Islamic Development Bank Group Approves Additional US$1.2bn in Funding Commitments at its 2021 Annual Meetings in Tashkent in September 2021 to Support Post-pandemic Economic Recovery among its Member Countries.
Tashkent – The Islamic Development Bank (IsDB) Group, the multilateral development bank (MDB) of the 57 member countries of the Organisation of Islamic Cooperation (OIC), has boosted its COVID-19 mitigation financing response with an additional US$1.2 billion in funding commitments as part of its effort to support the post-pandemic economic recovery among its member countries.
The funding commitments comprise around 30 MOUs and agreements signed between IsDB Group entities and counterpart institutions in member countries in Africa and Asia during the Group’s 2021 Annual Meetings held in Tashkent, Uzbekistan on 1-4 September 2021.
The Islamic Trade Finance Corporation (ITFC), the trade fund of the IsDB Group, is provide trade financing to several countries to support the import of strategic commodities, including energy products and foodstuffs. These include:
- EUR330 million (US$392 million) over the next 3 years to Comoros Islands to support food and energy security.
- EUR85 million (US$100 million) to Burkino Faso to support the purchase of refined petroleum products for the country’s energy sector.
- US$100 million to Guinea to support the import of fuel and food commodities.
- US$75 million to Maldives to support the import of fuel and food commodities.
At the same time, the Board of Executive Directors (BED) of the Islamic Development Bank (IsDB) also held its 341st meeting on the sidelines of the Annual. The meeting chaired by the new President of the Bank, Dr Muhammad Al Jasser, approved several rounds of development financing,
These include US$110.14 million for three new development projects, comprising:
i) US$86.64 million to Nigeria for the upgrading of the Minna-Bida Road Project in Niger State aimed at reducing travel time, vehicle operating and road maintenance costs, improving business and goods flows and increased road safety.
ii) US$18.8 million to Guinea for the Wastewater Treatment Development Project in Conakry, aimed at improving sanitation services in Conakry by treating wastewater to protect the public and environment.
iii) US$5 million to Sierra Leone for implementing Digital Connectivity in Schools to Accelerate COVID-19 Education Response and Recovery Project.
In addition, the BED also approved US$150 million to fund two major projects in Benin – one to support community health and nutrition and the other to upgrade the storm draining system of the capital city of Cotonou in order to reduce the risks of flooding.
Of this US$50 million were approved for a primary healthcare project in Benin, which is funded from ordinary resources and concessional financing from IsDB’s Lives and Livelihoods Fund (LLF) with the support of the Bank’s donor partners. The project aims to address the critical and urgent gaps in primary healthcare and nutrition services in Benin, particularly with regard to maternal and child healthcare.
The financing includes a US$17.5 million (35%) grant by the LLF, a collaborative initiative of the IsDB with the Abu Dhabi Fund for Development, Bill & Melinda Gates Foundation, UK’s Foreign, Commonwealth & Development Office, Islamic Solidarity Fund for Development (ISFD), King Salman Humanitarian Aid and Relief Centre, and Qatar Fund for Development.
The LLF, says the IsDB, uses an innovative financing model that combines grants from regional and international donor partners with the lending capital of IsDB to offer concessional loans to address critical drivers of poverty. “It finances interventions that benefit the poorest and most vulnerable communities in IsDB Member Countries with a focus on health, agriculture, and basic infrastructure. The blended financing does not merely address immediate gaps in human capital development needs but rather sets in motion a fundamental change that can create opportunities for millions of disadvantaged people, especially women and the youth.”
LLF investments, says the IsDB, also support the Bank’s Economic and Social Infrastructure Strategic Framework towards achieving the UN SDG3 (Universal Health Coverage) in Benin. To IsDB President, Dr Al Jasser, it “is a vitally important project for the long-term, sustainable socio-economic prosperity of Benin. Through this Lives and Livelihoods Fund investment, we are helping to create lasting positive change in the country’s health sector to help people live longer and happier lives and set the foundation for the next generation to thrive and reach their full potentials. Together with our donors and partners, the IsDB is looking forward to delivering on the project milestones, and contributing, step by step, towards the achievement of the UN Sustainable Development Goals.”
The objectives of the project are to improve access to primary healthcare and nutrition services and to strengthen the surveillance and prevention of epidemics and infectious diseases in communities. The Project will be implemented through the National Agency for the Control of AIDS in a timeline of five years.
ICIEC Signs Facultative Reinsurance Agreements with Saudi Eximbank to Boost Non-oil Exports Out of the Kingdom
Tashkent – The Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC), the export credit agency (ECA) of the Islamic Development Bank (IsDB) Group, signed two landmark Facultative Reinsurance Agreements (FRAs) with the Saudi Eximbank in early September 2021 whereby ICIEC would provide Credit Reinsurance Cover to the Saudi ECA.
The FRAs were signed by Oussama Kaissi, Chief Executive Officer of ICIEC, and Eng. Saad Alkhalb, Chief Executive Officer of Saudi Eximbank, during the 46th Annual Meetings of the IsDB Group held in Tashkent, Uzbekistan from 1-4 September 2021.
“These agreements,” emphasized Mr Kaissi, “consolidates our long-standing partnership with the Saudi Export Program and now the Saudi Eximbank in supporting export development and Foreign Direct Investment in Saudi Arabia.”
Under the FRAs, ICIEC will provide Shariah-compliant reinsurance covering up to 70% of Saudi Eximbank’s exposure under a Documentary Credit Insurance Policy Commercial and Political Risks (Multi Risk) issued to the Original Insured up to the agreed Credit Amount Limit. The aim of Saudi Eximbank is to help Saudi banks to provide more credit facilities to local corporates for the export of non-oil products.
Saudi Arabia is keen to increase its non-oil exports and thus dependency on hydrocarbon exports as part of its ongoing economic restructuring towards the objectives of Saudi Vision 2030. According to Saudi Eximbank, non-oil exports increased by 52% year on year in Q2 2021 to SR65.66 billion (US$17.51 billion).
Consortium of Eleven Banks Arrange US$2.6bn Hybrid Islamic-Conventional Syndicated Revolving Credit Facility for Saudi Electricity Company in Early September 2021
Jeddah – A consortium of eleven international banks arranged a US$2,577.5 million Syndicated Revolving Credit for Saudi Electricity Company (SEC) in early September 2021.
The Consortium comprised Intesa Sanpaolo, Bank of China, First Abu Dhabi Bank, HSBC Bank Middle East, JPMorgan Chase Bank, Mizuho Bank, MUFG Bank, Standard Chartered Bank, Sumitomo Mitsui Banking Corporation, Abu Dhabi Islamic Bank and Natixis.
In a disclosure to the Saudi Stock Exchange (Tadawul), SEC confirmed that the facility had a 3-year tenor and the proceeds from the facility will be used to “refinancing of an existing Revolving Credit Facility and financing general corporate purposes including capital expenditure.”
No details were given as to the breakdown of the Islamic financing and conventional financing components.
ADIB Launches Amwali, “the World’s First Islamic Digital Bank Targeting Youth Between the Age of 8 to 18”
Abu Dhabi – Islamic digital banking took a differentiated twist in August 2021 when Abu Dhabi Islamic Bank (ADIB) launched Amwali Digital Bank which it claims is “the world’s first Islamic digital bank targeting youth between the age of 8 to 18.”
Co-created with the Founders Club, a cohort of Emirati youth and their parents, the all-in-one banking solution, says ADIB, “is designed to empower young customers with a dedicated digital banking experience, access to financial knowledge, and personalised offers that fit their lifestyle, all under the parental control.”
ADIB has been building up its youth banking segment over the last decade. It now has over 100,000 customers under the age of 24. According to Raweya Al Qader, Head of Youth Banking at ADIB, “our research shows that many UAE millennials and Gen Z’s are looking for a dedicated digital channel that truly delivers their banking needs and financial goals. They have grown accustomed to fast-paced and digital interactions that offer convenience and mobility, especially as we progress towards a more technology-led and cashless society. With Amwali, we fill this gap by integrating financial literacy, budget control, and banking services in a simple, convenient, and digitised banking experience.”
Elsewhere, Kazakhstan’s first Islamic digital bank, Tayyab, was also officially launched in August 2021. Tayyab has a partnership agreement with Bank RBK, a Kazakhstan-based conventional financial bank that allows Tayyab access to its banking license and infrastructure. Tayyab is registered as an offshore unit at the Astana International Financial Centre (AIFC), which means that the start-up bank cannot target clients and business in mainland Kazakhstan. To operate in the Kazakhstan mainland, it would require a banking license from the Central Bank of Kazakhstan.
Tayyab operations are certified by the Bahrain-based Shariyah Review Bureau. It pre-launched its first product, a debit card, attracting 6,500 clients within the first few weeks of its release in May whilst aiming to attract 70,000 clients within the next year.
Tayyab currently offers digital-only cards, physical plastic cards, payments, and transfers services in four currencies, Kazakh Tenge, U.S. dollar, Euro and Russian Rouble.
Malaysia’s Mortgage Securitiser Cagamas Berhad Sustains its Sukuk Issuance with RM300m (US$71.69m) Hybrid Sustainability SRI Sukuk and Sustainability Bond in August 2021
Kuala Lumpur – Cagamas Berhad, the National Mortgage Corporation of Malaysia, one of the most prolific issuers of Sukuk, successfully closed its first double issuance of an ASEAN Sustainability SRI Sukuk and ASEAN Sustainability Bonds totalling RM300 million in August 2021.
The offerings were issued under Cagamas’s existing RM60 billion Islamic/Conventional Medium Term Notes Programme. The transaction comprised a 3-year RM100 million SRI Sukuk and a RM200 million Sustainability Bond. The proceeds from the issuances, according to the Corporation, will be used to fund the purchase of eligible Islamic financing and conventional housing loans for affordable housing.
“After the success of our inaugural sustainability issuances last year, Cagamas continues its efforts to facilitate the mobilisation of its issuance proceeds towards the development of sustainability financing. We are glad to see the increasing awareness and support given by investors on sustainability financing and issuances of such nature which would allow investors to deploy capital towards essential social needs,” explained Datuk Chung Chee Leong, President/Chief Executive Officer of Cagamas.
The issuances, via private placement, were priced at 38 to 43 basis points above the corresponding 3-year Malaysian Government Investment Issue (MGII)/Malaysian Government Securities (MGS). The SRI Sukuk and Sustainability Bonds for affordable housing were assigned the highest Social Benefit rating of Tier-1 by RAM Sustainability Sdn Bhd under Cagamas’ Sustainability Bond/Sukuk Framework.
In a second transaction in August 2021, Cagamas issued an aggregate issuance of RM755 million; comprising RM200 million 1-year Floating Rate Notes (FRNs), RM85 million 1-year Conventional Medium Term Notes (CMTNs), RM25 million 1-year Islamic Medium Term Notes (IMTNs), RM345 million 3-month Islamic Commercial Papers (ICPs) and RM100 million 3-month Conventional Commercial Papers (CCPs). Proceeds from the issuances will similarly be used to purchase housing loans and Islamic home financing from the financial system.
“We are very appreciative of the support from our investors with the conclusion of our latest aggregate issuances. The turn to safe-haven assets arose from sentiments of lingering threats by the COVID-19 Delta variant which may dampen global economic recovery. We are confident that Cagamas papers will continue to be in demand while local market players remain cautious amid pandemic uncertainties under the current Economic Recovery Plan that aims to shape the growth trajectory moving forward,’’ explained Datuk Chung Chee Leong, President/Chief Executive Officer of Cagamas.
“The 1-year FRNs marked the Company’s first FRNs issuance since 2019. This underscores the Company’s ongoing efforts in developing onshore capital markets through the issuance of diversified structures, catering for various investment needs. The FRNs were priced competitively at the corresponding 3-month Kuala Lumpur Interbank Offered Rate (KLIBOR), or equivalent to 1.94% based on KLIBOR fixing on the pricing date,” added Datuk Chung.
The other issuances were also priced competitively, representing 23 to 37 basis points above the corresponding Malaysian benchmarks. The transactions marked the Company’s 19th issuance exercise for the year and brings the year-to-date issuance amount to RM9.5 billion.
The above issuances follows Cagamas’ RM300 million 3-month Islamic Commercial Papers (ICPs) offering in July 2021.
Cagamas plays a major role in Sukuk origination and continues to be an innovator in the mortgage finance and securitisation market. The Cagamas papers, which will be redeemed at their full nominal value upon maturity, are unsecured obligations of the Company, ranking pari passu among themselves and with all other existing unsecured obligations of the Company. They will be listed and traded under the Scripless Securities Trading System of Bursa Malaysia.
Cagamas’ corporate bonds and Sukuk continue to be assigned the highest ratings of AAA and P1 by RAM Rating Services Berhad and AAA/AAAIS and MARC-1/MARC-1IS by Malaysian Rating Corporation Berhad, denoting its strong credit quality. Cagamas is also well regarded internationally and has been assigned local and foreign currency long-term issuer ratings of A3 by Moody’s Investors Service Inc. that are in line with Malaysian sovereign ratings.
The Cagamas model is well regarded by the World Bank as the most successful secondary mortgage liquidity facility. Cagamas is the second largest issuer of debt instruments after the Government of Malaysia and the largest issuer of AAA corporate bonds and Sukuk in the market. Since incorporation in 1986, Cagamas has cumulatively issued circa RM320.1 billion worth of corporate bonds and Sukuk.
IILM Continues Consecutive Monthly Short-Term Sukuk Issuance with US$1.25bn Three-Tranche Offering in August as 2021 Aggregate Tops US$9.36bn
Kuala Lumpur – The International Islamic Liquidity Management Corporation (IILM) continued its short-term Sukuk issuance calendar with its eighth monthly auction in August 2021 by successfully reissuing a total of US$1.25 billion short-term Sukuk across three tenors – 1 month, 3 months and 6 months.
The transaction comes under IILM’s US$4.0 billion short-term issuance programme. The Corporation held an auction on 17 August 2021 for the three series of re-issuances, priced by the market as follows:
- US$400 million of 1-month tenor certificates at 0.30%
- US$550 million of 3-month tenor certificates at 0.30%
- US$300 million of 6-month tenor certificates at 0.38%
This follows the three-tranche issuance of short-term securities in July 2021 totalling US$1.1 billion.
The Sukuk reissuance, which marks the IILM’s eighth Sukuk auction for 2021, garnered significant interest among the GCC-based Islamic Primary Dealers and investors despite the holiday season, as well as higher participation observed among Asian-based Primary Dealers and investors for the 3- month tenor,” explained the Corporation.
The issuances were distributed through a competitive tender process which witnessed a strong orderbook in excess of US$2.04 billion, representing an average oversubscription rate of 1.6 times.
In light of the reissuance, the IILM has achieved year-to-date cumulative issuances totalling US$9.36 billion through 24 Sukuk series. The IILM will continue to reissue its short-term liquidity instruments monthly as scheduled in its issuance calendar.
The IILM is a regular issuer of short-term Sukuk across varying tenors and amounts to cater to the liquidity needs of institutions offering Islamic financial services.
The IILM’s short-term Sukuk programme is rated “A-1” by S&P with current outstanding issuance size amounting to US$3.51 billion. According to the IILM, the primary dealers that participated in the auction conducted under the competitive bidding of the Bloomberg AUPD Platform included Abu Dhabi Islamic Bank; Al Baraka Turk Participation Bank; Barwa Bank; Boubyan Bank; CIMB Islamic Bank Berhad; First Abu Dhabi Bank; Kuwait Finance House; Macquarie Bank; Maybank Islamic Berhad; Qatar Islamic Bank; and Standard Chartered Bank.
ADIB Closes Two Real Estate Structured Financing Transactions in the UK in August as Total Realty Financing Reaches AED 750 million (GBP150m) in the January-August 2021 Period
London – Abu Dhabi Islamic Bank (ADIB) continues its real estate financing activities in the UK propery market with two transactions in August 2021. ADIB provided structured financing of AED124 million (UK£24 million) through its UK operation supporting Bahrain based Blacksand with their latest acquisition.
Blacksand is a UK focused property company, which owns a diversified property portfolio ranging from offices to student accommodation as well as residential development projects. The property, Vibe Student Living, comprises a purpose-built student accommodation asset situated in Kingston-upon-Thames, comprising 300 fully furnished units.
According to Paul Maisfield, Head of UK Real Estate at ADIB, “the appetite amongst our GCC investors remains strong for quality UK real estate, particularly assets that have demonstrated resilience during the pandemic, with underlying strong fundamentals. Despite the unparalleled uncertainty during the last academic cycle, investors continue to view the UK realty sector favourably. The market has performed stronger than expected throughout the crisis, with reports of robust booking and occupancy rates.”
ADIB also provided structured Islamic financing for Middle East investors on two supermarket assets in the UK. The first transaction supported the acquisition of a Tesco Extra store and ancillary retail parade in Oldham, Greater Manchester by Kuwait Business Town Real Estate Co. The second transaction comprises a purpose-built supermarket in Weston-super-Mare, Somerset owned by Capital Trust. The building is leased to Waitrose Ltd until May 2045.
According to Savills, the UK supermarket sector saw investment volumes reach circa £1.5 billion (AED 7.65 billion) in 2020. The average prime achievable retail yield has moved out from 4.43% in 2019 to 4.75% at the end of 2020, while in contrast the average prime achievable yield for supermarkets moved in from 5.7% to 5.53% over the course of 2020.
ADIB has a strong track record in offering bespoke and competitive Sharia’a-compliant property financing solutions for its clients in the UK. This year alone, it has closed over AED 750 million (£150m) in senior financing transactions including AED 260 million (£53m) financing for a major Saudi investor to acquire the PWC HQ in Belfast.
Turkish Treasury Raises US$106.69m Through Fixed Rate TRY Lease Certificate Issuance in August 2021
Ankara – The Debt Office of the Turkish Treasury and Finance Ministry raised TRY921.7 million (US$106.69 million) through a TRY 2-year Fixed Rate Lease Certificate (Sukuk al Ijarah) issuance on 18 August 2021.
The Lease Certificate issuance was done through a direct sale auction on 16 August 2021. The auction was conducted by the Central Bank of Turkey via AS (Auction System under Central Bank Payment Systems). The issuance has a tenor of 2 years maturing on 16 August 2023 and was priced at a fixed rental rate of 8.90% over a 6-month rental payment period.
This is the second consecutive month of Fixed Rate Lease Certificates issued by the Debt Office. In July it raised TRY1,143.74 million (US$135.45 million) through a TRY 2-year Fixed Rate Sukuk al Ijarah which had a fixed rental rate of 9.04% over a 6-month rental payment period.
The Turkish Treasury is a proactive issuer of lease certificates as part of a wider universe of government fund-raising instruments which include bonds and Sukuk – leasing certificates/bonds, FX denominated issuances and gold-backed certificates/bonds. The usual mantra of the Turkish Treasury when announcing these auctions is “in order to increase the domestic savings, broaden the investor base and diversify the borrowing instruments, TRY denominated fixed rent rate lease certificates will be issue to the banks through direct sale method.”
All the lease certificates were issued by Hazine Mustesarligi Varlik Kiralama A.S., a special purpose vehicle wholly-owned by the Ministry of Treasury & Finance, the obligor.
TURKISH TREASURY TRY 2-Year FIXED RATE LEASE CERTIFICATES
(SUKUK AL IJARAH) ISSUANCES JANUARY-AUGUST 2021
Date | Volume (TRY millions) | Tenor | Maturity Date | Periodic Rental Rate | Rental Payment Period |
10/02/21 | TRY1,468.13 million | 2 years | 08/02/2023 | 6.95% | 6 months |
20/04/21 | TRY1,361 million | 5 years | 15/04/2026 | 1.43% | 6 months |
09/06/21 | TRY951.25 million | 10 years | 28/05/2031 | 1.59% | 6 months |
13/07/21 | TRY1,143.74 million | 2 years | 12/07/2023 | 9.04% | 6 months |
18/07/21 | TRY921.7 million | 2 Years | 16/08/2023 | 8.90% | 6 months |
Source: Compiled by Mushtak Parker from data from the Debt Office Ministry of Treasury & Finance, Turkey August 2021
Indonesian Government Raises IDR21 Trillion (US$1.5bn) Through Two Rupiah-denominated Sukuk Auctions and One Private Placement in August 2021 as Aggregate Funds Raised in January-August 2021 Total IDR146.02 Trillion (US$10bn)
Jakarta – The Government of Indonesia continues to consolidate its role as one of the most proactive repeat issuers of sovereign domestic Sukuk in the market through three auctions and one private placement during the month of August 2021.
The Department of Islamic Financing at the Directorate General of Budget Financing and Risk Management, Ministry of Finance of Indonesia, in fact raised a total IDR21 trillion in August 2021, with an aggregate total of domestic sovereign Sukuk raised for January-August 2021 amounting to IDR146.02 trillion.
The Government of Indonesia is a prolific issuer of domestic Sukuk and demand from local institutional investors is robust. The total bids for the June auctions amounted to IDR26 trillion.
The August 2021 issuances comprised three auctions of Sovereign Shariah Securities (SSS) or Sukuk Negara through the auction system of Bank of Indonesia and one transaction through a private placement.
The auction held on 10 August 2021 of Sovereign Shariah Securities (SSS) raised IDR11 trillion comprising six tranches with tenors of 6 months, 3 years, 5 years, 12.5 years, 15.5 years and 25 years. The tranches were priced at a coupon rate at discount, 4%, 4.875%, 6.375%, 6.10% and 7.75% respectively. Total incoming bids for the auction amounted to IDR51.659 trillion.
The auction held on 23 August 2021 of Sovereign Shariah Securities (SSS) raised IDR2 trillion comprising a single tranche. The transaction was done through a private placement. The IDR2 trillion tranche was priced at a yield of 5.26% and a fixed coupon rate 6.0% per annum. The issuance had a tenor of 5.5 years maturing on 15 January 2027.
The auction held on 24 August 2021 of Sovereign Shariah Securities raised IDR9 trillion comprising five tranches with tenors of 3 years, 5 years, 7 years, 12.5 years and 15 years. The tranches were priced at a coupon rate at 4%, 4.875%, 5.875%, 6.375%, 7.75% respectively. Total incoming bids for the auction amounted to IDR52.478 trillion.
Albaraka Turk Raises TL575 million (US$64.42m) Through Two Sukuk Ijara Offerings in September 2021
Istanbul – Leading Turkish Participation bank, Albaraka Turk Katilim Bankasi, a subsidiary of the Bahrain-incorporated but Saudi-owned Albaraka Banking Group, raised TL575 million through two Ijara (Lease Certificate) Sukuk issuances in July and August 2021. The issuances comprised a TL400 million issuance on in July 2021 with a tenor of 90 days maturing on 30 September 2021; and a TL175 million issuance on 3 September 2021 with a tenor of 91 days maturing on 3 December 2021.
The Sukuk were issued through Bereket Varlik Kiralama, a locally incorporated special purpose company, on behalf of the obligor, Albaraka Turk Katilim Bankasi.
Albaraka Turk executes regular Turkish Lira Lease Certificate Issuances in the domestic market. “With the help of these issuances, we aim to contribute to the development of Islamic Capital Market in Turkey as well as enhance our investor base,” said Malek K. Temsah, Albaraka Turk’s Assistant General Manager of Treasury, Investment Banking, and Financial Institutions.