(AFP) - JEDDAH: The Islamic Development Bank (IDB), which has so far limited its funding to government bodies, has set up an institution with Saudi and Iranian help to promote the private sector in member countries.
The institution, started with $1bn capital, will aim "to support the efforts of economic development in Islamic member countries and encourage private projects in line with the principles of the Sharia" laws of Islam, which ban interest, the IDB said.
The institution is seemingly at odds with the IBD's mission of governmental assistance in aiding the private sector, which is of increasing importance in the Islamic world.
Like the bank, the body will be based in Jeddah, the trading capital of Saudi Arabia, which has launched economic reforms to encourage the private sector, the bank said in a statement late Saturday.
The 58-member IDB will put up half of the capital while member countries will account for 30% in the form of shares and the rest will come from financial institutions in Muslim countries.
The institution's board will be chaired by IDB president Ahmad Mohammad Ali. The chair of the body's general assembly will be the Saudi finance minister, while the vice chair will be his counterpart in Iran.
The co-operation marks a warming of relations between Iran and Saudi Arabia under Iran's President Mohammed Khatami, a reformist who was elected in 1997.
"There isn't anything strange about Saudi Arabia and Iran taking the principal roles in this institution, as they in particular co-ordinate their policies on the Islamic stage," an IBD official said on condition of anonymity.
The new banking body will hold its first meeting on August 5.
The 58-member Islamic Development Bank, founded in 1975, provides assistance to Muslim states through loans and grants.
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