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IsDB Board Approves US$176.1m of New Financing for Key Development Projects in Four African Member States

Sharm El Sheikh – The Board of Executive Directors of the Islamic Development Bank (IsDB), chaired by Dr Muhammad Al Jasser, President of the IsDB, in its 346th meeting on 1 June 2022 in Sharm El Sheikh, Egypt, in conjunction with the 47th Annual Meetings of the IsDB Group, approved financing totalling US$176.12 million to finance new road transport, health, water and sanitation, and food security projects in Guinea Bissau, Togo, Benin and Cameroon.

The financing allocated included:

i) US$15.8 million for Guinea Bissau towards the financing of Phase 1of Bissau-Dakar Road Corridor Project which comprises the section linking Farim in Guinea Bissau with Dungal near the Senegal Border.

The project aims to contribute to the unlocking transport links between Guinea Bissau and Senegal, and the strengthening of sub-regional integration and trade. The specific objective of the project is to improve by 2026 the level of service of the Farim – Tanaf road through reducing the transport cost by 45% and increasing the average daily traffic by 130%; and improving accessibility and the living conditions of about 865,000 inhabitants in the surrounding areas.

ii) US$42.80 million blended financing to Togo comprising US$27.80 million from the Bank and US$15 million from IsDB’s Lives and Livelihoods Fund (LLF) for the Strengthening of the Health System and Primary Health Care Project in Togo.

The key expected results include the increased use of Maternal, Newborn, and Child Health (MNCH) services coupled with the control of major communicable diseases across the country; construction of 30 health infrastructures; and the rehabilitation of 26 others as well as supplying related equipment.

iii) US$14.5 million (€13.6 million) to Togo for Water Supply and Sanitation services in Four Prefectures. The project will provide safely managed drinking water and sanitation infrastructure, community engagement and accountability, project management and coordination, financial audit services; and a Contingency Emergency Response Component (CERC). The project is projected to benefit some 50,000 residents.

iv) US$18.40 million blended financing to Benin comprising US$12 million Installment Sale financing and US$6.4 million LLF Donor Grant funding for the Integrated Agriculture Value Chain Development Project (IAVCDP).

The expected key results are increased innovative irrigated land under Intensive production for rice and maize by 650ha; seed systems built through the production of 154 tons of pre-base and base seeds for rice and maize; 900t of rice certified seed and 50 tons of maize certified seed produced for 12,000 ha under modern cultivation techniques; 50km of access roads to be constructed; rice and maize productivity increased from 1.5 Ton/Ha to 4.5 Ton/Ha and 1.5 Ton/Ha to 3 Ton/Ha.

v) US$84.62 million (€79.44 million) to Cameroon for financing the Rice Value Chain Development (RVCD) Project. The overall objective of the project is to contribute to rice self-sufficiency, enhance economic growth, and improve household incomes through improved production, processing, marketing, and support for private sector participation in the agricultural (rice) value chain.

The objectives will be achieved through the development of 5,000ha of land; rehabilitation of roads; construction of markets; construction of storage facilities; establishment of rice processing units; capacity building of farmers and other stakeholders; and access to finance.

This would result in an increase in rice productivity from 4.5 Ton/Ha to 6 Ton/Ha; an increase in national rice production by 10%; the creation of 210,000 jobs; and reducing post-harvest losses.

Consortium of GCC Banks Successfully Refinance and Upsize nogaholding US$2.2bn Murabaha Financing Facility

Manama – The Oil and Gas Holding Company (nogaholding), the energy investment and development arm of the Kingdom of Bahrain, successfully refinanced its US$1.6 billion Murabaha facility in May 2022 and upsized it to US$2.2 billion.

The new facility was structured as a dual-tranche (conventional and Islamic) sustainability-linked loan based on a Secured Overnight Financing Rate (SOFR), with a maturity date of September 2026.

This is the Company’s first sustainability-linked corporate financing facility, utilizing sustainability Key Performance Indicators (KPIs) related to Green House Gas (GHG) emission reduction as well as safety measures, including Lost-Time Injury frequency rate. “This first-of-its-kind facility for nogaholding,” explained Group Chief Executive Officer of nogaholding, Mark Thomas, “paves the way for sustainable funding in Bahrain, promoting ethical ESG-driven transactions within the energy sector and the region. nogaholding received strong participation from regional banks across Saudi Arabia, the UAE, Kuwait, Bahrain, and South Asia.”

The Facility was more than two times oversubscribed, with participation from 22 banks, making it the largest sustainability-linked loan facility in Bahrain and the region. Gulf International Bank (GIB) and Mashreqbank psc (Mashreq) together acted as the Initial Mandated Lead Arrangers and Bookrunners (IMLABs) for arranging the Facility, along with being the Sustainability Coordinators. Al Ahli Bank of Kuwait – DIFC Branch, GIB, and Mashreq together acted as Joint Coordinators, the Initial Mandated Lead Arrangers, and Underwriters for the transaction. GIB was also appointed as the Sole Structuring Bank and the Global Facility Agent. 

“As we continue to develop our energy strategy for Bahrain,” added Mr Thomas, “we are proud to have set the benchmark as the largest sustainability linked refinance in the history of the Kingdom, and to set a precedent with our dual-tranche sustainability-linked facility. With more than two times oversubscription, the participation of several financial institutions highlights our strong credit.”

The refinanced facility will allow nogaholding to cover its CAPEX programme for 2022 aimed at increasing scale and diversification of its oil and gas assets and achieving goals that align with the United Nations Sustainable Development Goals (SDGs) included in the Bahrain Economic Vision 2030.

According to Ahmed Abdelaal, Group Chief Executive Officer of Mashreq, the facility underscores nogaholding’s commitment to action the broader framework of decarbonization and energy transition. “This transaction also underscores the growing commitment from regional investors and financial institutions to fund Sustainability-Linked transactions. We believe that collaboration between financial institutions, governments and energy stakeholders is key to meeting the financing challenges for the energy transition in the region,” he emphasised.

ICIEC Board Shows Strong Support for ECA by Approving 268% Increase in the Corporation’s Subscribed Capital to ID797m (US$1,067.98m)

Sharm El Sheikh – The Board of Governors of the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC), the export credit agency (ECA) of the Islamic Development Bank (IsDB) Group, approved the Corporation’s 3rd Capital increase during its 29th Annual Meeting held in Sharm El Sheikh, Egypt on 4th June 2022.

The Meeting chaired by Dr Muhammad Al Jasser, Chairman of the Board of Directors of ICIEC, approved a 150% increase in The Authorized Capital of the Corporation from its current ID0.4 billion to ID1.0 billion and a 268% increase in the Subscribed Capital by ID500 million to ID797 million.

In addition, the Board of Governors approved a Special Share Class comprising 20% of the increase in Subscribed Capital (ID100 million) for subscription by financial institutions owned/controlled by Member States.

The Capital approval underscores the strong support of ICIEC member states for the Corporation and its strategic growth plans. Oussama Kaissi, CEO of ICIEC, welcomed the substantial increase in the Corporation’s capital and thanked the Board of Governors for their support, foresight and confidence in the Senior Management.

“Capital is important for a multilateral insurer because it governs our ability to underwrite more business and boost our reinsurance capacity. The Board recognised there is a need to increase the capital of ICIEC in order for it to continue to do its job and carry out its mandate effectively. Furthermore, the capital increase will enhance ICIEC’s financial strength, boost the loss-bearing equity resources, improve internal capital generation capacity, help to continue its operation on a solid foundation, and strengthen its credit fundamentals,” he emphasized.

Despite a challenging year, and despite the ongoing global economic impact of the COVID-19 pandemic, ICIEC reported business insured totalling US$9.79 billion in 2021. ICIEC’s 2021 business results show a year of unprecedented risks, shifting priorities, and the IsDB Group COVID-19 response initiatives.

Despite the impact of the pandemic on insurance operations and the steep decline in market rates of investment insurance operations, Corporate Net-Results for 2021 stood strong at a US$ 9.3 million surplus equating to a 182% percent achievement of the Business Plan target for the year.

PS: ID = Islamic Dinar, the unit of accounting of the IsDB Group

One ID = One SDR (Special Drawing Right) of the International Monetary Fund)

One SDR = US$1.34 at 7 June 2022       One ID = US$1.34

Sharjah-based Arada Development Successfully Closes Maiden US$350m Sukuk Issuance in May 2022

Sharjah – Arada Developments, the largest developer in Sharjah, successfully completed the issuance of its maiden public debt financing offering on 1 June 2022, a US$350 million 5-year fixed rate RegS Sukuk issuance, which has been admitted for listing on the London Stock Exchange.

The Sukuk certificates, rated BB- by Fitch Ratings and B1 by Moody’s Investor Services, was priced at par with a coupon of 8.125% per annum, inside the initial price guidance area of 8.25% for a spread of 530 basis points over Treasuries.

The deal, which reopened the MENA US dollar markets after a six-week hiatus, was also the first US dollar corporate Sukuk globally in 2022; the first corporate issuance from Sharjah for five years; and the first real estate issuance from the MENA region to date this year.

According to Arada Development, the Sukuk issuance saw strong demand from both regional and international investors, with a subscription order of US$720 million, more than two times the offer size.

The Joint Global Coordinators for the Sukuk transaction were Standard Chartered Bank, Dubai Islamic Bank and Emirates NBD Capital, while Abu Dhabi Commercial Bank, Ajman Bank, Al Rajhi Capital, Mashreq, Sharjah Islamic Bank, Kamco Invest and Warba Bank acted as Joint Lead Managers and Bookrunners.

The successful issuance took place shortly after Moody’s and Fitch assigned Arada first-time credit ratings, of B1 and B+ respectively, both with a stable outlook. Arada is 40% owned by Basma Group, which is owned by Sharjah’s deputy ruler, and 60% by Corp KBW Investments, which is owned by Prince Khaled bin Alwaleed bin Talal Al Saud, a member of the Saudi royal family.

According to Prince Khaled bin Alwaleed bin Talal, Vice Chairman of Arada, “the closure of our debut Sukuk on the London Stock Exchange is an exceptional endorsement from international institutional investors of both Arada’s track record and its future prospects. We are delighted that this issuance has appealed to the market appetite for stable companies with a good history of strong management, transparency and good governance.”

Investor interest for the Sukuk was diversified geographically, coming from Europe, the Middle East and Asia. The investors for this issuance include institutional investors, fund managers, High Net Worth Individuals (HNWIs), and banks.

The proceeds for the Sukuk will be used for the management of existing bilateral funding, general corporate purposes and to support development at Arada’s existing projects.

Since its launch in 2017, Arada has launched three successful master planned projects in Sharjah, with a combined sales value of AED33.5 billion, which are setting a new standard for integrated community living in the Emirate. In January this year, Arada announced the purchase of a plot of land on Dubai’s The Palm Jumeirah megaproject, in line with the company’s stated intention to diversify into new markets.

The developer is targeting a year-on-year 25% increase in the value of property sold in 2022 to AED3 billion and is also aiming to complete 4,000 homes during 2022. In total, Arada has sold just under 10,000 units since inception, valued at over AED7 billion. The developer has completed 2,500 units, with another 27,500 homes in the pipeline.

Malaysia’s Mortgage Securitiser Cagamas Berhad Continues Issuance Momentum with RM345m (US$78.17m) 1-year Floating Profit Rate Islamic Medium-Term Notes Issuance in May 2022

Kuala Lumpur – Cagamas Berhad, the National Mortgage Corporation of Malaysia, one of the most prolific issuers of Sukuk, continued its Sukuk issuance momentum with the successful pricing of its RM345 million (US$78.17 million) 1-year Floating Profit Rate Islamic Medium-Term Notes (IMTNs) and its RM680 million (US$154.07 million) 1-year Floating Rate Conventional Medium Term Notes (CMTNs) issuance.

The proceeds from the IMTNs and CMTNs will be used to fund the purchase of house financing and housing loans from the financial system.

“Despite the challenging market environment arising from continued geopolitical tension and growing expectations of central banks to begin expediting the removal of policy accommodation, liquidity in the local fixed income market remains stable and resilient. The IMTNs and CMTNs represent the first issuance concluded by the Company post- Overnight Policy Rate hike of a quarter basis point by Bank Negara Malaysia,” said President/Chief Executive Officer, Datuk Chung Chee Leong.

According to Datuk Chung, the IMTNs and CMTNs, with its floating rate mechanism, provide potentially higher returns to investors amid a rising interest rate environment. The deals were successfully priced with 3-month Kuala Lumpur Interbank Offered Rate (KLIBOR) reference at equivalent to 2.66% based on KLIBOR fixing on the pricing date. The new issuance brings the Company’s aggregate issuances for the year to RM7.19 billion.

The IMTNs and CMTNs will be redeemed at their full nominal value upon maturity, are unsecured obligations of the Company, ranking pari passu with all other existing unsecured obligations of the Company.

Cagamas issued a similar RM300 million (US$69.91 million) 1-year Floating Profit Rate Islamic Medium-Term Notes (IMTNs) issuance on 13 April 2022, which was priced via private placement at the corresponding 3-month Kuala Lumpur Interbank Offered Rate (KLIBOR) or equivalent to 2.12% based on KLIBOR fixing on the pricing date.

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 RM321.595 billion worth of corporate bonds and Sukuk.

IILM Continues Consecutive Monthly Auction in May 2022 with Two Reissuances of Short-Term A-1 Rated Sukuk Raising an Aggregate US$1.51bn

Kuala Lumpur – The International Islamic Liquidity Management Corporation (IILM) held two separate auctions in May 2022 reissuing US$1.51 billion of short-term “A-1” rated Sukuk across two different tenors of one and three-month respectively.

“We made a strategic decision to split the May auction into two, given the current market conditions, especially with the recent rate hike by the US Federal Reserve of its benchmark interest rate by half a percentage point (50 basis point),” explained Dr. Umar Oseni, Chief Executive Officer of the IILM.

In the first auction on 11 May, the IILM reissued a total of US$910 million short-term “A-1” rated Sukuk across two different tenors of one and three-month respectively. They were priced as follows:

  1. US$330 million of 1-month tenor certificates at 1.03%
  2. US$580 million of 3-month tenor certificates at 1.60%

This Sukuk reissuance marked the IILM’s fifth Sukuk auction for 2022. The auction garnered significant interest among Islamic Primary Dealers and investors across the GCC markets as well as Asia. The competitive tender witnessed a strong orderbook in excess of US$1.38 billion, representing an average bid-to-cover ratio of 152%. According to Dr Oseni, “as evidenced by today’s successful auction, the IILM decided to issue two tenors of one and three-month, compared to the usual three tenors which includes the 6-month issuance.”

In the second auction on 24 May 2022, the IILM reissued a total of US$600 million short-term “A-1” rated Sukuk across two different tenors of three and six-month respectively.

They two series were priced as follows:

  1. US$240 million of 3-month tenor certificates at 1.68%
  2. US$360 million of 6-month tenor certificates at 2.25%

This Sukuk reissuance marked the IILM’s sixth auction for 2022.

The auction, according to the IILM, similarly attracted significant interest among Islamic Primary Dealers and investors across the GCC markets and a significant allocation to Asia-based investors. The competitive tender witnessed a strong orderbook of approximately US$1.14 billion, representing an average bid-to-cover ratio of 190%.

Further to today’s reissuance, the IILM has achieved year-to-date cumulative issuances totaling US$6.2 billion through 16 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 Ṣukuk across varying tenors and amounts to cater to the liquidity needs of institutions offering Islamic financial services. The IILM has issued a total of US$79.96 billion across 173 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 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.

Egypt Edges Towards Maiden Sovereign Sukuk Issuance in Current Fiscal Year

Sharm El Sheikh – The Egyptian Government is edging towards issuing the country’s maiden sovereign Sukuk in the current financial year. “The Government of Egypt,” explained Dr Hala Helmy El Said, the Minister of Planning and National Economy, in an interview with Focus on Egypt “is preparing to issue the first sovereign Sukuk over the next period in order to contribute to providing the necessary funding for investment projects included in the economic and social development plan in the state’s general budget, to achieve development goals in a manner consistent with the state’s efforts to enhance aspects of spending on improving the standard of living of citizens.”

The executive regulations of the Sovereign Sukuk Law has been prepared in cooperation with Al Azhar University and the Egyptian Financial Regulatory Authority, as well as local and international law firms to cover all legal aspects, she added.

Egypt is seeking to diversify its sources of funding; by introducing innovative financing tools, in order to mitigate the SDG financing gap, such as issuing green bonds, Sukuk and climate/SDG debt swaps, co-financing, blended finance, and results-based financing. Egypt is also prioritizing advancing public-private partnerships mainly through the Sovereign Wealth Fund of Egypt. 

“Egypt pioneered the first sovereign green bond in the Middle East and North Africa – worth US$750 million – tapping investors interested in financial and environmental returns. Its first impact report shows 46% of proceeds earmarked for clean transport (the Cairo monorail), and 54% for sustainable water supplies and wastewater management,” she added.

The Minister also gave a thumbs up for a greater role for Islamic finance in the economy. To deliver the SDGs, the UN estimates that between US$5 to US$7 trillion per annum needs to be mobilised by 2030. Developing countries face an annual funding gap of US$2.5 trillion to achieve the SDGs. Low-income countries will require the largest increases in public expenditure relative to GDP to fill this gap. To increase the share of resources available for development purposes and to ensure that these resources reach those most in need, she observed, Islamic finance provides a novel option.

Islamic finance is increasingly adopting sustainability criteria, so it is well positioned to maximise social impact and address the SDGs, she added. It provides an emerging opportunity that could be harnessed by investors and development partners, such as multilateral development organisations.

“Islamic finance has great potential in supporting developing countries’ efforts to finance the SDGs agenda. The SDGs require unprecedented mobilization of funds to support their implementation. Islamic finance offers an effective non-traditional means of financing for sustainable development activities and projects in developing countries.

“Islamic financing focuses on the real economy, which comes very much in line with the National Structural Reform Program that the Government of Egypt launched in 2021, which focuses on tackling the root causes of imbalances in the real sector, through the creation of decent jobs, diversifying and develop production patterns, improving the business climate, localizing manufacturing, and enhance the competitiveness of Egypt’s exports. “

Many countries, she maintained, have started to reap the benefits offered by Islamic financing options which lowers their debt to equity ratios for capital intensive projects. Over the next few years, Islamic finance will be considered as one of the primary financing strategies, especially for Egypt. 

Her sentiments were reiterated by Egyptian Finance Minister Dr. Mohamed Maait at a side meeting on the potential for Sukuk in Green Finance at the Annual Meetings of the IsDB Group in Sharm El Sheikh. Dr Maait urged the IsDB and Member States to further enhance skills and processes for actualizing Green Sukuk due to the additional framework and reporting requirements by issuers to cater to the demands of investors. This, he added, will help to reap the benefits of diversifying sources of funding as well as attracting new investors including those who focus on Environment, Social and Governance (ESG) and Socially Responsible Investments (SRI) linked instruments.

The Egyptian Parliament and the Senate approved a new Sovereign Sukuk Law in May 2021.  However, the country’s debt management institutional structure took some time to accommodate this new fund-raising instrument and asset class. The law was passed after approval by the Sharia’a Council of Al-Azhar University, the Financial Regulatory Authority (FRA), and other regulatory entities.

After a market and ministerial consultation, the Egyptian Cabinet in April 2022 further approved the executive regulations of the Sovereign Sukuk Law No. 138 of 2021. This should expedite the issuance of the maiden sovereign Sukuk, most probably before the end of 2022.

Bank Negara Malaysia Licences Five Digital Banks Including Two Islamic Digital Banks (IDBs) with Two More in the Offing

Kuala Lumpur – Bank Negara Malaysia (BNM) has recently announced the five successful applicants for digital bank licences as approved by the Minister of Finance Malaysia, of which two applicants are to be licensed under the Islamic Financial Services Act 2013. The digital banks are expected to further advance financial inclusion.

The successful applicants to be licensed under the Financial Services Act 2013 (FSA) include:

i) A consortium of Boost Holdings Sdn. Bhd. and RHB Bank Berhad;

ii) A consortium led by GXS Bank Pte. Ltd. and Kuok Brothers Sdn. Bhd; and

iii) A consortium led by Sea Limited and YTL Digital Capital Sdn Bhd.

The successful applicants to be licensed under the Islamic Financial Services Act 2013 (IFSA) are:

i) A consortium of AEON Financial Service Co., Ltd., AEON Credit Service (M) Berhad and MoneyLion Inc.; and

ii) A consortium led by KAF Investment Bank Sdn. Bhd.

According to BNM, three out of the five consortiums are majority-owned by Malaysians namely Boost Holdings and RHB Bank Berhad, Sea Limited and YTL Digital Capital Sdn Bhd and KAF Investment Bank Sdn Bhd.

The final allocations of digital bank licences came after a “thorough assessment” of 29 applications received. The assessment criteria cover the character and integrity of applicants, nature and sufficiency of financial resources, soundness and feasibility of business and technology plans as well as ability to meaningfully address financial inclusion gaps. Applications, added BNM, were assessed on their individual merits, as well as relative to other applications based on consistent evaluations of each assessment criteria. This horizontal review is based on the assessment criteria applied across all applicants to determine the relative strength of each application and identify successful applicants.

Throughout the assessment process, BNM instituted strict governance and evaluation procedures to ensure robust, objective and consistent assessments across all 29 applications received. Four levels of assessment were carried out, supported by a cross-functional technical team, a review team and internal independent observers from BNM’s risk and legal departments. The final recommendations to the Minister were deliberated and endorsed by BNM’s Management Committee.

According to Bank Negara Malaysia Governor Tan Sri Nor Shamsiah “digital banks are expected to further advance financial inclusion. By adopting digital technology more widely for everyday transactions, we can significantly increase opportunities for our society to participate in the economy – by overcoming geographical barriers, reducing transaction costs and promoting better financial management. Digital banks can help individuals and businesses gain better access to more personalised solutions backed by data analytics. As businesses move online, digital banking also provides a safer and a more convenient way to transact.”

Following this announcement, the successful applicants will undergo a period of operational readiness that will be validated by BNM through an audit before they can commence operations. This process may take between 12 to 24 months.

At least two standalone Islamic banks — Bank Islam Malaysia Bhd and Al Rajhi Banking & Investment Corp (M) Bhd (Al Rajhi Malaysia) — are in the process of setting up their own digital banks under their existing Islamic banking licences, to compete in the new and more competitive landscape.

Tenaga Power Generation Issues RM1.5bn (US$340m) Sustainability Sukuk Wakalah to Fund its Nenggiri Hydroelectric Power Plant Project in Kelantan

Kuala Lumpur – Tenaga Nasional Bhd (TNB), the Malaysian multinational electricity company, confirmed on 2 June 2022 that its wholly-owned subsidiary TNB Power Generation has issued a RM1.5 billion (US$340 million) Sustainability Sukuk Wakalah to fund its Nenggiri Hydroelectric Power Plant project in Kelantan. 

The Sukuk was issued under its 30-year Sukuk Wakalah Programme of up to RM10 billion, which was lodged with the Securities Commission Malaysia in April 2022 and is based on the Sharia’a principle of Wakalah Bi Al-Istithmar.

The issuance comprised three tranches – a first tranche with a size of RM150 million (US$33.99 million) with a 10-year tenor and priced at a periodic distribution rate of 4.7% per annum; a second tranche with a size of RM750 million (US$169.93 million) with a tenor of 15 years and priced at a periodic distribution rate of 5.05% per annum; and a third tranche with a size of RM600 million (US$139.95 million) with a tenor of 20 years and priced at a periodic distribution rate of 5.20% per annum respectively.

The demand for the Tenaga Power certificates was robust. “At the peak of the book-building exercise, the sustainability Sukuk Wakalah was oversubscribed by approximately 3.41 times, from the issue size of RM1.5 billion, with orders received amounting to an aggregate of RM5.1 billion from over 30 accounts,” said the company.

The proceeds from the issuance of the Sustainability Sukuk Wakalah shall be utilised by Tenaga Power for the Nenggiri Hydroelectric Power Plant Project as set out in its Sustainability Sukuk Framework, which has been accorded a “GOLD” rating by MARC Ratings Berhad as the independent external reviewer.

In a statement, TNB maintained that “as a significant and wholly owned subsidiary of TNB, Tenaga Power will play an important role in supporting TNB’s sustainability aspirations and commitment in mitigating climate change by adopting greener, cleaner and more efficient power generation technology. This sustainability funding initiative by Tenaga Power demonstrates its commitment to support TNB’s aspiration to achieve net zero emission by 2050, a move towards decarbonisation and renewable energy.”

CIMB Investment Bank and Maybank Investment Bank acted as joint principal advisers, joint lead arrangers and joint sustainability framework advisers for the Sukuk Wakalah Programme, as well as the joint lead managers for the first issuance of Sukuk under the Programme.

Abu Dhabi-based Sharia’a Compliant Venture Capital Firm GII Acquires Anglo-Gulf Trade Bank, the ‘World’s First Digital Trade Finance Bank’ from Abu Dhabi SWF Mubadala

Abu Dhabi – The UAE sovereign wealth fund, Mubadala, has sold its digital trade finance bank, Anglo-Gulf Trade Bank (AGTB) to Gulf Islamic Investments (GII), a private equity, real estate and venture capital company.

GII, with total assets under management exceeding US$3 billion, is a full service Sharia’a compliant financial services company “that builds growth performance with its stakeholders.” It is based in the UAE and regulated by the Securities and Commodities Authority (SCA) of the UAE.

GII acquired a 100% stake in AGTB at end May 2022. AGTB has sought to differentiate itself from other lenders in the market by taking a digital, data-driven approach towards trade finance. The acquisition of AGTB, which is licensed to operate within the Abu Dhabi Global Market (ADGM), is in line with GII’s objective of providing “the best” financial services solutions to investors and clients, which include UHNWIs, family offices, banks and other financial institutions, and sovereign wealth funds in the Middle East and Asia.

According to GII, AGTB was set up in 2019 to address a growing gap in the trade finance market, which has become highly fragmented. As the first digital bank of the ADGM, it provides its customers with technology-enabled smart banking solution[s] in a well-regulated ecosystem.

The timing of the acquisition is interesting. Technology in trade and post-trade services is a key megatrends impacting global trade and investment going forward. World Trade Organisation data shows that global trade has been more resilient during the pandemic than during the 2008 global financial crisis, reaching US$6.2 trillion during the pandemic compared with US$4.8 trillion during the crisis. Similarly, says the OECD, global FDI grew by 88% to US$1,815 billion in 2021, which is 37% above pre-pandemic levels.

Trade Finance is about global risk mitigation and funding availability for global transactions. It will also be about trade facilitation and digitisation to leverage various benefits and opportunity costs. TradeTech encompasses digital security, transaction integrity, digital LCs, and related Fintech solutions such as cryptocurrencies, digital payment gateways, and digital supply chain solutions which are all driving trade efficiencies. TradeTech and its impact on global trade and FDI flows will see transactions and interaction between clients, brokers, underwriters, insurers, reinsurers, and claims providers become seamless. This translates into cheaper cost of financing and transaction costs especially for exporters and importers in emerging markets.

As such, according to Oussama Kaissi, CEO of multilateral trade insurer ICIEC, the establishment of digital infrastructure frameworks that can support cross-border regulatory harmonization is vital for e-commerce and mitigating cybersecurity, KYC, credit history and AML issues. The regulatory environment is becoming more complex and fragmented. This has implications for digital economic growth since digital barriers could reduce GDP growth by restricting trade output and slowing productivity.

In line with AGTB’s links with the UK, the imminent adoption of the UK Electronic Trade Documents Bill is of huge significance and could become the governing law for digital trade in the international market.  It puts electronic trade documents on the same legal footing as paper documents.

The ICIEC-led OIC Business Intelligence Centre (OBIC) initiative similarly will play a key role in enabling digitization of the credit ecosystem in Member States that will ultimately facilitate further cross-border financing. Cross-border credit registry connected credit bureau services, data compilation, and coordination are all part of the OBIC initiative.

Digital technologies have an enormous potential to unlock economic opportunities in trade, investment, agriculture, manufacturing, and services in support of achieving the SDGs.

 

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