Initially it was announced that Guyana will borrow US$900 million credit from the Islamic Development Bank (IsDB). However, the Minister of Finance clarified that the US$900 million is not automatically available. He noted that the government has to come up with projects consistent with the lending mandate of IsDB. Therefore, they used the term resource envelope, which means the line of financing is available if the government can come up with projects acceptable and consistent with the lending mandate of IsDB. In that sense, therefore, the money does not add to the external debt until the government borrows the funds.
IsDB lending has to be consistent with rules of Shari’ah, which is the foundation of Islamic finance and economics. The projects chosen by the Guyana government will have to be Shari’ah compliant. I find Islamic finance to be very interesting. It is a growing field of study and subfield of Islamic economics. It is definitely a subfield of the very broad subject of economics, which is mainly based on Western thought. Several non-Muslim economists often do research in the area of Islamic finance. I have also been discussing the features of Islamic finance with a few of my Middle Eastern students. I will use this column to outline the three core principles of Islamic finance and explain some differences with conventional Western finance. There are some sound reasons why the Guyana government may want to utilize this source of finance.