Malaysia Follows IsDB and Indonesia in Issuing Dedicated Covid-19 Mitigation RM500m Sukuk Prihatin 

Putrajaya – More countries are following the Islamic Development Bank (IsDB) and Indonesia in issuing dedicated Covid-19 mitigation Sukuk. Malaysian Prime Minister Tan Sri Muhyiddin Yassin announced on 5 June that the Ministry of Finance will tap the Islamic debt market in the third quarter of this year through a RM500 million ‘Sukuk Prihatin’ – a ‘People’s Sukuk – from the people to the people’ – the proceeds of which would be ring-fenced to fund among others micro enterprises and research grants for infectious diseases.

The IsDB closed its second Sukuk issuance in 2020 with the aim of consolidating its financing “to tackle the aftermath of the COVID-19 pandemic in its Member Countries,” with a debut US$1.5 billion Sustainability Sukuk on 19 June 2020. Similarly, Indonesia issued a 3-tranche US$2.5 billion global Sukuk including a US$750 million Green Sukuk and to regular Sukuk to fight the impact of climate change and Covid-19.

“Proceeds from the Sukuk Prihatin issuance will be utilised for specific development programmes such as connectivity of schools (especially in rural areas), funding for micro enterprises (focused on the women entrepreneurs) and research grants for infectious diseases. The issuance of the Islamic debt instrument is to enable the Rakyat to join the government in supporting post-recovery measures of the COVID-19 pandemic,” said the Prime Minister when announcing the government’s short-term Economy Recovery Plan (ERP) in June.

The Sukuk would be an adjunct to the Prihatin Rakyat – Economic Stimulus Package 2020 announced by the government in March and other Covid-19 mitigation packages such as the National Economic Recovery Plan (PENJANA), totaling RM295 billion. 

The social financial programme, according to the Ministry of Finance, is in the form of initial capital for micro entrepreneurs through zakat and matched with micro financing at affordable rates.

The Prihatin Rakyat package provides RM4.5 billion additional funds including RM3 billion to the Special Relief Fund (SRF) for SMEs with reduced interest rate/profit rate from 3.75% to 3.5%; increase in the size of funding by RM1 billion to RM6.8 billion under the All Economic Sector Facility; a RM500 million fund under the Micro Credit Scheme with an interest rate/profit rate of 2% without collateral; a guarantee facility of RM5 billion and an increase guarantee coverage from 70% to 80% by Syarikat Jaminan Pembiayaan Perniagaan (SJPP).

Finance Minister Tengku Zafrul Abdul Aziz confirmed on 13 June that Putrajaya would borrow up to RM35 billion from the local financial market to finance initiatives under the Prihatin Rakyat and PENJANA packages. Given Malaysia’s strong liquidity position with current exposure to foreign borrowings only RM13 billion, raising funds from the domestic market not only makes sense but would be a major boost to the domestic capital market, which of course is dominated by the Islamic capital market (ICM).

According to the latest annual report of the Securities Commission, in 2019 the size of overall capital market totaled RM3,202.11 billion, of which the ICM accounted for RM2,035.59 billion or 63.57%. At end January 2020, the size of the ICM held firm at RM2,001.77 billion or 63.46% of the overall capital market. The resilience of the ICM is underlined by its steady growth trajectory over the last few years from RM1,133.83 billion (or 59.19% market share) in 2017 to RM1,036.52 billion (or 60.55% of market share) in 2018 to its 2019 growth.

Malaysia has an active local sovereign Sukuk and bond issuance Programme for reserve, liquidity management and interbank money market transactions – both Shariah-compliant and conventional. These comprise mainly Malaysian Government Securities (MGS), Malaysian Government Investment Issues (MGII) and Mudarabah Certificates. It would be revealing to see what portion of the RM35 billion the government seeks to raise locally would indeed be through Shariah-compliant issuances.

If the issuances tilt towards Islamic debt securities given their competitiveness in pricing and uptake and the fact that the ICM already constitutions a majority market share, then it could be a major boost to the Malaysian Sukuk market, which has over the last few years been overtaken by the Saudi sovereign Sukuk market as the largest in the world.  If not, Malaysia may see its reputation as a major Sukuk market dented (albeit slightly) indulging instead in the rhetoric of aspiration.

Al Rajhi Bank Signs Strategic Partnership with MoneyGram to Facilitate Cross-border P2P Payments and Money Transfers

Dallas – Saudi Arabia’s largest Islamic bank in terms of assets and market capitalisation, Al Rajhi Bank, signed a strategic partnership agreement on 4 June 2020 with MoneyGram International Inc., the US-based global leader in cross-border P2P payments and money transfers. The agreement will be run through the bank’s remittance subsidiary, Tahweel Al Rajhi, which is the leading local and international remittance facilitator in the Kingdom. The partnership covers both digital and walk-in channels and will enable strong customer growth in one of the world’s largest remittance markets.

“This partnership is an important milestone that capitalizes on recent strategic investments in major receive markets,” said Grant Lines, MoneyGram Chief Revenue Officer. “Over the last few months, we’ve expanded with new partners in India, Egypt, Pakistan, and the Philippines to name a few. All of these markets are key recipients of transfers from Saudi Arabia, and consumers will now benefit from this customer-centric integration with Al Rajhi Bank.”

According to the World Bank, Saudi Arabia is home to over 11 million immigrants who send about US$33.6 billion in remittances, making it the second- largest country for outbound flows. As one of the most innovative banks in Saudi Arabia, Al Rajhi Bank continues to integrate the latest technologies to provide customers with multiple options to send money. MoneyGram will work with Al Rajhi Bank to provide customers with multiple payout services including cash, account deposit and digital wallet capabilities.

Abdullah Al-Furaiji, Al Rajhi Bank Head of Remittance and Exchange Business said, “Al Rajhi Bank is the market leader in the Kingdom, and customer centricity is at the heart of all we do. Our alliance with MoneyGram will help our esteemed customers transfer their hard-earned money with ease and convenience to over 200 countries and territories.”

Al Rajhi Bank believes that the partnership with MoneyGram will increase the service standards and provide user-friendly innovative options in serving customers. “We always try to exceed customer expectation by offering them an enhanced value proposition, this time for money transfers to more than 200 countries around the world. This partnership will be a new added value for Tahweel Al Rajhi’s esteemed customers, in addition to the free insurance on each remittance throughout the 10 channels that is available to the customers in the best quality, secure and affordable way,” said the Bank.

MoneyGram was founded in 1998 and is the second biggest service provider for money transfer across the world. MoneyGram provides to its customers the latest technology in money transfer in the most secure way. Today, MoneyGram provide its services through 350 thousand agent and in more than 200 countries internationally collaborating with the world’s leading brands.

ITFC Signs €8m Murabaha Financing Deal with Banque Islamique du Sénégal to Help Private Sector Mitigate Covid-19 Impact 

Dakar – The International Islamic Trade Finance Corporation (ITFC), the trade fund of the Islamic Development Bank (IsDB) Group, extended an €8 million Murabaha financing to Banque Islamique du Sénégal to support the Bank’s trade finance operations within Senegal’s private sector.

The financing agreement, signed on 2 June 2020, said ITFC “is aimed at helping Senegal, to continue to contribute to economic inclusion by gearing capital towards the private sector, a key driver of jobs and socio-economic development, in this period of economic crisis resulting from the COVID-19 pandemic. Around 300,000 SMEs and microenterprises account for 90% of businesses in Senegal.”

The facility is expected to support around 1,000 jobs within the private sector, including companies in food and distribution. “The swift disbursement of this financing by ITFC has enabled local private companies to procure urgent food staples, and support the national response efforts to ensure food security,” said the Corporation.

According to Hani Salem Sonbol, CEO of ITFC, “this Murabaha facility is a necessary intervention during extraordinarily difficult global conditions and will support Banque Islamique du Sénégal and the Government’s efforts to safeguard the availability of much-needed commodities for the people of Senegal. It also aims to support private companies that are the nation’s largest employers”.

ITFC has been actively supporting trade development in Senegal since its inception in 2008, with more than US$764 million of financing and trade facilitation programmes in favour of the West African country and its critical sectors, such as energy and agriculture. 

Albaraka Turk Raises TL1,200 million Through Four Sukuk Ijara Offerings in June 2020

Istanbul – Leading Turkish Participation bank, Albaraka Turk Katilim Bankasi, a subsidiary of the Bahrain-incorporated but Saudi-owned Albaraka Banking Group, raised TL1,200 million through four Ijara (Lease Certificate) Sukuk issuances in June 2020. The issuances comprised a TL300 million issuance on 24 June 2020 with a maturity of 210 days; a TL200 million issuance on 24 June 2020 with a maturity of 79 days, a TL300 million issuance on 12 June 2020 with a maturity of 187 days and a TL400 million issuance on 3 June 2020 with a maturity of 62 days. 

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.

Strong Demand Continues to Mark IILM’s June Auction of Short-term Sukuk totaling US$600m Amid COVID-19 Uncertainties and Low Oil Price Volatility

Kuala Lumpur – The International Islamic Liquidity Management Corporation (IILM) successfully concluded an auction on 9 June 2020 by issuing two short-term A-1 rated Ṣukūk of 1-month and 3-month tenors for a total amount of US$600 million.

The auction, said the Corporation, attracted an order book of more than US$1.19 billion, bringing the average bid-to-cover ratio of the two tranches to 198%.

The first tranche of US$300 million Ṣukūk with a 1-month tenor offered a profit rate of 0.27%, while the second tranche of US$300 million Sukuk with a 3-month tenor offered a profit rate of 0.40%. “The final pricing,” said the Corporation, “came up lower than the initial pricing guidance. Despite the market rates being well anchored at the short end of the curve, the IILM remains committed to providing the market with Sharīa’a-compliant short- term high quality liquidity management instruments.”

The IILM short-term Sukūk programme is rated “A-1” by Standards & Poor’s. The total of IILM Ṣukūk outstanding is US$2.51 billion with a Sharia’a tradability ratio of 71% tangible assets.

According to the IILM, the primary dealers that participated in the two auctions 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. The allocation was dominated by GCC-based institutions. 

NCB Successfully Closes SR4,200m Additional Tier 1 Perpetual Sukuk Issuance to Boost Capital Through Private Placement 

Jeddah – Saudi Arabia’s The National Commercial Bank (NCB) issued a local currency SR4,200 million (US$1,120 million) Additional Tier 1 Perpetual Sukuk denominated in Saudi Riyals on 16 June 2020.

The Sukuk was distributed by way of a private placement with the settlement date on 30 June. The transaction was handled by NCB Capital, which was the sole Bookrunner, Lead Arranger and Lead Manager for the private placement offer aimed at sophisticated local investors.

In a disclosure to the local Tadawul Saudi Stock Exchange, NCB said that the Sukuk was priced at a profit rate of 4.25% per annum. Being a perpetual issuance there is no maturity to the transaction. But according to NCB, the Sukuk may be redeemed early due to a capital event, tax event or at the option of the Bank as described in the terms and conditions of the Sukuk.

The proceeds from the Sukuk issuance, according to the Bank, will be used to strengthen the Bank’s capital base in accordance with the Basel III framework. 

GFH Financial Group Closes US$200m Sukuk Wakala Second Tranche of a US$500m Issuance in June 2020 

Manama – Bahrain-based GFH Financial Group, formerly Gulf Finance House, successfully priced a 5-year US$200 million Sukuk Wakala issuance on 9 June 2020 thus completing a US$500 million Sukuk approved by the Bank’s shareholders in late 2019. This follows the successful issuance of a debut US$300 million Sukuk on 28 January 2020.

The proceeds from the Sukuk issuance will be used to further strengthen GFH’s balance sheet and diversify its income. The US$200m Sukuk certificates were admitted for listing on Nasdaq Dubai on 10 June, GFH’s second Sukuk listing on the bourse, following the listing of a US$300 million Sukuk in February 2020.

Hisham Alrayes, Chief Executive of GFH Financial Group, emphasised at the bell ringing ceremony: “As we strengthen our activities as a leading regional and international financial group following our latest successful capital raise, we are delighted to expand our relationship with investors through Nasdaq Dubai. The global visibility that the exchange provides, and its high standards of regulation provide valuable support to our strategy of engaging positively with market participants and maintaining their support for our growth and development.”

On 20 June, Fitch Ratings reaffirmed the GFH Financial Group’s Long-and Short-Term Issuer Default Rating (IDR) at ‘B’ with the Outlook on the Long-Term IDR as ‘Stable’. The rating, according to Fitch, takes into account the GFH management’s strategic objective of reshaping GFH’s business model towards more stable and recurring revenue sources such as fee generation and lower-risk fixed income assets. GFH has continued to grow its money market activities, as reflected in liquid assets accounting for an average of 24.3% of assets in 2019, compared with 9.7% in 2018. To Fitch the two tranche US$500 million Sukuk issued in 2020 has helped to strengthen GFH’s liquidity.

“We’re pleased once again with the ongoing recognition from Fitch and the market of the positive momentum that GFH continues to maintain across our key business lines. Despite the COVID-19 pandemic and 2020’s slump in oil prices, our diversified business provides a solid platform to take advantage of current market dislocations, which we expect will help GFH deliver a robust financial performance in 2020,” added Mr Alrayes.

The 5-year US$300 million Sukuk Wakala issued in January, like the June issuance was jointly arranged by Société Générale, Standard Chartered Bank, Emirates NBD Bank, Kamco Investment Company, Mashreqbank, SHUAA Capital, and Warba Bank.

The issuer and trustee to both January and June transactions is GFH Sukuk Company Limited, a Cayman Islands incorporated exempted company, which issued the certificates on behalf of the obligor, GFH Financial Group. They were both priced at a coupon rate of 7.5% per annum.

Investors Scramble to Invest in FGN N150bn Third Sovereign Sukuk 

Abuja – The 7-year FGN N162.557 billion (US$419.5m) Sukuk Ijara issued by the Debt Management Office (DMO) of the Ministry of Finance on behalf of the Federal Government of Nigeria (FGN) on 21 May 2020 “attracted a very high level of subscription from investors with total subscriptions of N669.124 billion, representing a subscription level of 446%.”

“The proceeds from the issuance,” according to the DMO, “will be used solely for the construction and rehabilitation of key roads across the six geopolitical zones of the country.”

The impressive demand for the Sukuk, according to the DMO, came from a wide range of investors which included Ethical Funds, Insurance Companies, Fund Managers and Retail Investors amongst others. “This participation by a wide range of investors is in line with the DMO’s objectives of diversifying the investor base for Government Securities and promoting financial inclusion,” added the DMO.

The issuance of the third Sovereign Sukuk, which followed the debut issuance of N100 billion in September 2017 and a second issuance of another N100 billion in December 2018, is based on the DMO’s commitment to using borrowed funds to finance infrastructure. The Sukuk Issuances are project-tied and are used to finance specific projects which are disclosed to investors.

The DMO allotted N162.557 billion to investors in the third Sovereign Sukuk. “The proceeds of the issuance will be used to finance 44 critical Road Projects across the Six (6) Geopolitical Zones of Nigeria. The benefits from the earlier Sukuk Issuances, which were also used to finance roads, include improved safety on the roads, faster travel times, access to markets for farm produce and opening up parts of the country for development. Other important benefits of using Sukuk to finance road projects are job creation and increased level of activity for service providers, many of whom are small businesses,” explained the DMO.

The DMO expects to continue to raise funds through Sukuk to support improvement in infrastructure and development of the domestic capital market.

Sharjah Islamic Bank Latest Benchmark US$500m Sukuk Wakala 7.2 Times Oversubscribed 

Sharjah – Sharjah Islamic Bank (SIB) is the latest Islamic financial institution in the Gulf Cooperation Council (GCC) region to issue a benchmark Sukuk when it raised US$500 million through a 5-year offering on 16 June 2020.  The Sukuk Wakala was issued through SIB Sukuk Company III Limited, incorporated with limited liability in the Cayman Islands, under SIB’s US$3 billion Trust Certificate Issuance Programme launched and arranged by Standard Chartered Bank on 28 May 2020.

The Sukuk certificates were priced at a profit rate of 2.85% per annum, ands assigned an A- rating by Standard & Poor’s. SIB was able to generate significant momentum from 150 international and regional investors with the order books reaching a high of US$3.6 billion, thus oversubscribed 7.2 times. The proceeds from the Sukuk said SIB would be used for enhancing the Bank’s liquidity and business growth.

According to Mohammed Abdullah, CEO of Sharjah Islamic Bank, “the success of this sukuk is evidence of an investor’s confidence in the solid foundation of SIB, and their belief in the growing economy of the emirate of Sharjah and the UAE. We are delighted with the results of this successful deal which have been achieved amid the challenging Covid-19 pandemic. We will continue to remain committed to our local and international investors, those who have faith and continue to support our diverse funding strategy.”

He further added that the launch of the Sukuk aligns with the bank’s plans and strategy, aimed at increasing the bank’s capitalisation rates in order to enhance future growth and strengthen the bank’s financial position.

SIB’s latest US$500 million Sukuk was admitted for listing on Nasdaq Dubai on 23 June, 2020. The capital raised will support SIB’s activities and strategic development to cater to its customers in corporate, investment and retail banking.

This is SIB’s eighth Sukuk issuance since it’s debit Sukuk in 2006. This latest US$500 million offering brings the total value of SIB Sukuk listings on Nasdaq Dubai to US$2 billion following listings of US$500 million each in 2016, 2018 and 2019.

Speaking at the bell ringing ceremony, CEO Mohammed Abdulla, stressed that “the very positive response from the market to our latest Sukuk reflects investors’ strong belief in SIB’s strategy as we develop our activities across all our areas of business for a wide range of businesses and individuals. Our listing on the region’s international exchange supports our visibility regionally and globally and reflects the leading role played by UAE financial institutions in collaborating to develop the Sharia’a-compliant Sukuk markets.”

Abdul Wahed Al Fahim, Chairman of Nasdaq Dubai, was “delighted to welcome SIB as our eighth Sukuk listing so far this year and look forward to welcoming many more regional and international Islamic issuances during the course of 2020. We will strengthen our support for private and public issuers and investors who use the Sukuk asset class as an effective capital markets vehicle.”


Share this post