Islamic Development Bank to return to ringgit sukuk market

SARAJEVO May 5 The Islamic Development Bank (IDB) plans to sell local currency Islamic bonds (sukuk) in the Malaysian market this year after a three-year hiatus, the head of the Jeddah-based multilateral lender told Reuters.

The deal would be the fourth ringgit-denominated sukuk from the AAA-rated IDB, one of the largest issuers of sukuk alongside the governments of Malaysia, Indonesia and Qatar.

"It could be both, private and public placement," IDB president Ahmad Mohamed Ali said on the sidelines of an industry conference in Sarajevo, adding that specific size and timing of the deal would depend on market conditions.

"We have a very active cooperation and relationship with Malaysia and sometimes we need to have ringgit and we will act according to the needs and issue sukuk in ringgit."

The IDB board has approved the issuance of up to 400 million ringgit ($99.9 million) in sukuk this year, from a 1 billion ringgit programme listed on Bursa Malaysia in 2008.

It has raised a total of 700 million ringgit via three sukuk transactions since then, the latter a 5-year 300 million ringgit sukuk in July of 2013.

Last year, the IDB increased the ceiling of its flagship London-listed sukuk programme to $25 billion from $10 billion, aiming to expand its financing activities.

The bank, which operates to promote economic development in Muslim countries and communities, has 56 member countries and counts Saudi Arabia, Libya and Iran as its largest shareholders.

(Reuters / 04 May 2016)

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Islamic Development Bank increases sukuk programme to $25 bln

The Islamic Development Bank (IDB) has increased the ceiling of its Islamic bonds (sukuk) programme to $25 billion from $10 billion, as it aims to expand its financing across member countries, the Jeddah-based lender said on Tuesday.

An expanded programme would support the AAA-rated bank's aim to issue one sukuk publicly every year with a minimum size of $1 billion, while keeping pace with growing investor requests for private placements.

IDB sukuk are highly sought after by banks since the lender is designated a zero risk-weighted institution by the Basel Committee, the international banking supervisory body. This means its paper can be used to manage capital adequacy on bank balance sheets.

The programme has now been expanded three times since it was set up in 2005 - the IDB raised $4.4 billion in 2014 and last tapped the market in March with a $1 billion deal.

Most IDB sukuk have been issued with maturities of 5 to 7 years, but the lender wants to build a wider yield curve. This would help price longer-dated infrastructure transactions which the IDB wants to promote.

The bank, which operates to promote economic development in Muslim communities, has 56 member countries including Saudi Arabia, Libya and Iran as its largest shareholders.

The IDB also approved development projects worth a combined $450 million, including a $200 million energy project in Mozambique and $70 million to finance the import of agricultural equipment in Kazakhstan, it said in a statement.

In 2013, the IDB more than tripled its authorised capital to $150 billion. It provides financing, loans and technical assistance for development schemes which follow Islamic principles, such as bans on interest payments and pure monetary speculation.

(Reuters / 10 June 2015)

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Islamic Development Bank to invest $1 billion to Kazakhstan in 2012-2014

Islamic Development Bank (IsDB) will invest $ 1 billion into the Kazakhstan’s economy in 2012-2014. Respective partnership strategy was signed October 2, 2012 in Astana, KazTag Agency reports.

“The new strategy enables to (…) channel sizeable investments into transport, power industry infrastructure, agriculture, science, regional cooperation projects”, the country’s Minister of Industry and New Technology Asset Issekeshev said before the signing ceremony.

According to the ministry’s press-release, as of the beginning of October the Bank invested into the Kazakh economy a total of $987 million. Cooperation with the Bank dates back to November 30, 1995.

“Further cooperation with the Bank is of great interest to Kazakhstan. Kazakhstan was the first CIS nation to develop a partnership program with the Bank (…) the current industrial programs in Kazakhstan offer wide opportunities for bilateral cooperation”, President Nazarbayev said following his talks with the Bank’s President Ahmad Mohamed Ali Al-Madani.

“The partnership program will strengthen cooperation between Kazakhstan and the Bank and deepen interaction of Kazakhstan and Organization of Islamic Cooperation member states, notably in power industry and construction of motor and rail ways”, Ahmad Mohamed Ali Al-Madani said in his turn.

The Islamic Development Bank (IsDB) is a multilateral development financing institution located in Jeddah, Saudi Arabia. It was founded in 1973 by the Finance Ministers at the first Organisation of the Islamic Conference (now called the Organisation of Islamic Cooperation).

The bank officially began its activities on 20 October 1975, inspired by King Faisal. There are 56 shareholding member states.

For more information see:http://en.tengrinews.kz/politics_sub/Islamic-Development-Bank-to-invest-1-billion-to-Kazakhstan-in-2012-2014-13435/

Use of the Tengrinews English materials must be accompanied by a hyperlink to en.Tengrinews.kz

(Tengri News / 03 Oct 2012)

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Islamic Development Bank (IDB) approved more than $1 billion for global development projects

The 284th meeting of the Board of Executive Directors of the Islamic Development Bank, which convened at IDB headquarters starting Sunday 16 July, under the chairmanship of Dr. Ahmad Mohamed Ali, President, IDB Group, approved more than $ 1,158 million towards development projects financing for IDB member countries and Muslim communities in non-member countries.

This is the largest amount of approvals by a single IDB board meeting since the Bank’s inception in 1975. The approvals covered a large number of strategically important development projects comprising:

$683 million for power generation and power transmission projects in five IDB Member Countries:  Morocco, Tunisia, Iran, Uzbekistan and Tajikistan;

$274.8 million for food security and rural development activities in African countries:  Cameroon, Chad, Uganda, Benin, Burkina Faso, Mali, Niger, Mauritania and Togo;

$146.2 million for educational projects in Indonesia, Yemen and Bangladesh;

$45 million to Indonesia Exim Bank for the financing of export-oriented small and medium size industries;

$7.6 million as additional financing for Durres fishing in Albania (bringing IDB contribution for that project to $16.8 million);

$400,000 technical assistance grant to Djibouti for the Mother to Child AIDS Transmission Prevention Project in the health sector.

In line with the Islamic Development Bank’s resolve to support development efforts in Muslim communities in non-member countries, the board also approved $1.1 million as grants from the Wakf fund for participation in four educational projects for Muslim communities in Ethiopia, India, Papua New Guinea and Germany and one health project in the Philippines.

During its meeting, the board reviewed a number of important reports including the progress report on the implementation of IDB’s program for supporting Youth Employment in Arab Countries for which the Bank had already allocated $250 million and another report on the latest developments on the establishment of the ‘Mega Bank’, aiming at liquidity management for Islamic banks, and for which a tripartite Memorandum of understanding was signed earlier between the Government of Qatar, the IDB and the Dallah Al Baraka Group.

(Albawaba / 19 June 2012)

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Fitch affirms Islamic Development Bank

June 21 - Fitch Ratings has affirmed the Islamic Development Bank's (IsDB)


Long-term Issuer Default Rating (IDR) at 'AAA' with a Stable Outlook and
Short-term IDR at 'F1+'.

IsDB's ratings are underpinned by strong intrinsic features, primarily by 
excellent capitalisation. IsDB is one of the most highly capitalised 
multilateral development banks (MDBs) covered by Fitch. The ratio of equity to 
assets has remained above 60% since inception (64.1% at end-1432H, equivalent to
25 November 2011 in the Gregorian calendar), mainly thanks to regular capital 
inflows from shareholders and steady yet moderate profits. The ratio of debt to 
equity is low, at 49.2% at end-1432H. The bank also maintains a comfortable 
level of liquid assets, which more than fully covered its short-term liabilities
at end-1432H.

Credit risk is moderate. The IsDB mainly extends project financing guaranteed by
member states or state-owned banks to finance infrastructure or social services.
Due to compliance with Islamic finance principles, most financing is 
asset-backed. As with other MDBs, activity is mostly focused on speculative 
grade borrowers (63.7% at end-1432H) but the bank benefits from 
preferred-creditor status on sovereign-guaranteed operations, therefore keeping 
impaired operations at a minimum. It limits concentration risk as it operates in
a diversified number of countries and abides by strict country and single 
obligor limits. The five largest borrowers accounted for 32.8% of equity at 
end-1432H, a lower level than most peers.

Fitch deems other risks under control. Credit risk on treasury assets is 
mitigated by the recourse to short-term investments in a diversified range of 
instruments and banks. Interest rate risk and foreign exchange risk are strictly
hedged. The bank's risk on equity investments is higher (equity stakes and fund 
participations accounted for 16.2% of total operations at end-1432H and have 
suffered significant unrealised losses recently) but remains manageable given 
the bank's long-term investment horizon and comfortable cushion of equity. 

Shareholders' support is also supportive of the rating. IsDB's capital is owned 
by 56 countries, all members of the Organisation of Islamic Cooperation, which 
have committed to provide callable capital in case the bank should require it to
honour its liabilities. Although the proportion of highly rated callable capital
is lower than for peers (with 43.4% of callable capital being rated 'AA-' or 
above at end-1432H), willingness to support is strong as illustrated by 
continuous capital inflows to the bank.

The bank undertook countercyclical action in 2009-2011, significantly increasing
its loan portfolio. It has temporarily slowed its growth rate in 1433H but 
intends to significantly reinforce the use of its capital resources in the 
coming years. This should affect capitalisation and leverage but Fitch expects 
the IsDB to preserve its cautious prudential framework.

Downward pressure on IsDB's ratings would occur if Fitch observed a pronounced 
deterioration of asset quality or a sudden and unexpected deterioration in 
capitalisation and leverage.

The IsDB is based in Jeddah, Saudi Arabia. It was established in 1975 with the 
aim of fostering economic development and social progress, and provides project 
and trade finance as well as technical assistance to its member countries. It 
employed 739 staff at end-1432H and operated through four regional offices in 
Morocco, Malaysia, Kazakhstan and Senegal. 

(Reuters / 21 June 2012)

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The Islamic Development Bank (IDB) exploring microfinance options in UK

LONDON, 9 Rajab/30 May (IINA)-The Islamic Development Bank (IDB) is exploring social and financial inclusion opportunities in the UK including the provision of community-based microfinance, SMEs (small-and-medium-sized enterprises) financing and technical assistance programs.

An IDB delegation, led by its President Dr. Ahmed Mohammed Ali, participated in a roundtable here Monday with financial institutions, law firms, corporates and community organizations and leaders.

Dr. Ali said that in addition to the direct assistance to microfinance institutions, initial discussions have taken place with the UK’s Department for International Development (DFID), World Bank and CGAP to start some pilot projects in various common member countries and eventually develop a global Islamic microfinance facility.

In the UK, there are several initiatives aimed at helping small business start-ups and young entrepreneurs and to promote financial inclusion. These include Community Development Financing Institutions (CDFI), the Enterprise Capital Fund, and regional ones such as Bolton Business Ventures.

On Monday, Lord Young, the former Conservative cabinet minister, announced the launch of a GBP85 million initiative to help young people in the above respect. The reality is that the UK is facing a multi-billion pound funding gap for small businesses.

One microfinance initiative that is seeking to cooperate with the IDB is GLEOne London, whose CEO Nicholas Nicolaou, revealed that the entity is working on a program to assist Muslim immigrants starting up small businesses and becoming entrepreneurs.

In fact, City law firm Norton Rose; Gatehouse Bank, one of the five UK-authorized Islamic banks; and international auditing firm and consultancy KPMG have been cooperating with GLEOne London to develop an Islamic microfinance product based on the Mudaraba (trust funding) concept.

According to Farmida Bi, Partner at Norton Rose, the product is ready to roll out and addresses the various tax and legal issues especially under the Consumer Credit Act, which protects the rights of customers.

Dr. Ali reiterated IDB’s support for various microfinance initiatives. He stressed that the Islamic banking industry registered a year-on-year growth of 35 percent in 2010 to 2011. Within OIC countries for instance, Islamic financial institutions are becoming major economic players in an increasing number of these countries.

In Indonesia, for instance, a recent Central Bank of Indonesia report has indicated that the industry is growing very fast at a rate of 35 to 40 percent per annum and is expected to capture up to 20 percent market share of the total banking industry in the next few years.

“If this trend continues the Islamic financial industry will become a major industry with an important role to play in global finance. London being the gateway for Islamic banking in Europe, needs to be prepared for this tremendous growth of this industry,” he said.

Dr. Ali also held talks with the Lord Mayor of the City of London, Alderman Ian Luder; the Sheriff of the City of London, Alderman Alan Yarrow; the British Consul General in Jeddah, Mohamed Shokat, and Richard Thomas, CEO, Gatehouse Bank, at Mansion House, the official residence of the Lord Mayor.

The IDB president’s visit was at the invitation of the Lord Mayor who earlier this year visited the bank’s headquarters in Jeddah.

Dr. Ali also met Andrew Mitchell, UK Secretary of State for International Development, to review progress on the implementation of the Memorandum of Understanding (MoU) signed by the two parties in Jeddah in March whereby the UK and the IDB agreed to cooperate in co-financing projects in IDB member countries aimed at generating youth employment and reducing poverty.

Alderman Luder stressed the close and historical relations between the City of London and the IDB and the GCC countries, in particular, Saudi Arabia. The City of London, as a premier international financial center, has much to offer not only in innovation, but also in education and training and also in the growing phenomenon of Islamic finance.

Dr Ali emphasized that the visit was a testament to the IDB’s partnership with the UK and specially with the City of London. “We have worked together to further some areas of our common interest. This visit also provides IDB with the opportunity to support the development of Muslim communities in the UK,” he said.

IDB’s Medium Term Note Program amounting to $6.5 billion for sukuk issuance is registered with the Financial Services Authority in UK and is listed on the London Stock Exchange.Under this program, IDB has made several issuances in US dollars, as well as pound sterling denominated private sukuk issuances have been made.

As far as the money market placements are concerned, the IDB has over the years increased its exposure to the UK’s financial institutions and IDB stands ready to do more in this regard when appropriate opportunities are identified.

The IDB is working with such recognized institutions as the Prince of Wales’ Prince’s Charities and has contributed just under $1 million to help young people in the inner cities to start up projects or small businesses.

The IDB has also been providing assistance for economic and social empowerment to UK citizens as part of IDB’s special assistance program for cooperation with Muslim communities in non-member countries. To date IDB has approved a total of 19 projects for the UK and further projects are being planned. These projects are mainly in the field of education, social welfare and research.

In the wake of the global financial crisis, economic recession and the impact of the eurozone debt crisis, the issue of embedded inclusiveness especially of the financial services industry is increasingly important. Not surprisingly, the IDB President appealed to the financial institutions to help in this respect.

“Achieving sound and sustainable socio-economic development is not simply a financing issue. It is a much broader endeavor,” said Dr. Ali, adding: “It is not within the bandwidth capacity of a single institution or even a single country. It requires strong commitment to reform the socio-economic system and its institutions. All stakeholders, including the government, private sector, civil society and donor community, have to play an active role and align their priorities and activities to achieve this common goal. Due to the strong banking traditions in the UK, it can contribute significantly to this endeavor.”

This, he added, is a once-in-a-lifetime opportunity and called upon all the Institutions to pull together and work towards building “an equitable, just and stable financial system which is capable of providing sustainable growth with employment creation for our own future. IDB would be happy to cooperate with initiatives in this regard.”

A key delivery vehicle for inclusiveness which the IDB has been promoting is through SME financing and microfinance programs aimed at generating employment, especially youth employment, and economic growth.

Due to the recent changes in the MENA region as a result of the Arab Spring, there has been a demand for funding of SMEs. In this context, the Bank has launched the IDB Youth Employment Support (YES) Program for which the IDB’s Board of Executive Directors approved $250 million to help empower Financial Institutions, Employers, Education and Vocational training organizations in the Arab Region to reduce youth unemployment.

Dr. Ali revealed that the targeted countries include Tunisia, Egypt and Morocco and that the first disbursements have started with Tunisia. However, he pointed out that it is up to the receiving countries to come up with project proposals to access the funding.

Furthermore, the Islamic Solidarity Fund for Development has allocated $500 million for Islamic microfinance and a similar amount for vocational literacy programs (VOLIP). The IDB Islamic Microfinance Development Program was established to strengthen the Islamic microfinance institutions and develop the overall enabling environment for them.

According to the IDB, the French Development Agency (AFD) and the Consultative Group to Assist the Poor (CGAP) are also collaborating with the IDB in the development of Islamic microfinance.

(Internatonal Islamic News Agency  / 30 May 2012)

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