News in Brief

IsDB and IFRC in Discussions to Issue a Sukuk to Support Fund to end cholera

Jeddah – The Islamic Development Bank (IsDB) and the International Federation of Red Cross and Red Crescent Societies (IFRC) have held discussions to establish a multi-million dollar fund to combat cholera and other diarrheal diseases in OIC countries.

Called the WASH Fund, the programme aims to strengthen and integrate the delivery of water, sanitation, and hygiene (WASH) with health services to combat cholera and other diarrheal diseases building upon well proven methodologies. According to the IsDB the WASH Fund will finance a programme to impact the lives of 5 million people in 29 OIC member countries.

The WASH Fund, says the IsDB, will use an innovative financing mechanism designed to attract new philanthropic and private investor capital in addition to traditional humanitarian donor financing. This fund structure would then be increased in size through the issuance of a Sukuk enabling it to operate at a multi-million-dollar scale.

The WASH Fund, maintains the IsDB, will contribute to the achievement of UN Sustainable Development Goal (SDG) 3 on health, SDG 5 on gender-equality, SDG 6 on water and sanitation, and SDG 17 on partnership. It will also contribute to the Ending Cholera Global Roadmap– a multi-stakeholder plan announced in late 2017, which aims to reduce cholera deaths by 90 per cent by 2030.

IsDB Extends US$64.8m Financing Facility to Djibouti to Widen Internet Access and to Improve Maternal and Child Health Services

Jeddah – The Islamic Development Bank (IsDB) has extended a US$64.8 million Islamic credit facility to Djibouti for financing towards the Djibouti Africa Regional Express-1 Submarine Cable Project, and Health System Strengthening, with an emphasis on Maternal, Newborn and Child Health (MNCH) Services.

The facility was signed by IsDB President Dr Bandar Hajjar and Ilyas Moussa Dawaleh, Djibouti Minister of Economy and Finance, at the bank’s headquarters in Jeddah in June 2019.

The objectives of the Djibouti Africa Regional Express- 1 Submarine Cable Project is to contribute to provide efficient and reliable information and communication technology services to make Djibouti a regional ICT hub by 2024 and to contribute to providing internet access to 60,000,000 subscribers in the region by 2024, thus enhancing revenue generation by the Government from the ICT sector from 7 per cent (in 2018) to 12 per cent of GDP by 2024.

The objectives of the MNCH project is to contribute towards strengthening and improving the health system to meet the health care needs of the population.

The IsDB has approved 67 operations for Djibouti, including10 Special Assistance Operations, for a total amount of US$ 317.81 million. The active portfolio comprises 11 projects with a commitment value US$165.14 million.

Savola Group Launches Latest Sukuk Offering Following Establishment of New SR5.3bn Sukuk Issuance Programme

Riyadh  – Following the establishment of its SR5.3 billion Sukuk Issuance Programme in May 2019, Saudi Arabia’s Savola Group, one of the leading food retail and edible oil companies in the MENAT (Middle East, North Africa and Turkey) region, launched the first issuance under the Programme in June 2019. 

In a statement, Savola stressed that the Sukuk will be denominated in Saudi riyals and will be offered by way of a private placement to qualified Saudi investors. “The subscription period is set to close at the end of August 2019 after which the value and final terms of the issuance and the number and value of previous Sukuk that may be exchanges will be determined subject to market conditions and the company’s needs,” added the statement.  The 7-year Sukuk will pay a return based on SAIBOR plus a profit spread.

The transaction, which is lead managed by HSBC Saudi Arabia, comprises an exchangeable consideration relating to the intention of the company “to offer the first issuance under its Sukuk programme in exchange for monetary consideration or in exchange of all or some of the Sukuk issued on 22 January 2013 as deemed appropriate by the Company.”

The proceeds from the Sukuk will be used to finance the Group’s balancing sheet and expansion activities.

Savola has been a regular user of Islamic financing facilities over the years, including Sukuk issuances and syndicated Murabaha facilities.

IILM Re-issues US$750mn Sukuk in Two Tranches in June 2019

Kuala Lumpur – The International Islamic Liquidity Management Corporation (IILM) successfully re-issued a total of US$750 million in short-term Sukuk in two tranches during June 2019.

The US$750 million Sukuk were rated A-1 by S&P and were reissued in two tranches comprising:

  1. A US$250 million tranche with a 1-month tenor at a profit rate of 2.55 per cent; and
  2. A US$500 million tranche with a 3-month tenor at a profit rate of 2.60 per cent.

According to the IILM, the reissuance was “well supported with demand across the two series of the IILM Sukuk with a bid to cover ratio of 181 per cent and 184 per cent for the 1-month and 3-month tenors respectively.”

Purchases by Islamic Primary Dealers (PDs) in the primary auction amounted to 85 per cent and 56 per cent for the 1-month and 3-month Sukuk respectively.

In terms of geographical distribution, the allocation of GCC-based PDs stood at 78 per cent and 69 per cent for the 1-month and 3-month Sukuk respectively, whereas Asia-based PDs were allocated 20 per cent and 6 per cent respectively. The PDs based in other jurisdictions received 2 per cent and 25 per cent for the 1-month and 3-month Sukuk respectively.

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.

Nigeria DMO Chief Confirms Third Sovereign Sukuk on Cards in 2019 as Two Corporates Gear up to Issue Debut Sukuk

Abuja – It seems that Nigeria, one of Africa’s largest economies, is finally gaining some traction in its Sukuk issuance ambitions. Following on from its two highly successful 100 billion Naira (US$277.2m) sovereign domestic Sukuk issuances in 2017 and December 2018, the Debt Management Office (DMO), according to its Director General Patience Oniha, has confirmed that the government is actively working on issuing a third N100 billion Sukuk for the financing of some infrastructure projects listed in the 2019 budget.

The aim is to get the issuance to market before the end of 2019, with the possibility also of issuing the country’s debut sovereign Sukuk in the international market, most likely a US dollar issuance.

The DMO and the government have been encouraged by the success of the two previous Sukuk issuances, especially in its social and development impact reach in financing the rehabilitation of 21 key arterial roads, on a transparent and anti-corruption oversight basis.

“It will be this year 2019 by God’s grace because the budget has been approved. The projects would be those included in the budget and the borrowing will also be what has been approved in the budget, as part of new domestic borrowing. So, it will be this year,” Oniha said in a statement.

There is a possibility that the size of the Sukuk could be N200 billion but it depends on whether the market is ready to absorb the amount. The December 2018 Sukuk saw retail subscription to the issuance by ordinary Nigerians reach a staggering 28 per cent. If this trend continues the government would have no problem placing an increased Sukuk size, according to Attahiru Maccido and Ummahani Ahmad Amin, principals of The Metropolitan Law Firm, which worked on both the Nigerian sovereign Sukuk issuances with the DMO and Lotus Financial, one of the arrangers of the Sukuk transactions.

They confirmed that Sukuk issuance in Nigeria should now become more frequent and have confirmed that they are working on two corporate Sukuk issuances by two top Nigerian entities, which will be coming to the market in the near future.

A further positive sign is that the two sovereign Sukuk have been admitted for listing on the Nigeria Stock Exchange and FMDQ OTC Securities platforms, effective 1 July 2019. This will help unlock liquidity from the Sukuk issuances, albeit there is still much market education needed to inform both institutional and retail investors.

Indonesian Government Issues IDR11.00 Trillion of Domestic Sukuk in Two Transactions in June 2019

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 with two issuances in June 2019 raising IDR9.5 trillion in the process.

The Department of Islamic Financing at the Directorate General of Budget Financing and Risk Management, Ministry of Finance of Indonesia (MoF), is a prolific issuer of Sukuk on behalf of the Government of Indonesia. In the period January to May 2019, the MoF raised IDR78.507 trillion (US$5.7 billion) in rupiah-denominated Sukuk and US$2.1 billion is US dollar denominated Sukuk.

The issuances comprised a IDR8 trillion issuance with five tranches of various maturities on 25 June 2019 of Sovereign Shariah Securities (SSS) through the auction system of Bank of Indonesia for which total incoming bids were IDR40.19 trillion.

On 21 June 2019, the Government raised IDR3 trillion through a private placement of two series’ of its Sukuk Negara SSS. The two tranches comprised IDR1.5 trillion each, which carried a yield of 8.29 per cent and a fixed coupon rate of 8.375 per cent per annum for the 13-Year tranche, and a yield of 8.34 per cent and a fixed coupon rate of 8.375 per cent per annum for the 14-Year tranche.

Philippines Senate Passes Comprehensive Bill to Expand and Regulate Islamic Banking in the Country

Manila – The Philippines Senate approved a bill in June 2019 authorizing the expansion of Islamic banking system in the country under the supervision of the Bangko Sentral ng Pilipinas (BSP), the central bank, and regulation by the Monetary Board (MB).

House Bill No. 8281, which is “an Act Providing for the Regulation and Organization of Islamic Banks”, seeks to put in place a sound legal and regulatory framework for the development of Islamic banks in the country, will likewise pave the way for the entry of foreign Islamic banks to operate in the Philippines, said Sen. Francis “Chiz” Escudero, chairman of the Senate Committee on Banks, Financial Institutions and Currencies, and sponsor of the Bill.

The Bill also allows conventional banks to engage in and offer Islamic finance products in the Philippines through a dedicated unit or window, provided that there will be a system for segregating the transactions of the Islamic banking unit from its conventional banking transactions. The Philippines has a long history of involvement in Islamic finance through the local Amanah Bank, but for manifold reasons has not yet taken off in an organised institutional way.

The Bill allows, inter alia, authorized Islamic banks to engage in universal banking activities, issue Sukuk, offer trade finance solutions, accept foreign currency deposits, and act as correspondent of banks and institutions to handle remittances or any fund transfers.

UAE Bank Consortium Arrange US$375m Dual Tranche Conventional/Islamic Credit Facilities for Government of Pakistan

Karachi – The government of Pakistan signed a US$375 million syndicated loan facility with banks in the United Arab Emirates in June made up of conventional and Islamic Murabaha financing tranches. The tranches, according to a government statement, were fully subscribed by a syndicate of leading UAE banks.

Emirates NBD Capital Limited was the global coordinator. The transaction was arranged by Commercial Bank of Dubai, Emirates NBD Bank, Noor Bank, Dubai Islamic Bank, Mashreqbank and Sharjah Islamic Bank.

In May 2019, UAE-based Ajman Bank similarly arranged a syndicated Murabaha financing of US$275 million for the government of Pakistan. The facility saw the participation of a consortium of banks. The facility has a tenor of 1 year, said Ajman bank in a statement.

Kumpulan Perangsang Selangor Signs RM150m Murabaha Facility with RHB Islamic Bank

Kuala Lumpur – A subsidiary of Malaysian entity, Kumpulan Perangsang Selangor Bhd (KPS), has signed an Islamic finance credit facility for up to RM150 million from RHB Islamic Bank Bhd to partially fund the acquisition of a subsidiary.

In a filing with Bursa Malaysia, KPS said that wholly-owned subsidiary Perangsang Dinamik Sdn Bhd (PDSB) had signed a Commodity Murabahah Term Financing facility with RHB Islamic Bank in order to finance up to 48.2 per cent of the group’s acquisition of Toyoplas Manufacturing (Malaysia) Sdn Bhd (TMMSB) from Toyoplas Consolidated Ltd. The facility is secured over the shares of TMMSB whilst KPS has issued a guarantee of PDSB’s obligations to RHB Islamic thereunder.

PDSB is paying RM311.25 million for the entire equity interest in TMMSB.

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