Bidaya Home Finance (BHF), the Riyadh-based Islamic mortgage finance company, successfully issued its latest Sukuk, a SR300 million 2 year offering under its recently established SR1.0 billion Sukuk programme, which was arranged by the UK’s Ashmore Investment Advisers with the local Albilad Capital acting as dealer.
The fourth Sukuk, launched in December 2019, was arranged by Riyad Capital, which also acted as the Dealer.
“Bidaya again sets the Saudi mortgage finance industry benchmark by issuing our 4th Sukuk in the domestic Sukuk market. It is a testament to our performance and the level of trust investors have in the company,” said Bidaya’s CEO, Mazin Al Ghunaim in a statement. “We remain committed to providing attractive home finance solutions through our digital platform in a manner which is bold and innovative”.
Bidaya’s Sukuk Programme is aimed at maximizing the utilization of Islamic capital markets, resulting in diversification of the company’s funding sources. It is an unprecedented initiative in the Saudi real estate market and in line with the Saudi Vision 2030 to facilitate homeownership for all Saudi citizens.
The Riyadh-based BHF is a joint venture Islamic mortgage finance company established in 2015 with a capital of US$900 million, largely owned by Saudi Arabia’s sovereign wealth fund, Public Investment Fund (PIF) (22 percent), and the Islamic Corporation for Development of the Private Sector (ICD), the private sector funding arm of the Islamic Development Bank (IDB) Group, as well as a number of other prominent Saudi investors including Rashed Abdul Rahman Al Rashed & Sons Company, Arab Investment Company, Al Othaim Holdings, Manafi International (M.Y Naghi & Brothers), El Khereiji Investment Company, Manafea Holding Company and Jawahir Investment Co. It is the leading non-bank provider of mortgage finance in the Kingdom.
Bidaya’s fourth Sukuk issuance followed the first SR250 million issuance in April 2018 (fully repaid in October 2019), followed by a SR100 million Sukuk in December 2018 and a third issuance of SR150 million earlier in 2019. “Bidaya remains the only mortgage finance company in Saudi Arabia to access the domestic Sukuk market; thus, paving the way for the development of the debt capital market in the country, in addition to the growth of the mortgage finance industry,” said Bidaya’s CEO, Mazin Al Ghunaim in a statement.
According to Al Ghunaim, “there was tremendous appetite for the issuance with participation from a range of investors including government organizations, asset managers, financial institutions and family offices in the Kingdom. Bidaya is keen to play a role in the development of the local debt capital market and hopefully, this issuance shall continue to act as a catalyst for other private issuers seeking to tap the market.”
The proceeds of the Sukuk issuances under the programme will be used to fund the expansion of mortgage finance in the Kingdom and is also aimed at tapping the Islamic capital market to diversify the company’s funding sources.
Bidaya offers mortgage finance products based on the Ijarah Muntahiya Bittamleek (leasing) and Forward Ijarah structures. Under the Ijarah Financing, the customer is enabled to own the property (the house) by agreement and contract between the client and the financing party, where the financier buys the property and owns it and then rents to the client for a specific period of time against monthly instalments, with a promise to transfer ownership of the property or home to the customer after payment of the last installment.
Bidaya also offers a financing product for real estate developers called Fast & Easy Programme, in which, three parties are involved: Bidaya, the Real Estate Developer, and the Real Estate Valuation Company. Bidaya, as a lender, provides the programme management and coordination, in addition to financial services to customers who will purchase properties from involved developers, which provide the projects.
BHF was specifically set up with the mandate to broaden the provision of Islamic mortgage and residential real estate finance solutions primarily to Saudi Arabia’s burgeoning young population under the Government’s “home ownership for all” policy and to meet a growing demand also for affordable housing. The company is keen to playing its part by streamlining mortgage finance end-to-end processing, short turnaround times, using innovative mortgage technologies, and an engineered approach to evaluating customer creditworthiness.
Demand for residential units in Jeddah, like elsewhere especially in metropolitan Saudi Arabia, is sizeable and growing for the foreseeable future. Due to the rise in population, especially the young demography, and declining household size, the overall supply of housing units in Jeddah and in other metropolitan areas has been inadequate. The overall housing demand in the Kingdom, according to several studies including one by the International Finance Corporation (IFC) of the World Bank Group, indicated a demand of over 1 million units over the next few years, with Jeddah alone needing 21,000 units a year.
The company has indicated that it plans further issuances under its SR1 billion Sukuk Programme and an asset sale programme with the SRC worth SR 0.5 billion. The company earned a net profit of SR5.47 million for the three months ending September 30, and total assets increased to SR1.8 billion for the same period.