News in Brief

IsDB Approves US$337.63m for a Number of Development Projects in the Transport, Agriculture, and Human Capital Development Sectors in Three West African Member Countries

Jeddah – The Board of Executive Directors of the Islamic Development Bank (IsDB), in its 344th meeting held virtually in early February 2022, under the chairmanship of IsDB President, Dr. Muhammad Al Jasser, approved project financing totalling US$337.63 million on a concessional basis for a number of development projects in the transport, agriculture, and human capital development sectors in Guinea, Cote d’Ivoire, and Senegal.

The financing includes:
i) A US$27.6 million facility to Guinea to support the development of the Technical and Vocational Education Project-ERAM Phase II. The Project, says the IsDB, will strengthen human capital development by increasing access to vocational education and training through the construction and equipping of two Technical and Vocational Education and Training schools with the capacity of 800 students.
ii) A US$40 million facility for the Hydro-Agricultural Development Project in Upper Sassandra and Fromager Regions (Phase III). This project’s major development objective, says the IsDB, is to contribute to increasing the incomes of actors along the rice value chain and ensure food and nutritional security. The project is also expected to contribute to increasing the rice production by 20,000 tons, market garden products by 6,156 tons, fishing products by 780 tons, and the vegetable yield (tomato) from 10 to 18 tons/hectare.
iii) A US$270 million financing for Senegal for the Construction of Dakar-Tivaouane-Saint Louis Highway/ Mekhe-Saint Louis Section. The construction of this project falls in line with the Transport Policy of the IsDB’s 10-year Srategy. The project will boost economic development and reinforce national cohesion and regional integration. Once completed, the key results of the project would include savings on Vehicle Operating Costs and travel time, better access to social services and facilities, and improved living conditions for the population.

Danajamin Guarantees KABEP’s Inaugural Issuance Under its RM500m (US$119.55m) Sukuk Murabahah Programme to Fund the Company’s Foray into the Renewable Energy Sector

Kuala Lumpur – Danajamin Nasional Berhad, Malaysia’s first Financial Guarantee Insurer, confirmed in January 2022 that it is guaranteeing KAB Energy Power Sdn Bhd’s (KABEP) inaugural issuance under its RM500.0 million Multi-Currency Islamic Medium Term Notes Programme (Sukuk Murabahah Programme).

KABEP is a wholly owned subsidiary of Kejuruteraan Asastera Berhad (KAB). The proceeds from the issuance will propel KAB’s expansion into the renewable energy and green energy solutions sector.

According to Danajamin, the Sukuk Murabahah Programme will help fund KAB’s future energy related ventures, greenfield projects and/or brownfield assets in Malaysia as well as across Asia, including Vietnam, Indonesia and India.

Mohamed Nazri Omar, Chief Executive Officer of Danajamin stressed that the credit enhancement insurer is “pleased to begin 2022 by extending our support to KAB’s Sukuk Murabahah programme through our Financial Guarantee Insurance (FGI). We hope this will complement KAB’s investment in this new initiative and provide added confidence to the programme’s investors.

“By encouraging energy efficiency initiatives, we want to continue playing a significant role in contributing to the nation’s economic sustainability and leave a positive impact in minimizing the environmental footprint. We hope to see more Malaysian companies participating in the green economy in the future.”

According to Dato’ Lai Keng Onn, Managing Director of KAB, ‘Danajamin’s FGI for our Sukuk Murabahah Programme will bring us a step closer to realising the government’s aspiration in promoting green technology and sustainable energy initiatives in the private sector. This issuance has been earmarked for our growth and signifies our continuous effort towards value creation in the energy sector. We are actively looking out for greenfield projects and brownfield energy assets to invest in both locally and regionally, such as solar power generation, hydropower plants and biogas plants.”

Proceeds from the issuance will be used for a 2.2-megawatt waste heat recovery facility at Safran Landing System Malaysia Sdn Bhd, a leading French manufacturer of aircraft landing gear and braking systems globally. The waste heat recovery facility is located at Sendayan TechValley in Negeri Sembilan and is currently operational.

To date, Danajamin’s financial guarantees have assisted 44 issuances, with a total Guarantee size of RM10.9 billion. The total market impact of these deals, through risk-sharing collaboration with partner banks, stands at RM23.2 billion.

Abu Dhabi’s Masdar and ICIEC Sign Landmark MoU to Co-operate in Origination, Financing and Execution of Renewable Energy Projects through ICIEC’s Insurance Support in Member Countries

Jeddah/Abu Dhabi – Another sign of the growing involvement of Islamic financial institutions in funding and underwriting projects and facilities linked to just transition to clean energy in pursuit of the Net Zero ambitions of the COP27 process and the Paris Climate Agreement, is the signing of an MoU between The Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC), the export credit and investment insurance agency of the Islamic Development Bank (IsDB) Group, and Abu Dhabi Future Energy Company (Masdar) in January 2022.

The MoU signed in a virtual meeting between by Oussama Kaissi, Chief Executive Officer of ICIEC, and Mohamed Jameel Al Ramahi, Chief Executive Officer of Masdar,
is set to give a major boost to the transition to renewable and clean energy in markets of mutual interest to both entities.

Under the MoU, the two parties agreed to co-operate “in promoting joint action in the origination, financing and execution of renewable energy projects through ICIEC’s insurance support in its member states.”

Among ICIEC’s mandate is to promote the flow of foreign investments among and into its member states and enlarge the scope of trade transactions between them. This includes support in transitioning to clean energy through the generation of electricity from renewable non-emitting sources and eventually the transition to a Green Economy whilst ensuring sustainable economic growth.

Masdar similarly is mandated to develop commercially viable renewable energy projects in the Middle East & North Africa (MENA) and international markets. In December 2021, Masdar launched a global clean energy powerhouse partnership with ADNOC, Mubadala and TAQA intended to spearhead the drive to net-zero carbon by 2050.

The partnership will have a combined current, committed, and exclusive capacity of over 23 Gigawatts (GW) of renewable energy, with the expectation of reaching over 50GW total capacity by 2030. The expanded Masdar entity will become one of the largest clean energy companies of its kind and be well positioned to lead the industry on a global scale.

Masdar and ICIEC share a common interest in contributing to the growth of renewable energy in ICIEC member states, including in the MENA region, and to the international climate finance architecture. ICIEC is positioned to play a key role in private sector engagement through the credit enhancement its policies provide to financial institutions on the one hand and the access it has to its Member Country national and sub-national bodies who are the custodians of the relevant Climate Action projects and transactions.

According to Oussama Kaissi, CEO of ICIEC, “co-operation between ICIEC and Masdar would bring about better co-ordination and a more efficient implementation of their respective activities to the benefit of renewable energy production in ICIEC member states. At ICIEC, each of our insurance policies, whether the policyholder is a financial institution, specialised company or contractor, that offer cover against political and commercial risks, can contribute to the flow of Climate Action related investment, specialised technology and equipment or services into its Member Countries thereby contributing to the goals of the Paris Climate Agreement and UN SDG Agenda.”

APICORP and IsDB Launch US$1bn private sector-focused Infrastructure Financing Initiative in January 2022 Aimed at Financing Utility Projects in Member Countries Common to Both

Jeddah/Bahrain –The Arab Petroleum Investments Corporation (APICORP), an energy-focused multilateral development financial institution, and the Islamic Development Bank (IsDB) established a US$1 billion private sector-focused infrastructure financing initiative in January 2022 called the Infra Initiative.

The Infra Initiative funds, said the two multilaterals in a joint statement, will be used to finance strategic utility projects that contribute to human and economic development in the two multilateral financial institutions’ member countries and their respective national development strategies.

According to them, Infra Initiative bridges the investment gap in utility projects by incentivizing more private sector investments and mobilizing additional funding. It also targets projects with limited access to international financing, namely electricity projects which use renewable energy or natural gas and water and waste management facilities. It will also prioritize projects in member countries common to APICORP and the IsDB.

Under the Infra Initiative agreement, the two institutions will jointly identify and deliver structured finance facilities to utilities projects with limited access to international financing. Funds will be allocated to electricity generation and transmission projects which utilize renewable energy or natural gas, as well as water and waste management facilities. The involvement of the private sector at the local, regional, and international levels will also be a priority in the project selection process.

APICORP and IsDB aim to address low private sector participation in funding energy projects by incentivizing public-private partnerships (PPPs) to bridge the estimated US$200 billion investment gap in such projects in the Organization of Islamic Cooperation (OIC) member countries. Additionally, the initiative aims to mobilize other financing channels from commercial banks, other multilateral development banks, development agencies, and the capital markets including through Sukuk.

IsDB President Dr. Muhammad Al Jasser recognizes that quality infrastructure is key to economic and social development, and addressing the infrastructure needs of member countries is one of the Bank’s foremost priorities. “Our cooperation with APICORP on the Infra Initiative is in this spirit. It is intended to amplify our impact by combining our two institutions’ resources, skill sets and market knowledge. It also supports our respective commitments to the Sustainable Development Goals – particularly goals 6, 7 and 9,” he added (clean water and sanitation; affordable and clean energy; and industry, innovation and infrastructure, respectively).

Dr Ahmed Ali Attiga, CEO of APICORP, concurred that “increasing private sector investments in the energy sector is a key area of focus for us as part of our strategy to fund the energy transition in the Arab region. It is an objective we shared with our partner, IsDB. APICORP has significantly raised the size of its financing and investments in pioneering companies and strategic projects which are shaping tomorrow’s energy landscape.”

Infra Initiative has an initial gestation period of 3 years aimed at all OIC countries, with priority given to the 10 member countries common to APICORP and IsDB. However, projects in other countries are also eligible provided they are sponsored by a company headquartered in one of the shared member states.

APICORP’s 2021-2025 MENA Energy Investment Outlook projected the share of
private investments in regional energy projects to reach 27% by 2025, a threefold
increase from the 8.5% in the 2020-2024 outlook.

Malaysia’s Mortgage Securitiser Cagamas Berhad Launches 2022 Issuance Programme with Aggregate RM1.33bn (US$322m) Sukuk Issuances through two Auctions in January 2022

Kuala Lumpur – Cagamas Berhad, the National Mortgage Corporation of Malaysia, one of the most prolific issuers of Sukuk, started the new year with its first issuance – RM300 million 3-month Islamic Commercial Papers (ICPs) on 14 January 2022, which was issued under its RM20 billion Islamic and Conventional Commercial Paper Programme.

“We are delighted to start the year on a positive note with the successful issuance of the Company’s short-term papers amid a hawkish tone in raising interest rates in the United States in response to a surging inflation which is expected to keep the pressure on global fixed income markets, including Malaysia,” said Datuk Chung Chee Leong, President/Chief Executive Officer of Cagamas.

The CCPs were priced at the corresponding 3-month Kuala Lumpur Interbank Offer Rate (KLIBOR) benchmark based on KLIBOR fixing on the pricing date, representing a spread of 23 bps above the corresponding Malaysian Islamic Treasury Bills.

This was followed by a second auction on 31 January 2022 of aggregate issuances of RM1.03 billion, comprising RM100 million 1-year Islamic Medium Term Notes (IMTNs) and RM930 million 3-year IMTNs.

Datuk Chung Chee Leong commended “the successful conclusion of the Company’s latest issuances, supported by encouraging demand from investors amid challenging market conditions arising from the stronger indication of liquidity tapering and interest rate hike by the United States Federal Reserve.”

“The IMTNs were priced through a public book building exercise which successfully enticed participation from a diverse investor base; including financial institutions, insurance companies, asset managers, pension funds and statutory bodies. Demand for the Company’s papers were overwhelming, resulting in price tightening for the 3-year tranche from an initial price guidance of 3.33% to 3.31% and upsized from an initial RM500 million to a final issue size of RM930 million. The IMTNs registered spreads of 42 basis points (bps) against Malaysian Government Investment Issues,” added Datuk Chung.

The new issuances bring the Company’s aggregate issuances for the year to RM1.33 billion. The papers, which will be redeemed at their full nominal value upon maturity, are unsecured obligations of the Company, ranking pari passu and with all other existing unsecured obligations of the Company. All Proceeds from Cagamas issuances are used to fund the purchase of eligible sustainability assets, housing finance loans and Islamic home financing from the financial system.

Cagamas plays a major role in Sukuk origination and continues to be an innovator in the mortgage finance and securitisation market. The Cagamas papers are 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 RM320.4 billion worth of corporate bonds and Sukuk

IILM Kicks Off 2022 Issuance Season with a US$1bn Reissuance of Short-Term Sukuk and Commits to a Monthly Issuing Calendar of a Minimum of US$1bn of Short Term Sukuk

Kuala Lumpur – The International Islamic Liquidity Management Corporation (IILM) completed its first issuance of its short-term Sukuk issuance programme for 2022 when it successfully completed the auction for the reissuance of an aggregate US$1.0 billion short-term “A-1” rated Sukuk across three different tenors of one, three, and six-month on 17 January 2022.

All the above transactions come under IILM’s US$3.51 billion short-term issuance programme. The Corporation held an auction on 17 January 2022 for the three series of re-issuances totalling US$1.0 billion, priced by the market as follows:

i) US$350 million of 1-month tenor certificates at 0.22%
ii) US$450 million of 3-month tenor certificates at 0.33%
iii) US$200 million of 6-month tenor certificates at 0.50%

The auction, says the IILM, “garnered favourable demand” from both Primary Dealers and investors with a combined orderbook of US$1.54 billion, representing an average oversubscription ratio of 1.54 times.

Dr Umar Oseni, Chief Executive Officer of the IILM, stressed that the Corporation is “pleased to kickstart the year on a solid footing, with today’s transaction’s coverage
ratio and its competitive yield reflecting a strong appetite from both Primary Dealers and investors for high quality Sharia’a-compliant liquidity instruments. As demand for the IILM’s Islamic papers continue to grow, the IILM will strive to meet the needs of investors with plans to issue in excess of US$1 billion short-term Sukuk every month, throughout the year.”

The IILM has issued a total of US$75.54 billion across 161 short-term Sukuk issuances over the last eight years, reflecting the organisation’s ability to provide high quality Sharia’a compliant instruments and reliable offerings to Primary Dealers and investors, as well as offering stability to the global Islamic liquidity market.

The secondary market trading also recorded a surge in volume traded compared to last year, on the back of excessive internal credit line of the investors. The total volume traded in the IILM Sukuk certificates reached US$1.4 billion through 135 trades between Primary Dealers and end-investors throughout 2021, for instance.

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. It confirms that it will continue to reissue its short-term liquidity instruments monthly as scheduled in its issuance calendar.
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.

Kuveyt Turk Participation Bank Launches Two Time Deposits and Participation Accounts to Protect its Customers Against Turkish Lira Currency Fluctuations

Istanbul –Turkey’s leading participation bank, Kuveyt Türk, launched two new participation accounts at end December 2021 to mitigate the Turkish Lira savings and deposits of its customers against exchange rate volatility.

The move is pursuant to the December 2021 Communique on Supporting the Conversion of Turkish Lira Deposits and Participation Accounts published in the Official Gazette and the Implementation Principles of the Turkish Ministry of Treasury and Finance on Currency Protected Turkish Lira Time Deposits and Participation Accounts.

In the Currency Protected TL Participation Account offered by Kuveyt Türk, customers who use their savings as Turkish Lira deposits or convert their foreign currency deposits into TL, can protect their savings against exchange rate fluctuations in accordance with interest-free finance principles, with 3, 6 and 12-month maturity options.

As of December 20 2021, when the Communique was published, Kuveyt Türk customers who have deposits in US dollars, British pounds or euros can convert their savings into Turkish Lira with 3, 6 and 12-month maturity options and use them in the Sharia’a-compliant ‘Conversion Supported TL Participation Account’.

According to Ufuk Uyan, CEO of Kuveyt Türk Participation Bank, “With the exchange protected Turkish Lira deposit instrument, we see that in the short term, savers move away from foreign exchange and start to use their deposits in Turkish Lira. As Kuveyt Türk, we will stand by our customers who want to use their deposits in the field of interest-free finance, without being affected by exchange rate fluctuations, with the ‘Currency Protected’ and ‘Conversion Supported’ TL participation accounts that we offer.”

In this system, he added, where the withholding rate is zero percent, in addition to the profit share return at the end of the maturity, customers have the advantage of protecting their deposits against the difference between the exchange rate at the beginning of the maturity and the exchange rate at the end of the maturity. In these accounts, the foreign exchange buying rates announced by the Central Bank of Turkey (CBRT) every day at 11:00 will be taken as the basis for the beginning and end of maturity exchange rates.

Maxis Broadband Raises RM1.1bn (US$260m) in Three-tranche Sukuk Offering in January 2022 to Finance Capital Expenditure

Kuala Lumpur – Maxis Broadband Sdn Bhd (MBSB), the wholly-owned subsidiary of Malaysian telco giant, Maxis Berhad, issued three new series of Sukuk Murabahah amounting to RM1.1 billion (US$260 million) in nominal value issued under the RM10 billion Unrated Sukuk Murabahah Programme established by MBSB.

In a disclosure to Bursa Malaysia, the national stock exchange, Maxis said the three series comprised a RM150 million, a RM600 million and a RM350 million issuance respectively. The Sukuk mature between 4 January,2027 and 3 January 2030.

MBSB intends “to utilise the proceeds from the Sukuk Murabahah issuance to finance the settlement of purchase consideration in relation to the purchase of businesses and undertakings, including relevant assets and liabilities from the target companies, namely Maxis Mobile Sdn Bhd and Maxis Mobile Services Sdn Bhd.”

The proceeds will also be used as capital expenditure and for working capital requirements of the Maxis Group.

Capital Market Authority of Oman Establishes Dedicated Supreme Sharia’a Supervisory Board for ICM and Takaful Sectors in January 2022

Muscat – Oman is the latest country to establish a Supreme Sharia’a Supervisory Board (SSSB) at the country’s securities regulator, the Capital Market Authority of Oman.

Sultan Salim Said Al Habsi, Minister of Finance and Chairman of the Board of Directors of the Capital Market Authority, issued Decision No. 171/2021 establishing the Supreme Sharia Supervisory Board (SSSB) in the Capital Market Authority and issued its Articles of Association pursuant to Article 5 of the Takaful Law promulgated by Royal Decree No. 11/2016 on 12 January 2022.

SSSB, says the Capital market Authority, was established to enhance the legislative and regulatory processes for companies operating in the Islamic Capital Market (ICM) and Takaful business based on best international practices. “The SSSB will put in place the general policies regulating such types of companies and advising the CMA on the Sharia’a aspects related to ICM and Takaful and contribute to developing the legislations related to the Sharia’s beside advice on the compatibility of the products, services and contracts and deciding on issues of Fiqh disputes among the members of Sharia’s Supervisory Commitees in the market,” it added.

The Articles of the SSSB states that its Board must be constituted by the Board of Directors of the CMA comprising five members including the chairman of
SSSB and at least three members must have a Bachelor’s Degree in Islamic Sharia’a or an equivalent degree beside knowledge of Islamic law relating to financial transactions (Fiqh Al Muamalat), Islamic banking and finance, ICM and insurance in addition to a minimum of ten years ten experience.

The establishment of the SSSB comes in line with the evolution in the ICM and Takaful market in Oman during the past few years.

Saudi Central Bank (SAMA) Publishes Licensing Requirements for Crowdlending Activities in the Kingdom

Riyadh – The Saudi Central Bank (SAMA) published new Licensing Requirements for Crowdlending Activity in the Kingdom in January 2022.

The requirements prepared and published by SAMA is pursuant to The Finance Companies Control Law and the Rules for Engaging in Crowd Lending which stipulate the licensing provisions for Crowdlending activity in the Kingdom. The License Application Instructions for Crowdlending are very comprehensive and can be found on the SAMA website.

SAMA introduced definitions and guidelines aimed at regulating Crowdfunding platforms and activity in the Kingdom in January 2021. The documents include Rules for Engaging in Debt-Based Crowdfunding and Licensing Requirements for Crowd Lending Activity, which became effective on 1 January 2021. The documents were introduced under the Finance Companies Control Law and the Rules for Engaging in Crowd Lending, which stipulate the licensing provisions for Crowdlending activity.

SAMA, under the law and licensing rules, defines Debt-Based Crowdfunding as “raising funds from finance Participants through a digital Platform to be granted to an Institutional Beneficiary in accordance with a loan contract”; a Debt-Based Crowdfunding Company (the Company) as “a joint-stock company licensed to engage in Debt-Based Crowdfunding activity through a digital Platform”; an Institutional Beneficiary as “a micro, small or medium-sized enterprise registered in the Kingdom of Saudi Arabia that seeks to obtain financing through a Debt-Based Crowdfunding Platform” and Debt-Based Crowdfunding Platform as “a web-based platform or any other digital means, including websites and mobile applications, used and run by a Debt-Based Crowdfunding Company to carry out Debt-Based Crowdfunding.”

According to SAMA, eligible participants comprise a natural or legal person who has assets with a net value of at least SAR 3,000,000 (three million Saudi riyals); currently working or has worked for at least three years in the financial sector in a position related to finance or investment; has a professional certificate in finance or investment approved by an internationally recognized establishment; and has as an annual income of at least SAR 600,000 (six hundred thousand Saudi riyals) in the past two years.

The Rules apply to companies licensed by SAMA to engage in Debt-Based Crowdfunding activity. It is illegal for persons and entities not licenced by SAMA to engage in Debt-Based Crowdfunding activity. The objective of these Rules, says SAMA, is to establish licensing procedures and requirements for Debt-Based Crowdfunding activity in the Kingdom and to set the minimum standards and procedures for Debt-Based Crowdfunding Companies.

Under the provisions of the Companies Law, the minimum capital for the Debt-Based Crowdfunding Company is set at SAR5,000,000 (five million Saudi riyals). “Taking into consideration the associated risks and their nature, SAMA may increase or decrease the minimum capital based on the prevailing market conditions or if it deems that the Debt-Based Crowdfunding Company’s proposed business model or the nature of its activity requires so,” added the central bank.

The Rules are very specific and robust in pre-empting financial crime and boosting cybersecurity of the entire process. The Debt-Based Crowdfunding Company is required to comply with the information security requirements and the relevant laws, regulations and instructions issued by SAMA.

According to SAMA, “the Debt-Based Crowdfunding Company shall comply with the legal requirements mentioned in the Anti-Money Laundering Law, Combating Terrorism Crimes and their Financing Law, their Implementing Regulations, and the relevant rules and guidelines as specified by SAMA, in a manner that is consistent with the nature and size of the Company’s activity and risks it may be exposed to. The Debt-Based Crowdfunding Company shall also comply with the requirements and instructions issued by SAMA on financial crimes and fraud.”

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