 50% of the rare earths market at its Rhône Poulenc site in La Rochelle. But media and social pressure at the time led to the closure of the site, and China took over the refining activities. More recently, Rio Tinto’s Jadar project in Serbia was finally abandoned due to strong public opposition. For the time being, fears for the environment remain strongest, despite Europe’s urgent need to remedy its shortcomings in CRMs. Today, Europe is increasingly dependent on China and time is an additional obstacle for Europe. Even if mines were allowed to open in order to extract and produce critical minerals, it would take at least ten years from the discovery of a vein to the opening and the start of mining operations. What’s more, the closure of mines in Europe has resulted in a loss of skilled manpower that will take a long time to replenish.

However, it would be wrong to say that Europe is unaware of its CRM dependency problems. In 2008, the European Commission set up the Raw Materials Initiative to assess European dependency and plan a strategy for diversifying supplies. Several reports were subsequently published by this institution, analyzing Europe’s CRM requirements between 2011 and 2023. In the meantime, the number of CRMs studied has risen from 14 in 2011 to 30 in 2020, due in part to renewed international tensions and the emphasis on energy transition. But the new centerpiece of the European strategy was unveiled on March 16, 2023 with the Critical Raw Materials Act, which aims to secure critical materials supply chains in order to preserve Europe’s strategic autonomy in a much-deteriorated international geopolitical context with the war in Ukraine and growing rivalry between China and the USA. According to the Critical Raw Materials Act, objectives to be achieved by 2030 are as follows:

At least 10% of the EU’s annual consumption for extraction,
At least 40% of the EU’s annual consumption for processing,
At least 15% of the EU’s annual consumption for recycling,
Not more than 65% of the Union’s annual consumption of each strategic raw material at any relevant stage of processing from a single third country.

We can therefore observe a desire to build an industrial ecosystem around CRM with all segments of the value chain. The emphasis is on processing and refining activities rather than extraction. Nevertheless, environmental constraints remain, and the development of mining activity is proving delicate and complex to implement. What is more, the European effort on refining may not be enough to compete efficiently with China. Beijing has invested massively in refining-related research, and also exercises dominance in the field of patents. Thus, since 2014, China has been responsible for nearly 80% of patents for rare earth refining worldwide, and around 60% for titanium and manganese.

Europe prefers to focus on recycling, but this is technologically complex and subject to the financial factor of profitability. What’s more, the recycling rate for rare earths is extremely low as it is estimated at 1% on average. Solutions have already been envisaged in the past. In 2012, Solvay developed a system for recycling the rare earths found in low-energy light bulbs. This was at a time when their price was very high due to the crisis between China and Japan. But in 2016, prices fell again, and the French company’s process was discontinued as it was insufficiently profitable.

In the lithium battery sector, however, things are moving more quickly. Several recycling plants have been set up in Scandinavia, including Fortum in Finland and Stena Recycling in Sweden. Both plants claim to be able to recycle 95% of the materials found in batteries. In addition, a gigafactory project by Glencore and Canadian company Li-Cycle should see the light of day in Italy in a few years’ time.

However, it should not be forgotten that recycling is not sufficient to replace the extraction and processing of CRMs. The first reason has to do with the sustainability of the products used in the energy transition. Electric batteries currently have a lifespan of around ten years, while wind turbines have a lifespan of around 30 years. As a result, it takes many years before they can be recycled. What’s more, the rate of growth in demand for CRMs is extremely high, and far outstrips the possibilities of recycling.

Innovation could be one of the solutions to decreasing the need for CRMs and thus reducing dependence on Beijing. This requires the development of research projects to encourage innovation. One example is the French government, which, as part of its France 2030 plan, launched a research program in January 2023 to develop twelve projects with the Scientific Research National Center (CNRS) and the Atomic Energy Commission (CEA). One of the projects focuses on sodium-ion battery technology, which could greatly reduce our dependence on China for critical raw minerals. This new type of battery should start being produced in northern France by the Tiamat company as early as 2025. However, even though substitution can both reduce European dependence on China and the price of CRMs in certain areas such as electric vehicles, it is important to note that this is often at the expense of performance. For instance, sodium-ion and lithium-iron-phosphate (LFP) batteries have so far had a shorter range than lithium-ion batteries. Moreover, substitution is not possible in strategic industries. These include defense and national security, where lower performance can’t be afforded. Civil and military industries have different needs and different performance requirements. It will therefore be extremely difficult for European countries to shake off their dependence on China when it comes to national security. In the event of geopolitical tensions with China, Europe could be impacted by sharp price rises for some CRMs, or even a shortage if Beijing again decides to restrict or halt the export of some of them. But, European countries need CRMs to preserve their national security, whatever the cost may be.

Despite all the measures recently announced with the Raw Critical Materials Act, Europe will have to find alternatives to recycling in order to secure its CRM supply chain. Similarly, more resources will have to be allocated to innovation. Thanks to an effective strategy pursued over the past twenty years, China has succeeded in mastering the entire value chain for many CRMs, even those for which it had little or no domestic supply. Europe has been warned and is faced with a difficult choice in which the strategic stakes are likely to come up against environmental standards. Opening mines, however polluting they may be, will be essential but not sufficient. Europe will have to be much more active in obtaining more equity stakes in mines situated in Africa, Asia and Latin America. Brussels practices friendshoring and has partnerships with countries with which it shares the same democratic values (Australia for lithium, for example). But that won’t be enough. Partnerships with other countries will have to be considered, even if human rights are not respected there. Plurality and diversity of partners will be essential for Europe. If we are to survive in an increasingly hostile environment, with an increasingly powerful and uncompromising China, we will have to make difficult choices to cope with possible shortages of CRMs, for which Beijing would have a hegemonic position. If we don’t or can’t, so we’re in for a rude awakening.

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BUSINESS & ECONOMY

In Times of Conflict, Spare a Thought for the Non-Gulf Economies

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2 days ago

May 6, 2024

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By James Swanston

Positive news for non-GCC Arab economies has been in short supply of late. The Gaza conflict, missile attacks in the Red Sea, war in Ukraine and last month’s tit-for-tat missile strikes between Israel and Iran have weighed on sentiment, undermined limited confidence and cut into growth.

But some positives have emerged. Headline inflation rates have slowed across much of North Africa and the Levant, implying lower interest rates, a return to real growth and more stable exchange rates. March data show inflation at an annualised rate of just 0.9 percent in Morocco and 1.6 percent in Jordan. Tunisia’s inflation rate has also come down, although it is still running at over 7 percent year on year.

Egypt’s inflation rate jumped earlier this year as the government implemented price hikes to some goods and services – notably fuel. In February, the effect of the devaluation in the pound to the level of the parallel market affected prices. But March’s reading eased to an albeit still high 33 percent year on year.

Elsewhere, Lebanon’s inflation slowed to 70 percent year on year in March, the first time it has been in double – rather than triple – digits since early 2020 due to de-facto dollarisation and lower demand for imports. That said, inflation in these economies is vulnerable to increases in the prices of global foods and energy (such as oil) due to their being net importers. If supply chain disruptions persist, it could result in central banks keeping monetary policy tighter with consequences for growth and employment. And in Morocco’s case, it could undermine the Bank Al-Maghrib’s intention to widen the dirham’s trading band and formally adopt an inflation-targeting monetary framework.

The strikes by Iran and Israel undoubtedly marked a dangerous escalation in what up to now had been a proxy war. Thankfully, policymakers across the globe have for the moment worked to de-escalate the situation. Outside the countries directly involved, the most significant spillover has been the disruptions to shipping in the Red Sea and Suez Canal. Many of the major global shipping companies have diverted ships away from the Red Sea due to attacks by Houthi rebels and have instead opted to go around the Cape of Good Hope.

The latest data shows that total freight traffic through the Suez Canal and Bab el-Mandeb Strait is down 60-75 percent since the onset of the hostilities in Gaza in early October. Almost all countries have seen fewer port calls. This could create fresh shortages of some goods imports, hamper production, and put upward pressure on prices.

For Egypt, inflation aside, the shipping disruptions have proven to be a major economic headache. Receipts from the Suez Canal were worth around 2.5 percent of GDP in 2023 – and that was before canal fees were hiked by 15 percent this January. Canal receipts are a major source of hard currency for Egypt and officials have said that revenues are down 40-50 percent compared to levels in early October.

The conflict is also weighing on the crucial tourism sector. Tourism accounts for 5-10 percent of GDP in the economies of North Africa and the Levant and is a critical source of hard currency inflows.

Jordan, where figures are the timeliest, show that tourist arrivals were down over 10 percent year on year between November and January. News of Iranian drones and missiles flying over Jordan imply that these numbers will, unfortunately, have fallen further.

In the case of Egypt, foreign currency revenues – from tourism and the Suez canal – represent more than 6 percent of GDP and are vulnerable. This played a large part in the decision to de-value the pound and hike interest rates aggressively in March.

The saving grace is that the conflict has galvanised geopolitical support for these economies. For Egypt, the aforementioned policy shift was accompanied by an enhanced $8bn IMF deal and, while not strictly bilateral support, the bumper Ras el-Hekma deal seems to have been accelerated as the pressure on the Egyptian economy ratcheted up. This is providing much needed foreign currency. At the same time, Jordan recently renewed its financing arrangement with the IMF for $1.2bn over four years.

Tunisia, however, is an exception. President Saied’s anti-IMF rhetoric and reluctance to pass reforms, such as harsh fiscal consolidation, in an election year, mean that the country’s staff-level agreement for an IMF deal is likely to remain in limbo. If strains on Tunisia’s foreign receipts are stretched, and the central bank and government continue with unorthodox policies of deficit financing, there is a risk that Tunisia’s economic crisis will become messier more quickly in the next year – particularly large sovereign debt repayments are due in early 2025.

James Swanston is Middle East and North Africa economist at London-based Capital Economics

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BUSINESS & ECONOMY

Debt Dependency in Africa: the Drivers

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2 days ago

May 6, 2024

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In mid-April Ghana’s efforts to restructure its sovereign debt came to nothing, increasing the risk that it couldn’t keep up with its repayments. This is a familiar story for many African countries. Twenty of them are in serious debt trouble. Carlos Lopes argues that there are three factors driving this state of affairs: the rules of the international banking system; lenders’ focus on poverty reduction rather than development needs; and unfair treatment by rating agencies.

The debt situation in many African countries has escalated again to a critical juncture. Twenty are in, or at risk of, debt distress. Three pivotal elements significantly contribute to this. Firstly, the rules governing the international banking system favour developed countries and work against the interests of African countries.

Secondly, multilateral financial institutions such as the International Monetary Fund (IMF) and the World Bank focus on poverty alleviation. This is commendable. But it doesn’t address the liquidity crisis countries face. Many don’t have the necessary readily available funds in their coffers to cover urgent development priorities due to their dependency on volatile commodity exports. As a result governments turn to raising sovereign debt under conditions that are among the most unfavourable on the planet. This perpetuates a debt dependency cycle rather than fostering sustainable economic growth.

Thirdly, there’s the significant influence of biased credit rating agencies. These unfairly penalise African countries. In turn, this impedes their ability to attract investment on favourable terms. The convergence of these three factors underscores the imperative to implement effective strategies aimed at mitigating the overwhelming debt burden afflicting African nations. These strategies must address the immediate financial challenges facing countries. They must also lay the groundwork for long-term economic sustainability and equitable development across the continent.

By tackling these issues head-on, a financial environment can be created that fosters growth, empowers local economies, and ensures that African countries have access to the resources they need to thrive.

Rules of the banking game

The Bank for International Settlements is often called the “central bank for central banks”. It sets the regulations and standards for the global banking system. But its rules disproportionately favour developed economies, leading to unfavourable conditions for African countries. For instance, capital adequacy requirements – the amount of money banks must hold in relation to their assets – and other prudential rules may be disproportionately stringent for African markets. This limits lending to stimulate economic growth in less attractive economies.

The bank’s policies also often overlook developing nations’ unique challenges. Following the 2008/2009 financial crisis, the bank introduced a new, tougher set of regulations. Their complexity and stringent requirements have inadvertently accelerated the withdrawal of international banks from Africa.

They have also made it increasingly difficult for global banks to operate profitably in African markets. As a result, many have chosen to scale back their operations, or exit. The withdrawals have reduced competition within the banking sector, limited access to credit for businesses and individuals, and hampered efforts to promote economic growth and development.

The limitations of the new regulations highlight the need for a more nuanced approach to banking regulation. The adverse effects could be mitigated by simplifying the regulations. For example, requirements could be tailored to the specific needs of African economies, and supporting local banks.

Focus on poverty alleviation

Multilateral financial institutions like the IMF and the World Bank play a crucial role in providing financial assistance to many countries on the continent. But their emphasis on poverty alleviation and, more recently, climate finance often overlooks the urgent spending needs. Additionally, the liquidity squeeze facing countries further limits their capacity to prioritise essential expenditure. Wealthy nations enjoy the luxury of lenient regulatory frameworks and ample fiscal space. For their part African countries are left to fend for themselves in an environment rife with predatory lending practices and exploitative economic policies. Among these are sweetheart tax deals which often involving tax exemptions. In addition, illicit financial practices by multinational corporations drain countries of their limited resources. Research by The ONE Campaign found that financial transfers to developing nations plummeted from a peak of US$225 billion in 2014 to just US$51 billion in 2022, the latest year for which data is available. These flows are projected to diminish further.

Alarmingly, the ONE Campaign report stated that more than one in five emerging markets and developing countries allocated more resources to debt servicing in 2022 than they received in external financing. Aid donors have been touting record global aid figures. But nearly one in five aid dollars was directed towards domestic spending hosting migrants or supporting Ukraine. Aid to Africa has stagnated.

This leaves African countries looking for any opportunities to access liquidity, which makes them a prey of debt scavengers. As noted by Columbia University professor José Antonio Ocampo, the Paris Club, the oldest debt-restructuring mechanism still in operation, exclusively addresses sovereign debt owed to its 22 members, primarily OECD countries.

With these limited attempts to address a significant structural problem of pervasive indebtedness it is unfair to stigmatise Africa as if it contracted debt because of its performance or bad management.

Rating agencies

Rating agencies wield significant influence in the global financial landscape. They shape investor sentiment and determine countries’ borrowing costs. However, their assessments are often marked by bias. This is particularly evident in their treatment of African countries. African nations argue that without bias, they should receive higher ratings and lower borrowing costs. In turn this would mean brighter economic prospects as there is a positive correlation between financial development and credit ratings. However, the subjective nature of the assessment system inflates the perception of investment risk in Africa beyond the actual risk of default. This increases the cost of credit.

Some countries have contested ratings. For instance, Zambia rejected Moody’s downgrade in 2015, Namibia appealed a junk status downgrade in 2017 and Tanzania appealed against inaccurate ratings in 2018. Ghana contested ratings by Fitch and Moody’s in 2022, arguing they did not reflect the country’s risk factors. Nigeria and Kenya rejected Moody’s rating downgrades. Both cited a lack of understanding of the domestic environment by rating agencies. They asserted that their fiscal situations and debt were less dire than estimated by Moody’s.

Recent arguments from the Economic Commission for Africa and the African Peer Review Mechanism highlight deteriorating sovereign credit ratings in Africa despite some posting growth patterns above 5% for sustained periods. Their joint report identifies challenges during the rating agencies’ reviews. This includes errors in publishing ratings and commentaries and the location of analysts outside Africa to circumvent regulatory compliance, fees and tax obligations.

A recent UNDP report illuminates a staggering reality: African nations would gain a significant boost in sovereign credit financing if credit ratings were grounded more in economic fundamentals and less in subjective assessments. According to the report’s findings, African countries could access an additional US$31 billion in new financing while saving nearly US$14.2 billion in total interest costs.

These figures might seem modest in the eyes of large investment firms. But they hold immense significance for African economies. If credit ratings accurately reflected economic realities, the 13 countries studied could unlock an extra US$45 billion in funds. This is equivalent to the entire net official development assistance received by sub-Saharan Africa in 2021. These figures underscore the urgent need to address the systemic biases plaguing credit rating assessments in Africa.

Next steps

Debates about Africa’s debt crisis often lean towards solutions centered on compensation. These advocate for increased official development aid, more generous climate finance measures, or the reduction of borrowing costs through hybrid arrangements backed by international financial systems. These measures may offer temporary relief. But they need to be more genuine solutions in light of the three structural challenges facing African countries.

Carlos Lopes,a Professor at the Nelson Mandela School of Public Governance, University of Cape Town, is the Chair of the African Climate Foundation’s Advisory Council as well as its Chairman of the Board. He is also a board member of the World Resources Institute and Climate Works Foundation.

Courtesy: The Conversation

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BUSINESS & ECONOMY

IsDB President Advocates for Cultivating Entrepreneurial Leaders

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1 week ago

April 30, 2024

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By Hafiz M. Ahmed

The 18th Global Islamic Finance Forum recently served as a prominent platform for discussions on advancing Islamic finance and fostering leadership in the entrepreneurial sector. During this notable event, the President of the Islamic Development Bank (IsDB) emphasized the critical need for nurturing entrepreneurial leaders to propel the growth of the Islamic finance industry. This blog post explores the insights shared by the IsDB President, the implications for the future of Islamic finance, and the strategies proposed to develop the next generation of leaders.

Key Highlights from the Forum

The Global Islamic Finance Forum, held annually, brings together experts, policymakers, and stakeholders from across the world to deliberate on the challenges and opportunities within Islamic finance. This year’s focus on entrepreneurial leadership underscores the sector’s evolution and its growing impact on global economies.

The IsDB President’s Vision

Empowering Entrepreneurs. The IsDB President outlined a vision where empowerment and support for entrepreneurs are paramount. He highlighted the role of Islamic finance in providing ethical and sustainable funding options that align with the principles of Sharia law, offering a robust alternative to conventional financing methods.
Education and Training. A significant part of the address was dedicated to the importance of education and specialized training in Islamic finance. The President called for enhanced educational programs that not only focus on the technical aspects of Islamic finance but also foster entrepreneurial thinking and leadership skills among students.
Innovation in Financial Products. Recognizing the rapidly changing financial landscape, the call for innovation in designing financial products that meet the unique needs of modern businesses was emphasized. These innovations should aim to enhance accessibility, affordability, and suitability for diverse entrepreneurial ventures.
Collaborative Efforts. The IsDB President advocated for increased collaboration between Islamic financial institutions and educational entities to create ecosystems that support and nurture future leaders. This collaboration is essential for developing a holistic environment where aspiring entrepreneurs can thrive.
Supportive Policies: Lastly, the need for supportive governmental policies that facilitate the growth of Islamic finance was discussed. Such policies should encourage entrepreneurship, particularly in regions where access to financial services is limited.

Implications for the Future

The advocacy for entrepreneurial leaders in Islamic finance is timely, as the industry sees exponential growth and wider acceptance as a viable financial system globally. Cultivating leaders who not only understand the intricacies of Islamic finance but who are also capable of innovative thinking and ethical leadership is crucial for the sustainability and expansion of this sector.

Steps Forward

Integrating Leadership into Curriculum: Educational institutions offering courses in Islamic finance should integrate leadership training into their curricula.
Mentorship Programs: Establishing mentorship programs that connect experienced professionals in Islamic finance with emerging leaders.
Fostering Start-up Ecosystems: Creating supportive environments for start-ups within the Islamic financial framework can encourage practical learning and innovation.

Conclusion

The call by the IsDB President to nurture entrepreneurial leaders in Islamic finance is a step toward ensuring the sector’s robust growth and its contribution to global economic stability. By focusing on education, innovation, and supportive policies, the Islamic finance industry can look forward to a generation of leaders who are well-equipped to navigate the complexities of the modern financial world and who are committed to ethical and sustainable business practices. This vision not only enhances the profile of Islamic finance but also contributes to a more inclusive and balanced global financial ecosystem.

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