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IsDB Board Approves US$176.05m of Development Finance in Four Member Countries in June 2021

Jeddah – The Board of Executive Directors of the Islamic Development Bank (IsDB) at its 341st meeting on 20 June 2021 in Jeddah chaired by IsDB President, Dr. Bandar Hajjar, approved US$176.05 million of development finance for projects in four member countries.

The financing approved was an US$105.6 million facility to Benin for the Cotonou Storm Water Drainage Project. The main objective of the project is to reduce the risk of flooding in the capital, Cotonou, by building 13 km of drainage collection channels and paving 16 km of roads in order to support the existing drainage systems.

The project, said the IsDB, will benefit 150,000 people, 51 percent of whom are women, and will provide 600,000 job opportunities.

The Board also approved US$ 22 million of financing to Iraq to cover the construction of metal silos for enhancing the storage of wheat in the Governorate of Maysan.

At the same, the Board also approved US$33 million of financing for Mauritania towards the construction of the Atar-Chinguetti Road Project. The project aims to improve the efficiency and security of transportation services between Atar and Chinguetti and to reduce operational costs and journey time by 50%. This project, said the IsDB, is a continuation of the Bank’s contribution to the development of the transport sector in Mauritania. It also complements similar projects financed by the Bank in the region, particularly the road project between Atar and Tijikja, which was completed in 2020.

The IsDB Board finally also approved a US$15.45 million facility for Morocco for the Front-End Engineering Design (FEED) Study Project for the Nigeria-Morocco Gas Pipeline Project. The financing will be used to complete the necessary feasibility studies for the gas pipeline and will help to make the final investment decision for the project.

It includes an agreement with all countries crossed by the gas pipeline linking Nigeria and Morocco to obtain the permission to transit the pipeline in order to ensure the smooth implementation of works in the advanced stages, and to ensure that the project complies with all local and international environmental and social regulations and standards.

Indonesian Government Raises IDR26Trillion Through Two Rupiah-denominated Sukuk Auctions and Two Private Placements in June 2021 as Aggregate Funds Raised in January-June 2021 Totals IDR125.02 Trillion

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 June 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 IDR26 trillion in June 2021 compared to IDR10.75 trillion (US$754.2 million) in May 2021, with an aggregate total of domestic sovereign Sukuk raised for H1 2021 amounting to IDR125.02 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 June 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 on 23 June 2021 of Sukuk Negara PBS 026 and PBS 003 raised IDR2 trillion. The transaction was done through a private placement. The tranche of IDR2 trillion was priced at a yield of 6.51% and a fixed coupon rate 6.51% per annum. The issuance had a tenor of 15 years maturing on 23 June 2036.

The auction held on 15 June 2021 of Sovereign Shariah Securities raised IDR10 trillion comprising four tranches with tenors of 6 months, 2 years, 4.5 years and 13 years. The tranches were priced at a coupon rate at discount, 6.5%, 6.125%, 6.375% and 7.75% respectively. Total incoming bids for the auction amounted to IDR46.6745trillion.

The auction held on 2 June 2021 of Sovereign Shariah Securities raised IDR11 trillion comprising five tranches with tenors of 6 months, 2 years, 4.5 years, 7 years and 25 years. The tranches were priced at a coupon rate at discount, 6.5%, 6.125%, 5.875% and 7.75% respectively. Total incoming bids for the auction amounted to IDR44.6459trillion.

A second auction on 2 June 2021 of Sovereign Shariah Securities or Tradable Sukuk Negara PBS 026 and PBS 003 raised IDR3 trillion through two tranches. The transaction was done through a private placement.

The first tranche of IDR2 trillion was priced at a yield of 5.15% and a fixed coupon rate 6.625% per annum. The tranche had a tenor of 3 years maturing on 15 October 2024. The second tranche was for IDR1 trillion and was priced at a yield of 5.65% and a fixed coupon rate of 6% per annum. The issuance had a tenor of 5.5 years maturing on 15 January 2027.

ACWA Power’s Maiden SAR2.8bn Mudaraba/Murabaha Sukuk Achieves Lowest Spread Secured in the Saudi Capital Market by a Corporate or Bank issuer since 2017

Riyadh – ACWA Power, in which the Saudi sovereign wealth fund Public Investment Fund (PIF) has a 50% equity stake, issued its maiden Sukuk on 14 June 2021, raising SAR2.8 billion (US$746.67 million) in the process.

ACWA Power is a leading Saudi developer, investor and operator of power generation and desalinated water plants in 13 high-growth markets. This senior, unsecured floating rate hybrid Sukuk Mudaraba/Murabaha issuance is its first foray into the Saudi capital market.

ACWA Power  said the Sukuk, which has a 7-year tenor, attracted “significant interest from fund managers, government funds and insurance companies accounting for approximately 30% of the issuance and resulting in an over-subscription of 1.8 times over the issue size.”

ACWA Power appointed HSBC Saudi Arabia and Samba Capital as Joint Lead Managers and Bookrunners for the issuance, with HSBC Issuer Services also acting as Sukukholders’ Agent and Payment Administrator. The initial price guidance had been pegged at 100-125 bps per annum + 6 month SAIBOR. The over-subscription maintained Paddy Padmanathan, President & CEO of ACWA Power, “enabled the company to tighten pricing by 25 bps. The final 100 bps + SAIBOR pricing is the lowest spread secured in the Saudi capital markets by a corporate or bank issuer since 2017.”

“The success of the issuance,” added Padmanathan, “is proof of the wider market’s faith in the Saudi bond market and ACWA Power’s strong credit fundamentals which have attracted a diverse pool of sophisticated investors. The issuance is also a vote of confidence from investors in our ability to capture large opportunities in Saudi Arabia and other growth markets, thanks to our de-risked and 100% contracted business model that is well diversified across different technologies and geographies.”

According to Kashif Rana, Chief Financial Officer of ACWA Power, the transaction is significant for both ACWA Power and the Kingdom’s capital market in terms of timing, pricing, and from an investor diversification perspective. “The success of this issuance, underpinned by favourable cost of funding and terms, marks a new phase in diversifying our company’s funding sources to cater for future growth, reinforcing our strong track record in delivering power and desalinated water reliably and responsibly to communities in the Kingdom and around the world,” he added.

The transaction is ACWA Power’s first since PIF acquired a 50% equity stake in the company in 2020, as part of PIF’s strategy “to enable the growth of national champions to become regional and global leaders, whilst also realising sustainable investment returns.” Other major shareholders include the International Finance Corporation, the Saudi Public Pension Agency and a number of local industrial companies. 

Malaysian Bond/Sukuk Garantor Danajamin Issues Financial Guarantees for RM170m Sukuk Issuance of Commercial Property Developer AC First Genesis Berhad

Kuala Lumpur – Danajamin Nasional Berhad, Malaysia’a first Financial Guarantee Insurer, is guaranteeing up to RM170 million (US$40.95 million) of an issue by AC First Genesis Berhad (AFGB) of Class C Islamic medium-term notes under a first issuance of Sukuk Ijarah of up to RM800 million.

The issuance is under the company’s 20-year asset-backed Islamic Medium Term Notes Programme of up to RM3 billlion. AFGB is part of the Bellview Group.

According to Danajamin, proceeds from AFGB’s issuance will be used for the acquisition of Aman Central Mall from Great Realty Sdn Bhd.

Mohamed Nazri Omar, Chief Executive Officer of Danajamin, stressed that “the COVID-19 pandemic has caused major disruptions to the nation’s economy and left a lasting impact to the Malaysia retail industry. Despite the challenging market, we believe that Aman Central Mall will continue to be a catalyst to the Northern economy and Danajamin will put its trust again in what has turned out to be one of the more remarkable commercial development in Alor Setar.”

“Our relationship with Aman Central has been a long one. We supported the issuance back in 2014 when Belleview Sdn Bhd through their SPV Great Realty Sdn Bhd redeveloped an abandoned commercial property on prime land in the heart of Alor Setar. Aman Central is now the largest and most prestigious shopping mall in Kedah. Today, as a result of their successful track record over the last 7 years, and together with our Financial Guarantee, we are confident that the Belleview Group can mitigate the impact of COVID 19 on its business and revitalise the retail industry in Alor Setar,” he added.

Dato Sonny Ho, the Managing Director of Great Realty said at the signing ceremony on 28 May 2021: “With the support of Danajamin’s first issuance of MTN programme in 2014 in addition to this new ABS Sukuk Ijarah programme, we are able to transform and revitalise Aman Central from a 30 year old abandoned project into the most successful and largest lifestyle shopping mall in the state of Kedah.”

Following the issuance, Great Realty will free up its capital and simultaneously manage the asset as a servicer to AFGB. Additionally, the Sukuk Ijarah Programme will support AFGB for future injection/sales of assets if required.

The Joint Principal Advisors, Joint Lead Arrangers of the Sukuk Ijarah Programme are Hong Leong Investment Bank Berhad and MIDF Investment Bank. To date, Danajamin’s financial guarantees have assisted 42 issuances, with a total guarantee size of RM10.7 billion. Through risk-sharing collaboration with partner banks, the total market impact of these deals stands at RM22.7 billion

Malaysia’s Mortgage Securitiser Cagamas Berhad Raises RM2.25bn  through Hybrid Conventional Bond/Sukuk Issuances in June 2021 Amid Latest Pandemic Lockdown to Fund Purchases of Housing and Commercial Mortgages

Kuala Lumpur – Cagamas Berhad, the National Mortgage Corporation of Malaysia, one of the most prolific issuers of Sukuk, continued its Sukuk issuance programme in June 2021 amid the Government introducing another lockdown to contain a third wave of COVID-19 infections.

Cagamas Berhad issued a RM200 million (US$48.18 million) 5-year Islamic Medium Term Notes (IMTNs) offering on 15 June 2021. Proceeds from the issuance, according to the mortgage securitiser, will be used for the Corporation’s working capital purposes.

Cagamas President/Chief Executive Officer, Datuk Chung Chee Leong stressed that he is “pleased with the successful pricing of this issuance amid stricter measures implemented nationwide for the Movement Control Order 3.0 (MCO 3.0), following the rise in COVID-19 cases in recent weeks. While the local bond market sentiment improved as evidenced by buying activities, the impact on growth remains uncertain post MCO [Movement Control Order] 3.0.”

“The RM200 million issuance was concluded via private placement, registering a commendable 48 basis points spread against the Malaysian Government Investment Issues. The new issuance brings the Company’s aggregate issuances (both conventional and Islamic) for the year to RM6.1 billion,” added Datuk Chung.

The Corporation also issued hybrid conventional/Islamic issuances totalling RM2.05 billion on 28 June 2021 comprising three tranches of 2-year Conventional Medium Term Notes (CMTNs) and Islamic Medium Term Notes (IMTNs) with an aggregate issuance worth RM1.5 billion, two tranches of 3-month Conventional Commercial Papers (CCPs) with an aggregate issuance of RM400 million and a 5-year IMTNs worth RM150 million.

Datuk Chung Chee Leong observed that “with these latest issuances, we are encouraged by the Company’s issuance performance in First Half 2021 which registers a total of RM8.15 billion worth of bonds and Sukuk. The successful conclusion of the above transactions, despite a challenging market environment, continue to demonstrate investors’ confidence and support for the Company’s issuances.”

“The pricing of these transactions were concluded post-Federal Open Market Committee (FOMC) meeting, which signaled a hawkish tone that resulted in a knee-jerk reaction in the global and domestic fixed income market. The Company took the opportunity to price the above transactions when the market sentiment on concern of an earlier rate hike by the FOMC subsided,” added Datuk Chung.

Prior to the above, Cagamas issued a three-tranche hybrid offering aggregating RM945 million on 21 February comprising a RM245 million 3-month Islamic Commercial Papers (ICPs) tranche, a RM300 million 3-month Conventional Commercial Papers (CCPs) tranche and a RM400 million 1-year Conventional Medium-Term Notes (CMTNs) tranche.

In January, Cagamas started the 2021 issuance calendar with a similar four-tranche hybrid issuance totalling RM710 million thus bringing the total issuances for the first two months to RM1,655 million. Of this a total of RM545 million were in ICPs. Cagamas’ total combined issuances for 2020 amounted to RM11.7 billion.

Proceeds from both issuances are used to fund the purchase of house financing and housing loans from the financial system, in the case of the ICPs Sharia’a compliant mortgages.

Cagamas plays a major role in Sukuk origination and continues to be an innovator in the mortgage finance and securitisation market. Last September for instance, Cagamas, through its subsidiary Cagamas SRP Berhad, launched the Digital Skim Rumah Pertamaku (Digital SRP), the country’s first online home financing service aimed primarily at first time home buyers. Last November, Cagamas achieved another first by successfully pricing a combined issuance of its inaugural ASEAN Sustainability SRI Sukuk and Islamic Medium-Term Notes (IMTNs) totalling RM450 million.

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 RM319.5 billion worth of corporate bonds and Sukuk.

IILM Continues Consecutive Monthly Short-Term Sukuk Issuance with US$900m Three-Tranche Offering in June as 2021 Aggregate Tops US$7bn

Kuala Lumpur – The International Islamic Liquidity Management Corporation (IILM) continued its short-term Sukuk issuance calendar with its sixth monthly auction in June 2021. The auction raised US$900 million through the issuance of short-term Sukuk across three different tenors.

The transaction comes under IILM’s US$4.0 billion short-term issuance programme. The Corporation held an auction on 8 June 2021 for the three series of re-issuances, priced by the market as follows:

  1. US$400 million of 1-month tenor certificates at 0.26%
  2. US$300 million of 3-month tenor certificates at 0.3%
  3. US$200 million of 6-month tenor certificates at 0.37%

This follows the three-tranche issuance of short-term securities in May 2021 totalling US$1.1 billion.

The June Sukuk reissuance, said the IILM, witnessed strong demand from Primary Dealers and investors mainly across Middle East and Asia, with an encouraging orderbook in excess of US$1.4 billion representing an average over-subscription rate of 1.6 times.

“The conclusion of today’s US$900 million auction, the first transaction post the Eid holidays, underscores continued strong support from our Primary Dealers and diverse investor base. With vaccination programmes gathering apace around the world, we remain optimistic on the issuance and market outlook for the Second Half of 2021.” said Dr Umar Oseni, Chief Executive Officer of the IILM.

Further the June re-issuance, the IILM has achieved year-to-date cumulative issuances totaling US$7.01 billion through 18 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.

“Based on our indicative issuance calendar, the IILM envisages issuing in excess of US$1.0 billion short-term Sukuk for nearly every month in 2021. As we look towards 2021 with headwinds including uneven economic recovery, renewed lockdowns and rising debt burdens from government policy responses, we stand ready to collaborate with our shareholders, Primary Dealers, investors and industry partners towards fostering a resilient and sound Islamic liquidity management ecosystem.” added Dr Umar.

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.

Bank Negara Malaysia Publishes Exposure Draft on Electronic Money (E-Money) for Market Consultation in June 2021

Kuala Lumpur – Bank Negara Malaysia (BNM), the central bank, published an Exposure Draft (ED) on Electronic Money (E-Money) for market consultation on 11 June 2021. 

This exposure draft sets out Bank Negara Malaysia’s proposed requirements and guidance for issuers of electronic money (E-money) approved pursuant to section 11 of the Financial Services Act 2013 (FSA) or the Islamic Financial Services Act 2013 (IFSA).

“The Bank invites written feedback on the proposals in this exposure draft, including suggestions on areas to be clarified or elaborated further and any alternative proposals that the Bank should consider. The written feedback should be supported with clear rationale, accompanying evidence or illustrations as appropriate to facilitate the Bank’s assessment,” said BNM in a statement.

The Exposure Draft is a comprehensive document covering governance issues, including Sharia’a Governance; Operational and Risk Management Requirements; IT Requirements; Regulatory Process; and eleven Appendices relating to Eligibility Criteria, Limited Purpose E-Money, and a number of Control Measures on Internet Application, Mobile Application and Devices, Quick Response (QR) Codes and Cybersecurity.

According to the ED, E-Money is a payment instrument that stores monetary value that is paid in advance by the user to the issuer of E-money (EMI). E-money can be used to make payments for purchases of goods and services to merchants who accept E-money as a mode of payment. E-money users may also send or receive funds to or from another user’s E-money or bank account, respectively, through person-to-person (P2P) fund transfer service if the EMI enables such service.

Over the past decade, E-money has evolved and grown significantly due to the proliferation of mobile technology such as QR codes and mobile applications (apps), digitalization of financial services and shift in consumer behaviour. For example, the use of E-money for payments has steadily recorded a double-digit growth for the past five years and the form of E-money has progressed from the traditional stored value cards to network-based solutions such as online accounts or e-wallets.

E-money, says BNM, represents 33% of total electronic payments (e-payments) in Malaysia, with 131% increase in e-wallet (network-based E-Money) transactions to RM0.6 billion in 2020 as compared to RM0.3 billion in 2019. For the past five years, E-money liabilities have also grown significantly from RM0.5 billion to RM1.6 billion.

Therefore, given the growing prominence of E-money in the e-payments landscape, says BNM, “enhancements to the E-money regulatory framework are needed to ensure E-money continues to be a safe and reliable payment instrument amidst the increase in functionalities and evolvement in the enabling technology.”

It is important to ensure the safety of the E-money funds/float and the soundness of the EMIs in order to mitigate potential risk of loss to customers, as well as, to foster public confidence in the use of E-money, added BNM. The funds/float refers to the funds collected by an EMI from their customers, which is also known as outstanding E-money liabilities. Given the rapid development of E-Money, this policy document will come into effect immediately upon issuance of the final policy document.

Turkish Treasury Raises TRY951m Through Domestic CPI Lease Certificate Issuance and Issues Further Gold-backed Sukuk Ijarah in June 2021

Ankara – The Debt Office of the Turkish Treasury and Finance Ministry raised TRY951.25 million (US$109.65 million) through an Inflation Indexed (CPI) Lease Certificate issuance (Sukuk Al Ijarah) through a direct sale auction on 9 June 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 10 years maturing on 28 May 2031 and was priced at a fixed rental rate of 1.59% payable 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.”

Prior to this issuance, the Treasury held two auctions of CPI lease certificates – one in February 2021 and the other in April 2021 – which raised an aggregate TRY2,829.13 million. As such the total amount of funds raised in H1 2021 through CPI lease certificates was TRY3,780.38 million.

The Treasury on 16 June 2021 also issued Gold-backed Lease Certificates (Sukuk Ijarah) with a tenor of 1092 days maturing on 14 June 2024 priced at a Lease Rate of 1.15% payable over the 6 Month lease period.

The amount of gold collected, according to the Treasury, amounted to 10,091,290.000 grams of gold (995/1000 purity) from institutional investors for issuance of an aggregate 10,091,290 gold lease certificates (at a nominal value).

In May 2021 the Treasury similarly issued Gold-backed Lease Certificates (Sukuk Ijarah) with a tenor of 364 days maturing on 12 May 2022 priced at a Lease Rate of 0.75%.

The direct sale auction of its latest Gold-backed Lease Certificates (Sukuk Ijarah) offering was conducted by the Central Bank of Turkey via AS. In H1 2021, the Treasury conducted five such gold-backed lease certificate auctions in February, March, April, May and June 2021, collecting a total 62,807,765.000 grams of gold (1000/1000 purity) from institutional investors for issuance of an aggregate 62,807,765 gold lease certificates (at a nominal value).                   

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. The Ministry of Treasury & Finance issues these gold-backed lease certificates “to diversify borrowing instruments, broaden the investor base and bring the idle gold into the economy.”

According to Turkish Finance Minister Lütfi Elvan “citizens are provided with a safe investment tool for gold savings. With the gold bond and gold-denominated lease certificate issuance through five banks, our citizens will win themselves and contribute to the economy.” Investors will be paid TL-denominated returns on a semi-annual basis indexed to the gold price. On maturity, according to the Treasury, investors may request the principal payment as 1 kilogram of gold bar (produced by refineries) or Republic Gold Quarter Coins printed by the Turkish State Mint.

TURKISH TREASURY GOLD-BACKED LEASE CERTIFICATES

(SUKUK AL IJARAH) ISSUANCES January-June 2021

DATE

COLLECTED GOLD 995/1000 GRAMS

NUMBER OF GOLD LEASE CERTIFICATES ISSUED

TENOR

MATURITY DATE

LEASE RATE (TERM)

LEASE PERIOD

22/02/21

27,954,525.000

27,954,525

1092 Days

21/02/2024

1.15%

6 Months

22/03/21

10,472,375.000

10,472,375

1092 Days

21/03/2024

1.15%

6 Months

14/04/21

9,827,000.000

9,827,000

1092 Days

12/04/2024

1.15%

6 Months

18/05/21

4,462,575.000

4,462,575

364 Days

20/05/2022

0.75%

6 Months

 

16/06/21

10,091,290.000

10,091,290

1092 Days

14/06/2024

1.15%

6 Months

 

SOURCE: Compiled by Mushtak Parker from data from the Debt Office Ministry of Treasury & Finance, Turkey June 2021

Note: The amount of Gold Lease Certificates issued is taken as 1000 for 1 gram collected gold from the issuances to individual investors and 1 for 1 gram collected gold from the issuances to institutional investors

 

TURKISH TREASURY TRY CPI INDEXED LEASE CERTIFICATES

(SUKUK AL IJARAH) ISSUANCES JANUARY-JUNE 2021

Date

Volume (TRY millions)

Tenor

Maturity Date

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

Source: Compiled by Mushtak Parker from data from the Debt Office Ministry of Treasury & Finance, Turkey   June 2021

Saudi Corporates Raise SAR339m in Murabaha Facilities from Local Banks

Jeddah – Saudi corporates continue to be active in accessing Murabaha facilities from local banks to finance expansion and to re-finance existing debt facilities.

In June 2021 three firms – Middle East Paper Co. (MEPCO), Ataa Educational Company and Filing and Packing Materials MFG. Co. (FIPCO) raised a total of SAR338.68 (US$90.3 million) from local banks to finance expansion and to re-finance existing more expensive debt.

MEPCO renewed its Murabaha financing facility agreement with Saudi National Bank on 1 June, albeit it reduced the value of the facility from SAR169 million to SAR140 million as follows:

i) Medium-term facilities amounting to SAR65 million for 4 years

ii) Treasury Products amounting to SAR10 million for 5 years, and

iii) Short-term facilities amounting to SAR65 million renewable every year by end of August.

In a disclosure to the Saudi Stock Exchange (Tadawul), MEPCO said that the new facility is secured by a promissory note (equivalent to total facility value) in favour of the bank.The purpose of the facility is to finance the company’s working capital and Spare Parts for Parts for Factory Machines.

Ataa Educational Company (AEC) at the same time signed a Murabaha financing agreement for SAR125 million with the Saudi Investment Bank. The purpose of the agreement is to reschedule a number of existing loans with some Saudi banks and other obligations, in addition to working capital financing and facility line for letters of guarantees issuance.

The new facility agreement, said AEC in a Bourse filing, will provide better terms and competitive prices and restructure the balance sheet in addition to working capital financing and facility line for letters of guarantee issuance to be used as needed. The maturity date for the new Murabaha financing is June 2026, with a grace period of one year from the date of draw down. 

In the third transaction, FIPCO renewed its 3-year SAR73.68 million Murabaha facility with Riyad Bank on 7 June 2021. The facility is secured by a promissory note in favour of Riyad Bank.

The proceeds from the facility will be used to finance the working capital requirements of FIPCO and its subsidiary (FPC) and to finance the acquisition of new machines and production lines for FIPCO.

ADIB Partners with Visa to Introduce the UAE’s First biometric Authentication Solution for e-Commerce Transactions

Abu Dhabi – As part of an ongoing strategy to drive digital innovation in banking, Abu Dhabi Islamic Bank (ADIB) continues to deploy new solutions that offer a simple, convenient experience for businesses in the UAE.

On 8 June 2021, ADIB one of the largest Islamic banks in the region in terms of assets, partnered with world leader in digital payments, Visa, to introduce the UAE’s first biometric authentication solution for e-commerce transactions.

The solution, says ADIB, leverages the Visa Consumer Authentication Service (VCAS) to deliver a significant improvement in customer experience and reinforced data security. VCAS aims to enhance user experience, as well as mitigate security and fraud risks by replacing traditional verification methods, such as OTP requirements, with biometric authentication using fingerprint and facial biometrics.

Once the solution is implemented, ADIB customers can authenticate their e-commerce transaction by using their ADIB Mobile application biometric authentication instead of the conventional OTP that is sent by SMS or email. Unlike conventional procedures for user authentication, biometrics makes it difficult for intruders to use illegally obtained consumer credentials, allowing for stronger security and a time-efficient experience, even when the customer is travelling.

Philip King, Group Head of Retail Banking at ADIB, stressed that “due to the pandemic, online security and fraud protection has become more essential than ever. E-commerce websites have to confront various security issues from online fraud to theft of confidential data. Unlike conventional authentication processes, a biometric identification system uses the physical characteristics of an individual to grant account access, ensuring the security of consumers. Through our partnership with Visa, we aim to continue evolving our approach to using digital solutions to improve our customers’ experience.”

ADIB was also the first to introduce the region’s first biometric ATM readers.

In a further development on 21 June 2021 ADIB also launched a digital account opening system to enable SMEs to open Elite Business accounts without visiting branches, or submitting physical documents or signatures.

The remote account opening service uses video calling services to facilitate interactions between ADIB’s business banking relationship managers and customers. It also allows new Elite Business customers to fill up, sign and upload all the required forms and supporting documents, as well as conduct the required authentication and identity verification through one integrated system.

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