NEWS in BRIEF

Al Rajhi Bank Concludes 3-year dual tranche US$1bn Sustainability Commodity Murabaha Facility, the Largest Shariah-compliant ESG Syndication in the Middle East to Date

Jeddah – Al Rajhi Bank, one of the largest banks in the Kingdom and the largest Islamic bank in terms of assets, successfully concluded a 3-year dual tranche Sustainability Commodity Murabaha Facility “with total amount exceeding US$1 billion” in September 2022.

According to Waleed Al-Mogbel, CEO of Al Rajhi Bank, the transaction makes Al Rajhi Bank the first Islamic financial institution in the world to conclude such a Shariah-compliant facility whose proceeds will be used to increase the bank’s liquidity levels, which will have a positive impact on the Bank’s overall business activities and will be directed towards sustainability financing for corporates and projects. 

This transaction, stressed the Bank, is considered as the largest Shariah-compliant Syndication in the Middle East that complies with the Environmental, Social, and Governance (ESG) standards and practices. Standard Chartered Bank assisted Al Rajhi Bank in developing the sustainable finance framework. S&P Global assessed the framework as an independent entity and confirmed that it complies with the Green Loan Principles, Social Loan Principles, Environmentally Friendly Bond Principles, Social Bond Principles and Sustainability Bond Guidelines of ICMA.

The deal was well received in the international and regional markets and Al Rajhi accordingly succeeded in increasing the value of the facility from the initial offered amount. A diversified group of 13 global investors from North America, Europe, Asia and the Middle East participated in the landmark transaction.

The syndication was led by HSBC and SMBC International Bank as Mandated Lead Arrangers and Bookrunners. “The participation of global institutions reflects the trust shown by the international market in Al Rajhi Bank’s overall business activities, market share and market positioning. It also demonstrates the bank’s commitment to environmental and social sustainability, as all proceeds from this financing will be allocated to qualified sustainable projects that are Sharia’a-compliant and have a positive impact, as specified in the bank’s framework of sustainable financing,” added Al Rajhi Bank.

The transaction is the first ESG syndication in accordance with the Bank’s sustainable financing framework, which was established to facilitate the financing in accordance with global ESG standards and principles.

Africa Co-Guarantee Platform (ACGP) Steps Up De-Risking Support, Guarantees and Credit Insurance to Boost Trade and Investment Flows to the Continent

Cairo – The Africa Co-Guarantee Platform (ACGP) is stepping up its trade and project guarantees amid rising urgency for instruments to de-risk investment across Africa. Some 21 Sub-Saharan African states are members of the Islamic Development Bank (IsDB).

ACGP was established in 2018 and comprises six Platform Partners – the African Development Bank (AfDB); Islamic Corporation for the Insurance of Investment & Export Credit (ICIEC), the export credit and investment insurance agency of the IsDB Group; African Trade Insurance Agency (ATI), the multilateral African ECA; GuarantCo, part of the Private Infrastructure Development Group, which is supported by the UK, Swiss, Swedish, Dutch and Australian governments; African Union Development Agency (AUDA-NEPAD); and the African Export Import Bank (Afreximbank).

The mandate of the ACGP Platform is to “create an innovative and collective de-risking instrument, to address the perceived high risk across the continent and the lack of capacity of traditional lenders to provide risk mitigation products for projects.” The CGPA aims to increase the volume of insurance and guarantee solutions available to project sponsors and their bankers in a market-responsible manner, and to mobilize greater amounts of investment that would otherwise not take place in the region in the absence of affordable risk mitigation products.

In a meeting in Cairo in September 2022, the Platform Partners agreed to better leverage guarantee and insurance products, resulting in more trade and investment across Africa, and pledged to extend direct transaction support for specific projects, including infrastructure development and optimizing balance sheets by sharing risk.

They agreed to develop new and hybrid products, including Sharia’a compliant instruments, to address issues such as intra-regional trade, the current food and fertilizer crises, and enhanced coverage for infrastructure investments, public-private partnerships, and fragile/transition states and situations. The CGP will also work with stakeholders to build capacity in the use of risk mitigation instruments that strengthen project preparation and bankability.

According to the AfDB, Africa’s annual trade and investment gap is estimated to be US$200 billion. Risk – both real and perceived – is a key barrier to accessing more financing at better terms. Bank credit and investment insurance is more costly and banks are required to reserve more capital when financing in “sub-investment grade” countries. While the Platform Partners collectively support about US$10 billion in trade and investment annually through guarantees and insurance, more will be needed if Africa is to close the US$200 billion gap and meet Sustainable Development Goal targets.

According to Kofi Asumadu-Addo, Afreximbank’s Director of Guarantees and Specialized Finance, “This is a critical moment and the ACGP is needed more than ever. The COVID-19 pandemic, the Ukraine crisis and the consequent macroeconomic challenges facing the continent, require urgent action on our part as risk mitigation providers. Collectively, we have the capacity among the Platform partners to respond adequately and appropriately to help de-risk and attract investments into and across Africa. We need to bring this to bear in order to reduce the trade and investment financing gap.”

To Bessem Soua, ICIEC’s Division Manager for Sub-Saharan Africa and Europe, “the Co-Guarantee Platform is a unique opportunity for multilateral partners to work together on scaling up risk mitigation capacity to de-risk investments and trade in Africa. Priorities and concrete steps have been agreed among the partners to take the platform to the next level and ensure a collective and coordinated response to the continent’s needs.”

ITFC Signs Record US$189m Murabaha Facility Agreement with Maldives State Trading Organization for the Procurement of Essential Goods to Aid Country’s Post-Pandemic Economic Recovery

Male – The International Islamic Trade Finance Corporation (ITFC), the trade fund of the Islamic Development Bank (IsDB) Group, signed two landmark agreements in September 2022 in Male to support the essential commodities sector in the Maldives.

The first agreement is for a US$189 million Murabaha financing facility for the State Trading Organization plc (STO) of the Maldives. This financing which is a renewal and increase of an existing Murabaha trade facility, according to Eng. Hani Salem Sonbol, Chief Executive Officer, ITFC, will provide support for the procurement of petroleum products, staple food, medicine, and medical equipment to aid in the country’s economic recovery from the COVID-19 pandemic. The facility will ensure energy, food and medicine security in the country, while supporting economic stability and growth in key sectors.

The second agreement is a Memorandum of Understanding (MOU) with the Maldives Industrial Fisheries Company Ltd. (Mifco) to support the company with the relevant trade-related technical assistance. This MOU is aimed at enhancing the competitiveness of Mifco and it access to global markets. The fishing industry in the Maldives is the nation’s second-biggest industry after tourism, employing half of the country’s workforce and providing a livelihood for the population.

Eng. Sonbol stressed that “ITFC is pleased to sign its largest syndicated trade finance agreement with STO to finance the import of strategic commodities to support the recovery of the economy from the pandemic. Apart from the support extended on the trade financing front, the MoU with Mifco is also a major milestone given the fishing sector’s strategic importance to the economy. Capacity building and technical assistance initiatives offered to Mifco is expected to boost the fisheries sector’s competitiveness.” 

SPIMACO ADDWAIEH Signs SAR550m (US$146.33m) Murabaha Credit Facility Agreement with Bank Al Bilad 

Jeddah – Saudi Pharmaceutical Industries and Medical Appliances Corp. (SPIMACO ADDWAIEH) signed a SAR550 million (US$146.33 million) Murabaha credit facility agreement with Bank Albilad in August 2022.

According to a disclosure to Tadawul (the Saudi Stock Exchange), the facility comprises two tranches – a SAR200 million (US$53.21 million) 1-year revolving facility, and A SAR350 million (US$93.12 million) 10-year long-term facility including a 3-year grace period. The facility is guaranteed by a Promissory Note from the company covering the amount of the facility.

The proceeds of the short-term facility will be used for the purpose of financing working capital requirements, while the proceeds from the long-term facility will be used to financing future expansions and investments.

Malaysia’s Mortgage Securitiser Cagamas Berhad Continues Issuance Momentum with Aggregate RM1,085m (US$233.96m) of IMTNs and Social SRI Sukuk Issuances in August and September 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 RM1.63 billion of issuances in September 2022, comprising RM560 million 1-year Islamic Medium Term Notes (IMTNs), RM30 million 1-year Conventional Medium Term Notes (CMTNs), RM40 million 2-year CMTNs, RM30 million 3-year CMTNs and aggregate Singapore Dollar (SGD) 300 million 1-year Fixed Rate Euro Medium Term Notes (EMTNs).

“Amidst a raft of monetary policies tightening from major central banks, followed by a hefty interest rate increase by the US Federal Reserve, Cagamas successfully concluded issuance of RM1.63 billion worth of bonds and Sukuk from both domestic and international markets. Demand for Cagamas’ foreign currency bonds remain resilient amid market volatility and was fully subscribed by foreign investors, which include asset managers, financial institutions and insurance companies. The SGD issuances also mark the Company’s third and fourth foreign currency issuance exercise for the year and brings the year-to-date SGD denominated issuance to SGD550 million,” said Datuk Chung Chee Leong, President/Chief Executive Officer of Cagamas.

“The Company also raised a total of RM660 million from the domestic market with the successful pricing of its CMTNs/IMTNs at 37 to 46 bps above the corresponding Malaysian Government Securities (MGS)/ Malaysian Government Investment Issue (MGII). The conclusion of the above transactions brings the Company’s year-to-date issuance amount to RM12.70 billion.” added Datuk Chung.

The SGD denominated bond and CMTNs/IMTNs issuances are fully and unconditionally guaranteed by Cagamas Berhad.

In a second transaction in August 2022, Cagamas successfully priced RM1.11 billion of bonds and Sukuk, comprising RM25 million 1-year Islamic Medium Term Notes (IMTNs), RM85 million 1-year Conventional Medium Term Notes (CMTNs), RM285 million 2-year ASEAN Social SRI Sukuk (Social SRI Sukuk), RM115 million 2-year IMTNs, RM110 million 2-year ASEAN Social Bonds (Social Bonds), RM100 million 3-year IMTNs and RM390 million 3-year CMTNs.

“We are pleased with the successful conclusion of the issuances after the widely expected interest rate hike by the Federal Reserve, marking its second 75 basis points (bps) hike in a row. The issuances, which include Social SRI Sukuk and Social Bonds, demonstrate our continued efforts to facilitate an emerging sustainable asset class and to promote the growth of a sustainable market ecosystem,” said Datuk Chung Chee Leong, President/Chief Executive Officer, Cagamas.

“The Company successfully priced its 2-year Social SRI Sukuk and Social Bonds at 2 bps lower than the 2-year IMTNs, recording competitive spreads of 39 to 45 bps above the corresponding Malaysian Government Securities/Malaysian Government Investment Issues for the overall issuances. The Social SRI Sukuk and Social Bonds for affordable housing were assigned the highest Social Benefit rating of Tier-1 by RAM Sustainability Sdn Bhd under the Cagamas’ Sustainability Bond/Sukuk Framework,” added Datuk Chung.

Proceeds from both transactions will be used to fund the purchase of eligible assets from the financial system. 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 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 RM366.3 billion worth of corporate bonds and Sukuk

IILM Continues Consecutive Monthly Auction in August and September 2022 with Two Reissuances of Short-Term A-1 Rated Sukuk Raising an Aggregate US$2.37bn

Kuala Lumpur – The International Islamic Liquidity Management Corporation (IILM) held two separate auctions in August and September 2022 reissuing an aggregate US$2.37 billion of short-term “A-1” rated Sukuk across three different tenors of one month, three-months, 6 months.

In the first auction on 2 August 2022, the IILM reissued a total of US$1.03 billion short-term “A-1” rated Sukuk across three different tenors of one, three and six-months, priced as follows:

i)  US$460 million of 1-month tenor certificates at a profit rate of 2.38%

ii) US$220 million of 3-month tenor certificates at a profit rate of 2.90%

iii) US$350 million of six-month tenor certificates at a profit rate of 3.52%.

The August Sukuk reissuance marks the IILM’s ninth Sukuk auction for 2022. The auction, says the IILM, 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$2.09 billion, representing an average bid-to-cover ratio of 203%.

In the second auction on 6 September 2022, the IILM reissued a total of US$1.34 billion short-term “A-1” rated Sukuk across three different tenors of one, three and six-month respectively priced as follows:

i)   US$490 million of 1-month tenor certificates at a profit rate of 2.72%

ii)  US$400 million of 3-month tenor certificates at a profit rate 3.32%

iii) US$450 million of 6-month tenor certificates at a profit rate of 3.92%.

This Sukuk reissuance marks the IILM’s tenth 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$2.13 billion, representing an average bid-to-cover ratio of 159%.

Dr. Umar Oseni, Chief Executive Officer of the IILM, stressed that “given the size of the issuance, which is the IILM’s largest Sukuk issuance for the year to date, we are very pleased with a successful auction that saw the offerings being oversubscribed. This comes on the back of a tightening global environment with rising interest rates and its continuous impact on the financial markets. Despite the tougher conditions, the IILM will continue to supply its short-term cross-border Sharia’a-compliant liquidity instruments monthly to meet the needs of global investors in the Islamic financial industry.”

Further to today’s reissuance, the IILM has achieved year-to-date cumulative issuances totalling US$0.43 billion through 28 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$84.19 billion across 181 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.

ICIEC Joins InsuResilience Global Partnership Platform for Inclusive, Integrated Collaboration, Shared Learning and Delivery for Climate and Disaster Risk Finance and Insurance Solutions

Jeddah – In a further move to consolidate its commitment and involvement in boosting climate resilience, action, mitigation and adaptation, the Islamic Corporation for the Insurance of Investment and Export (ICIEC), the ECA of the Islamic Development Bank (IsDB) Group, acceded to membership of the Bonn-based InsuResilience Global Partnership, the world’s leading platform for inclusive, integrated collaboration, shared learning and delivery for Climate and Disaster Risk Finance and Insurance Solutions.

ICIEC’s membership of InsuResilience which became effective on 1 September 2022, is underpinned by the Corporation’s recognition of the key role that the Partnership plays in bringing together many of ICIEC’s member states, 13 of whom are members of the V20 Group of Ministers of Finance of the Climate Vulnerable Forum, and the G20, as well as donors, the private sector, international organisations and civil society groups for the achievement of wider Climate Action goals.

InsuResilience was launched at the UN Climate Conference COP23 in November 2017 and climate action has since then assumed even greater importance and urgency including for ICIEC’s 48 member states confronted with the task of dealing with the socio-economic costs of climate change and disaster management.

COP26 in Glasgow, which was attended by a high-level delegation from ICIEC, showed that the road to Net Zero 2050 and Transition to Clean Energy under the 2015 Paris Climate Action Agreement will indeed be challenging.

According to Oussama Kaissi, Chief Executive Officer of ICIEC, “The Corporation’s development mission is aligned with the UN Sustainable Development Goals (SDGs) and the ambitions of the Paris Agreement, and is informed by the needs of our member states. We welcome our accession to membership of InsuResilience and we remain committed to contributing to developing innovative financial solutions towards climate action, mitigation, adaptation, and capacity building in cooperation with partners through the InsuResilience platform, amongst other climate finance initiatives aimed at advancing the objectives of climate action.”

ICIEC also sees its role engaging with the private sector as a catalyst for closing the Climate Action financing gap, which is estimated at US$20 billion a year.

IsDB Board Approves US$2.91bn of Development Project Finance in Various sectors in Nine Member States, Including Two PPP Projects

Jeddah – The Board of Executive Directors of the Islamic Development Bank (IsDB) during its 347th session held in Jeddah on 19 September 2022, approved a total of US$1.12 billion for development projects financing in various sectors in 9 member countries as well as US$1.79 million in grants for a number of other projects including market access readiness in the Yemen.

In addition, the Board approved other key proposals, namely the debt restructuring of Queen Alia International Airport (QAIA) in Amman, Jordan, as well as a proposed Commodity Murabaha facility for the 300-bed hospital project in Kaduna State, Nigeria.

The financing include:

  1. US$295 million to Uganda for Upgrading National Roads to boost the socio-economic development of Uganda by providing better access to social infrastructure, facilitating access to markets for farmers and traders, and reinforcing regional integration and tourism.
  2. EUR205 million to Indonesia for the strengthening of the National Referral Hospital Oncology Centre. The Project aims to contribute to the reduction of the high rates of morbidity and mortality from cancer through the strengthening of the Oncology services of six national referral hospitals.
  3. US$200 million to Guyana for the reconstruction of the Soesdyke – Linden Highway Project.
  4. A US$106.7 million co-financing from the IsDB for the reconstruction and upgrading of the M39 Road in Uzbekistan. The Project objective is to improve the efficiency of the road transport infrastructure and ensure the safe movement of goods and people along the project road section.
  5. A EUR37.87 million co-financing for the Kiffa Water Supply Project in Mauritania. The Project objective is to increase access to improved water services in selected rural areas and small towns. In addition to generating nearly 3,000 new jobs and improving the standard of living in the project area and the wilayas of Guidimakha and Assaba.
  6. 25 million to Cameroon for the Presidential Plan for the Reconstruction and Development of the North-West and South-West Regions of Cameroon.
  7. US$ 26.29 million to Guinea for the rehabilitation and expansion of the Conakry Electricity Distribution Network (Phase II) Project. The proposed project aims to improve the reliability of the network and the financial and technical performance of the electricity company EDG by increasing the grid efficiency, the collection rate, and expanding access to electricity in Conakry.
  8. A US$15 million facility for Djibouti towards the Slum Upgrading and Integrated Urban Development Project in Djaga Bouldhouq. The Project objective is to contribute to the National Zero Slum Program and Housing Strategies aimed at improving human development and economic empowerment through enhanced access to urban services for poor households.
  9. US$5.54 million to Gambia for Enhancing Value Addition in the Groundnut Sector Phase II.

The Board also approved several projects involving Public Private Partnership (PPPs). They include:

  1. EUR100 million IsDB contribution for the Surkhandarya Combined Cycle Power Plant Project in Uzbekistan. This project’s objective is to improve the efficiency of the power sector while utilizing indigenous gas resources. It will reduce the operations and maintenance cost of the base load generation capacity required to maintain the power grid stability and allow for the integration of renewable energy resources into the power grid.
  2. US$100 million to Uganda towards the East Africa Crude Oil Pipeline (EACOP) Project, which will enable Uganda, a landlocked country, to emerge as a regional oil producer with export capacity to international markets.

Al Moammar Information Systems (MIS) Renews SAR266.6m (US$70.92 m) Murabaha Financing Facility with Saudi British Bank

Jeddah – Al Moammar Information Systems Co. (MIS), a regular user of Islamic financing facilities, has renewed its SAR266.6 million (US$ 70.92 million) Murabaha financing facility with The Saudi British Bank in September 2022. The facility has a four-month tenor and matures on 31 December 2022.

The facility agreement is secured by Promissory notes to the amount of total facilities limit. The proceeds from the facility will used to service invoice payables, projects financing and issuance of letters of credit and guarantees, said MIS in a disclosure to Tadawul (the Saudi Stock Exchange).

Sri Lanka’s Amana Bank Partners with UNDP to Raise Funds for the ‘Private Sector Giving Facility for Emergency Relief’

Colombo – Amana Bank, Sri Lanka’s leading Islamic bank, has partnered with the United Nations Development Programme (UNDP) in Sri Lanka, to channel support through the recently launched ‘Private Sector Giving Facility for Emergency Relief’, initiated towards overcoming the rising challenge of severe medical and food supply shortages due to the ongoing economic crisis.

By pledging support to this initiative, Amana Bank joins hands with many other leading corporates including Hemas Holdings, Dilmah Ceylon Tea, Brandix, Daraz and Citi Foundation, through whose collaboration UNDP will secure contributions towards procurement of medical supplies and address food security needs.

Amana Bank’s Managing Director/CEO Mohamed Azmeer explained that “with the country going through a challenging period, Amana Bank is committed to supporting the country and its people, since it is an integral part of the values based on which the unique people-friendly model of banking is built upon. Through this collaboration with UNDP, we aim to provide a platform to our customers as well as well-wishers to contribute to this timely cause and support the socio-economic recovery for the most vulnerable communities in the country, and hopefully drive a sustainable change.”

Malin Herwig, Officer-in-Charge, UNDP in Sri Lanka stressed that “Partners are key agents in times of crisis, with the private sector historically playing a critical and strategic role in humanitarian efforts. UNDP works with a wide range of partners such as Amana Bank, in achieving our shared vision to help countries achieve sustainable development by eradicating poverty in all its forms and dimensions, accelerating structural transformations for sustainable development, and building resilience to crises and shocks.”

Contributions will be channeled towards procuring relevant seeds and materials for Maha season harvesting and raising awareness towards strengthening home gardening activities. According to the July 2022 Food Security Survey conducted by World Food Programme, nearly half of Sri Lankan households are food insecure, reflecting a substantial deteriorating trend from the previous survey month. The UNDP private sector facility and related interventions, says Amana Bank, in which Bank Islam Malaysia has a sizeable equity stake, will complement and strengthen the ongoing health sector efforts of the Ministry of Health and the World Health Organization (WHO), and food sector efforts led and coordinated by the Food and Agriculture Organization (FAO) among others.

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