Annex 6 to OIC/COMCEC/36-20/REP
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Policy Recommendation 2: Designing effective local labor market policies that would
help tackling the informality problem and create more and better jobs
Rationale:
In the OIC member countries, roughly one in three jobs is formed in the informal labor
market. Informal workers are not protected by labor legislation or a social security system.
Families residing in slums are mostly employed in informal sector, which suggests that
informal employment is closely linked with more intensive urban poverty. To tackle
the informality problem, it is crucial to develop local labor market policies, which
gradually reduce the share of informal employment over time and create more and decent
jobs. These labor market policies include, among others, training and skill acquisition,
improved flexibility of formal work, stricter enforcement, differential tax schemes targeting
youth, women or other disadvantaged groups, supporting job creation and social protection.
Policy Recommendation 3: Activating the Islamic Social Finance Tools and
systematically integrating them into the general urban poverty policy toolbox
Rationale:
The existing evidence suggests that the Islamic social finance system is a viable
complementary tool that can be used in combination with traditional poverty reduction
policies to eradicate urban poverty in the OIC countries. For example, organizing an
effective distribution of individual-level compulsory transfers, charity-based recommended
transfers, and other voluntary transfers (both pecuniary and non-pecuniary) would greatly
improve welfare in the society and reduce poverty in urban settings. Activating the
Islamic social finance tools and systematically integrate them into the general urban
poverty reduction policy toolbox within a well-crafted “policy-mix” (e.g. the zakat-based
infrastructure projects implemented in Indonesia); and utilizing the related ICT tools (such
as blockchain technologies, FINTECH systems, cashless smart cards, geographical
information systems) that facilitate a more effective use of the Islamic social finance tools
(e.g., the Social Family Card in Egypt; cashless shopping cards distributed to refugees living
in camps in Turkey and Jordan) is of crucial importance for reducing urban poverty. The
OIC Member Countries provide numerous good practices on Islamic social finance tools
as a source of inspiration for their fellows. Through experience sharing and capacity
building programs, this valuable experience could be shared among the member countries.