IsDB Board of Directors Approve US$558m of New Financing for Sustainable Development and Infrastructure Projects in Bangladesh, Pakistan, Indonesia, Burkino Faso and Gambia

Jeddah – The Board of Executive Directors of the Islamic Development Bank (IsDB) at its 351st meeting in Jeddah in early May 2023 approved new financing totalling over US$558 million for six projects that focus on sustainable and inclusive growth and infrastructure development in the Bank’s member states.

The financing approved include:

A contribution of €270.57 million (US$296.37 million) to Phase 2 of the Rural and Peri-Urban Housing Finance Project in Bangladesh. The project aims to construct 1,989 units of sustainable multi-storied housing with improved quality and necessary basic facilities. It will benefit a total of 70,632 lower and middle-income people in rural and peri-urban areas in the country. The project is being implemented by the Bangladesh House Building Finance Corporation, and will ensure the optimum use of land and save cultivable land, while addressing the climate change issue by introducing 55 climate-resilient housing for climatically vulnerable segments and 39 eco-friendly housing for reducing greenhouse gas emissions.

A financing contribution of US$100 million inclusive of a US$ 35 million grant from the Bill and Melinda Gates Foundation, to the Polio Eradication Phase IV Project in Pakistan. The project is being implemented by the Ministry of National Health Services Regulations and Coordination.

Under the Project, IsDB will finance the acquisition of most of the required oral polio vaccines through the provision of a total of 930,006,578 doses of WHO pre-qualified vaccines, which will be deployed for the 231.4 million people in Pakistan by UNICEF. The project’s objective is to permanently contain the spread of all polioviruses, including wild poliovirus Type 1 (WPV1) and circulating vaccine-derived poliovirus Type 2 (cVDPV2), by the end of 2026, and maintain the country’s ‘polio-free’ status for the subsequent three years.

A US$100 million facility for PT Sarana Multi Infrastruktur, a special purpose vehicle of PT Sarana Multi Infrastruktur (SMI), to accelerate infrastructure development in Indonesia. The facility will cover the financing of several infrastructure projects located across various regions in the country.

It is aimed at mobilizing private sector financing for infrastructure and improving the overall quality and sustainability of infrastructure development in Indonesia. As a result, the facility will contribute to boosting investment in infrastructure, which will support the country’s economic growth, reduce poverty and provide better access to basic services for its people by facilitating better access to energy, transportation, water, information and communication technology, urban, agriculture, education, healthcare, waste management, and public housing.

A €40 million (US$43.81 million) facility to the Electrification and Development of Electrical Connection Project in Burkina Faso. Once operational, the project, being implemented by Société Nationale d’Electricité du Burkina Faso, will improve the living conditions of the populations in the targeted areas by providing reliable and affordable electricity through the extension and reinforcement of the electricity distribution and connection networks.

A US$15.31 million financing facility towards the widening of the Bertil–Harding Highway Phase II Project in Gambia. The project aims to help address the increasing annual traffic growth of more than 3% on the highway. It is expected that the traffic on the highway will increase to 28,000 vehicles a day by 2040, as compared to 16,000 vehicles per day in 2021.

Under implementation by the National Roads Authority/Ministry of Transport, the project will support the country in directly achieving SDG 9: resilient infrastructure, SDG 11: making cities and human settlements inclusive, safe, resilient, and sustainable, while indirectly promoting SDG 7: energy efficiency by reducing fuel consumption for cars as a result of more fluid traffic flows.

An additional financing of €2.32 million (US$2.54 million) for the Construction of the Guiba-Garango Road Project being implemented in Burkina Faso by the country’s Directorate General of Roads. The Bank had originally approved €45.03 million (US$49.30 million) of financing for this project, which aims to improve connectivity between the major transport corridors, while also facilitating local commercial activities within the project area to sustain economic growth.

Saudi Fund for Development Co-finances Mohmand Multipurpose Dam Project in Pakistan with US$240m Credit Facility to Boost the Country’s Energy and Water Resources Security

Islamabad The Saudi Fund for Development (SFD) signed a US$240 million credit agreement with the Ministry of Economic Affairs of Pakistan to support the construction of the Mohmand Multipurpose Dam Project, a major hydropower complex that is expected to contribute to Pakistan’s energy security, increase sustainable water supply for agriculture and human consumption and improve resilience to floods.

The agreement was signed by the SFD CEO, Mr. Sultan Abdulrahman Al-Marshad, and the Federal Secretary for Ministry of Economic Affairs, Pakistan, Dr. Kazim Niaz on 7th April 2023.

The project, which is co-financed by the SFD, OPEC, the Islamic Development Bank, and the Kuwait Fund for Arab Economic Development. It is expected to have a significant impact on Pakistan’s energy and water sectors. By using renewable energy sources, the project will generate 800 MW of electricity production capacity, contributing to Pakistan’s energy security. In addition, the storage of 1.6 million m3 of water will support sustainable agricultural practices, enable irrigation of 6,773 hectares of new land, and increase the total cropping area from 1,517 hectares to 9,227 hectares in the province, facilitating agricultural activities.

The Mohmand Multipurpose Dam Project, says the SFD, will also enhance water and food security, and improve the standard of living for people living in the Khyber Pakhtunkhwa province, where almost 80% of the population reside in rural areas, boosting the region’s socioeconomic development by creating employment opportunities and reducing poverty levels. The project aligns with SDG-2 (Food Security), SDG-6 (Clean Water), and SDG-7 (Clean Energy) and embodies SDG-17 (Partnerships for the Goals).

According to SFD’s Al-Marshad, to date the Fund has financed around 41 development projects and programmes in Pakistan, amounting to approximately $1.4 billion. In addition, SFD has financed between 2019 and 2023, oil derivatives worth more than US$5.4 billion, to support Pakistan’s economy, which comes as a continuation of the support provided by the Government of Saudi Arabia to Pakistan to build a sustainable economy.

Saudi Electronic Payments Increase Dramatically to 62% of Total Financial Sector Payments in 2022 Exceeding 60% Target of FSDP

Riyadh – The electronic payments revolution in Saudi Arabia has proliferated substantially according to the latest data released by the Saudi Central Bank (SAMA). In April 2023, SAMA announced that the share of electronic payments in the retail sector in the Kingdom reached 62% of total payments, including cash, in 2022, exceeding the 60% target set by the Financial Sector Development Plan (FSDP), a key pillar of Saudi Vision 2030.

This achievement reflects the continuous and accelerated development of local payments over the past few years. The progress in e-payments would not have been possible without the significant improvement in payment infrastructure, the enhancement of existing systems, and the introduction of new systems and services. In addition, progress in the regulatory, technical, and operational aspects of the sector has contributed to the recent transformation towards electronic payments.

Statistically, the number of PoS (point of sale) transactions executed via the Saudi Payment Network “Mada” reached an unprecedented 7.2 billion transactions during 2022, an increase of 40% compared to 2021. Mada card online transactions also grew by 76% in 2022, recording 610 million transactions. As of the end of 2022, there were 1.4 million PoS terminals, representing a 42% increase compared to 2021.

In April 2023, SAMA licensed the latest FinTech company – Rasid Payments Company for Financial Technology to provide payment solutions through PoS. This brings the total number of payment companies licensed by SAMA to 24, in addition to six companies ‘granted in-principle’ approvals. At the same time, SAMA also granted Creative Future for Digital Brokerage a license to carry out finance aggregation services, and MIS Forward a permit to carry out ‘Buy Now Pay Later (BNPL)’ solutions pursuant to the two relevant laws.

SAMA is invested in accelerating digital transformation towards electronic payments, supporting payment infrastructure, and encouraging its adoption. SAMA’s strategic plans for the payment sector have made this achievement possible by significantly reducing reliance on cash. The central bank’s goal is to increase the electronic payment share to 70% by 2025 and to create synergies between government and private sectors, paving the way for a new era of digitalization for payment systems.

In his 2023 National Budget, Saudi Minister of Finance Dr Mohammed Aljadaan, revealed that the number of technology companies listed on the Tadawul stock exchange increased from 3 companies in FY 2021 to 9 listed companies in FY 2022. The aim is to further increase the number of jobs in the sector to 340,000 jobs, with a growth of 7%, and increasing the percentage of women’s participation to 30.5%, which is a growth of 3.3%, compared to Q2 of FY 2021.

In the government services sector, five GCC countries led by Saudi Arabia, launched a potentially game-changing unified platform for linking and integrating electronic services, which connects 70 government bodies and, 6 private sector entities. The platform also aims to achieve the highest levels of security, reliability and operational durability in the exchange of electronic services. The total number of operations since the beginning of FY 2022 has reached more than 6.7 billion operations.

In the tourism and travel sector, the deployment of electronic gates (eGates) to complete travel procedures at a number of airports in the Kingdom, is facilitating and speeding up travel procedures and enhancing border security. In an OIC context, digital connectivity is playing a crucial role in enabling domestic and cross-border eCommerce and m-commerce. Saudi Arabia, Indonesia and Malaysia are some of the OIC countries that have the highest global eCommerce and m-commerce adoption, above the global average of 76.8% and 55.4%, respectively (December 2021).

Emirates Islamic Joins Emirates Development Bank’s Credit Guarantee Scheme Aimed at Boosting the Contribution of SMEs to National GDP

Dubai – Another sign of the increasing awareness of credit and investment insurance and guarantees in the MENAT (Middle East, North Africa and Turkey) region is the signing of a Memorandum of Understanding in April 2023 between Emirates Development Bank (EDB) and Emirates Islamic to collaborate on a joint credit guarantee scheme supporting financial inclusion of small-to-medium sized enterprises (SMEs) in the UAE.

The aim is also to support SMEs in their efforts to develop their export potential to regional and international markets especially in non-hydrocarbon products as part of the government’s diversification away from oil strategy and the contribution of the non-oil sector to GDP. 

Emirates Islamic is the 11th commercial bank to join EDB’s credit guarantee scheme platform offering favourable financing solutions to SMEs. Under the terms of the MoU agreement, EDB will guarantee 50% of the finance facility extended to eligible SMEs by Emirates Islamic. Both banks will also collaborate to identify further opportunities to enhance their banking solutions.

According to Ahmed Mohamed Al Naqbi, Chief Executive Officer of Emirates Development Bank, “EDB remains committed to enhancing our nation’s SME ecosystem and supporting the sustainable economic development of the nation, specifically the five key priority sectors. We are pleased to welcome Emirates Islamic to our expanding group of commercial bank partners with the shared goal of facilitating access to financing for SMEs contributing to the UAE’s non-oil GDP.

Salah Mohammed Amin, Chief Executive Officer at Emirates Islamic commented: “As a home-grown Islamic financial institution, supporting the UAE’s SME sector is a top priority for us. This reflects our shared commitment to supporting the growth of the segment in the UAE, as we strive to enhance the overall SME business ecosystem and make financing more accessible. SMEs are a key driver of Emirates Islamic’s growth strategy and we offer a wide range of business banking products and services tailored to meet the needs of companies in this critical sector.”

EDB’s mandate includes the provision of AED30 billion in financing towards the development of the UAE economy in five strategic sectors by 2026, of which AED5 billion are to be allocated through credit guarantee schemes.

In FY 2022 EDB approved AED6.1 billion in financing, representing a 673% increase over the previous year. Of this, a total of AED1.8 billion in financing was approved to SMEs for FY 2022, representing a 387% increase over FY 2021 and a 45% increase over the previous quarter. This comprised AED1.2 billion of direct financing and AED611 million of indirect financing through EDB’s credit guarantee scheme with partner commercial banks.

ADIB Becomes First Islamic Bank in the UAE to Use KYC Blockchain Platform for the Exchange of Verified Know Your Customer Data Between Licensing Authorities and Financial Institutions

Dubai/Abu Dhabi – Abu Dhabi Islamic Bank (ADIB) has become the first Islamic bank to go live on the UAE KYC (Know Your Customer) Blockchain Platform, a national ecosystem for the exchange of verified KYC data between licensing authorities and financial institutions.

Dubai’s Department of Economy and Tourism (DET) launched the initiative in 2020 in partnership with a group of four founding member banks: Emirates NBD, Commercial Bank of Dubai, Abu Dhabi Commercial Bank, and HSBC. Since then, the Platform has expanded with the joining of DIFC, RAKEZ, RAK ICC, Mashreq Bank and WioBank.

The UAE KYC Blockchain Platform is powered by Swedish fintech company norbloc’s Fides Blockchain Platform. According to Samih Awadhalla, Acting Global Head of Retail Banking at ADIB, “when ADIB joined the UAE KYC Blockchain Consortium, we did so with the clear goal that it will facilitate a faster, more secure onboarding and exchange of digital customer data and documents through advanced blockchain-powered distributed technologies, a first of its kind in the region.”

Astyanax Kanakakis, CEO and Co-Founder of norbloc stressed that “the continued expansion of the UAE KYC Blockchain Platform to include key banking institutions, such as ADIB, further strengthens the network which has been live for three years now.”

With the launch of the KYC Blockchain Platform, the authenticated and validated KYC data of companies will simultaneously be shared with financial institutions of their preference. This will expedite the opening of bank accounts for newly registered companies and pave the way for a less cumbersome and costly process of managing KYC data for companies that are already registered with the system, he added.

The introduction of the KYC Blockchain Platform is also part of the UAE government’s strategy towards attracting global investors to this market through leveraging blockchain technology to improve business efficiency and transparency.

Through this advanced mechanism, explained Ahmad Khalifa AlFalasi, CEO, Dubai Business License Corporation, “we aim to further improve the ease of doing business, and overall, further enhance and ensure regulatory compliance in the UAE. As blockchain is a breakthrough technology, we see tremendous potential in streamlining services and operations, saving time, money, and resources for everyone involved – individuals, companies, and government bodies.”

IsDB Approves US$397m of Financing for Food Security, Road Infrastructure and Children’s Education Projects in Uzbekistan as the Bank Partners with AIIB on Improving Regional Connectivity

Tashkent – The Islamic Development Bank (IsDB) has allocated US$396.7 million of financing facilities to support the development of critical infrastructure and social services in Uzbekistan. These agreements, according to the IsDB, aim to promote sustainable economic growth, enhance rural development, and improve early childhood education in the country.

An agreement for the facilities for three projects in the Central Asian member state was signed by IsDB President. Dr. Muhammad Al Jasser and Uzbekistan Minister of Investments, Industry, and Trade, Laziz Kudratov, on 27th April 2023 during the Tashkent International Investment Forum.

The financing facilities comprise:

A US$260 million financing facility for the Integrated Rural Development Project, which is being implemented under the IsDB Group’s Food Security Response Program (FSRP). The project will empower local communities, improve their access to quality and resilient infrastructure, and strengthen knowledge of climate-smart agriculture practices. By reducing rural poverty and increasing the resilience of the target population, this project will contribute to achieving sustainable development in the country.

A US$106.7 million financing facility to support the reconstruction and upgrading of the M39 road in Uzbekistan. This project will improve the efficiency of the road transport infrastructure and ensure the safe movement of goods and people along the project road section. This will not only benefit the local economy but also promote regional integration and trade.

A US$30 million financing facility for Enhancing Access to Quality Early Childhood Education Project which will support the Government of Uzbekistan’s target of achieving universal pre-school enrolment. It aims to enhance access to quality early childhood education facilities and improve the quality of early learning environments in Uzbekistan.

IsDB President, Dr. Muhammad Al Jasser, emphasised that “these agreements demonstrate our commitment to supporting Uzbekistan’s efforts to promote sustainable economic growth, reduce poverty and enhance human development. We are pleased to partner with the Government of Uzbekistan on these key projects that will have a significant impact on the country’s infrastructure, food security, and education sectors and will ultimately contribute to the nation’s efforts towards achieving the Sustainable Development Goals.”

Similarly, Laziz Kudratov, Uzbekistan Minister of Investments, Industry and Trade added that these critical projects “will contribute to Uzbekistan’s development and progress. These projects will create new opportunities and improve the lives of our people, particularly those in rural areas and young children who will benefit from enhanced education facilities.”

Dr. Muhammad Al Jasser in fact held bilateral talks with President Shavkat Mirziyoyev of Uzbekistan, on the side lines of the 2nd Tashkent International Investment Forum, which he also addressed in a keynote address.

The IsDB President noted that cooperation between the IsDB Group and Uzbekistan has been growing, with IsDB Group approvals for Uzbekistan exceeding US$3.46 billion since the country joined the IsDB in 2003. The financing was directed towards several projects in the country across various sectors, including agriculture, energy, education, and transport.

The IsDB has processed sizeable projects amounting to nearly US$0.5 billion submitted by the Government of Uzbekistan in 2022. In particular, the Bank approved the reconstruction and upgrading of road M-39 project, an integrated rural development project, and enhancing access to quality early childhood education projects. In addition, the Bank approved financing for the PPP Combined Cycle Gas Turbine Project, in September 2022.

Furthermore, the government of Uzbekistan has nominated the IsDB as the grant agent for the GPE Grant to finance the education development project for around US$200 million, and the Bank is keen to work with the government to process the project in 2023. The IsDB also expressed its keenness to continue to support the development of Islamic finance, with three ongoing technical assistance projects on promoting Islamic capital market regulations, a framework on Islamic Banking, Awqaf development, and Green Sukuk in the country.

Dr. Al Jasser is keen for more co-financiers to be involved in financing large projects to enable them to leverage their financing and increase impact. In this respect, he agreed with President Mirziyoyev’s request to organize the ACG Donors Roundtable in Tashkent with an active participation from the IsDB Group.

Dr. Al Jasser also confirmed that the IsDB is developing a Regional Central Asia Connectivity Programme in partnership with the Asian International Infrastructure Bank (AIIB), focusing on improving intra-and inter-regional connectivity.        

Malaysia and Indonesia Launch Two New Electronic and QR Pay-ments Linkages to Facilitate Faster, Cheaper and More Transparent National and Cross Border Payments Ecosystem

Kuala Lumpur/Jakarta – Two important developments in electronic payment systems materialised in Indonesia and Malaysia in April and early May 2023. In the first development, Bank Indonesia (BI) and Bank Negara Malaysia (BNM), the central banks of the two neighbouring OIC countries, completed the commercial launch of the Indonesia-Malaysia cross-border QR payment linkage in early May 2023.

The launch follows from the successful completion of the pilot phase of the linkage announced on 27 January 2022. The commercial launch of this linkage sees the number of participating financial institutions which include non-banks increase. This will enable more Indonesians and Malaysians to make instant retail payments in either country by scanning Quick Response Code Indonesian Standard (QRIS) or DuitNow QR codes at physical stores or online merchants using services offered by participating financial institutions.

According to Perry Warjiyo, Governor of Bank Indonesia, “cross-border QR payment linkage between Indonesia and Malaysia is concrete evidence of strengthened cooperation on Regional Payment Connectivity to promote faster, cheaper, more transparent and more inclusive cross-border payments, particularly for the benefits of micro, small and medium enterprises. The linkage aligns with the G20 initiative in establishing the Roadmap for Enhancing Cross Border Payments. It provides more options for users in cross-border payment transactions and serves as a key to improve efficiency, to promote digital economy and financial inclusion in the region, as well as to maintain macroeconomic stability by promoting more extensive use of local currency for bilateral transactions under the Local Currency Transaction Framework.”

Bank Negara Malaysia Governor Tan Sri Nor Shamsiah Mohd Yunus concurs that “ASEAN is more connected now than ever. Many more users from Malaysia and Indonesia will benefit from a secure, more seamless and more efficient experience to make and receive cross-border payments. This in turn has significant potential to boost economic activities, including tourism spending in our two countries. The payment linkage will also help expand markets for some businesses and facilitate increased settlements in local currency, thereby improving financial outcomes.”

The QR payment linkage, according to participating banks in both countries, will strengthen the close economic ties between Indonesia and Malaysia. It would support a more inclusive and stronger post-pandemic economic recovery. As international travel gathers momentum, the payment linkage is expected to not only provide travellers greater convenience, but also benefit the tourism and retail sector of both economies.

The QR payment linkage between Malaysia and Indonesia also complements a growing network of national and bilateral payment linkages within ASEAN that according to Bank Negara Malaysia “will contribute towards a more vibrant ASEAN and further development of the region as a centre of growth.” Indeed, the launch of the payment linkage is a result of close industry collaboration championed by both central banks which worked closely with the Indonesian Payment System Association, PayNet, and participating financial institutions. More financial institutions are expected to join the QR payment linkage to further expand the cross-border payments ecosystem.

In another development, the Securities Commission Malaysia (SC) in April 2023 launched a new electronic payment hub, e-PATH, which provides a more seamless and secure way for market participants and the public to make online payments to the SC. e-Path is part of the SC’s digital transformation initiatives and enables an easier online payment process for various regulatory and registration fees related to most submissions made to the securities regulator. These include fees for, among others, applications for initial public offerings, transfers of listing, as well as take-overs and mergers.

“e-Path, which will officially launch on 1st May 2023, will help enhance the overall user experience through faster and more efficient processing of payments, integration with a range of payment methods, including credit and debit cards, online banking, and access to real-time tracking of payment status,” said the SC.

OECD Members Endorse European Union Initiative to Modernise Export Credit Rules Aimed at Supporting Exporters in Member States in Transitioning to Green and Climate-friendly Transactions

Paris – OIC member states who participate in and are ‘beneficiaries’ of the Paris-based OECD’s Arrangement on Officially Supported Export Credits stand to benefit further following the endorsement by the European Union (EU) to modernise the facility’s export credit rules.

OECD member countries in fact reached an agreement in principle on 31 March 2023 on a wide-ranging EU initiative to modernise export credit rules and payment terms aimed at supporting exporters in Member States especially in transitioning to green and climate-friendly transactions.

The deal to update the Arrangement on Officially Supported Export Credits, says the OECD “will provide streamlined terms and conditions so that government-backed export finance can better meet the needs of exporters in an increasingly competitive landscape, while avoiding market distortions. At the same time, the outcome widens the scope of green and climate-friendly transactions benefitting from extra incentives in the form of more flexible financial terms and conditions.”

Specifically, the Participants agreed in principle on the expansion of the scope of green or climate friendly projects eligible for longer repayment terms (i.e. eligible under the Climate Change Sector Understanding or CCSU) to those related to (i) environmentally sustainable energy production, (ii) C02 capture, storage, and transportation, (iii) transmission, distribution and storage of energy, (iv) clean (green) hydrogen and ammonia, (v) low emissions manufacturing, (vi) zero and low emissions transport and (vi) clean energy minerals and ores.

The current financial terms are to be amended in several ways. According to an OECD statement, the proposed new Arrangement also provides more flexible financing terms and conditions for projects eligible for the CCSU as well as for all other transactions supported according to the Arrangement by:

i) increasing the maximum repayment term from 18 years to up to 22 years for climate-friendly and green transactions and from 8.5 years and 10 years to up to 15 years for most other projects.

ii) introducing further flexibilities regarding the schedule of repayments over the life of the financial package provided and adjusting the minimum premium rates for credit risk for longer repayment terms. In addition, these changes will lead to a simplification of the Arrangement text through streamlined provisions, as well as a more robust transparency regime and review procedures.

This reform is expected to come into effect later this year, once the participants complete their formal internal decision-making processes and agree to the new Arrangement text. The Participants to the Arrangement are the EU, Australia, Canada, Japan, South Korea, New Zealand, Norway, Switzerland, Türkiye, the United Kingdom, and the United States.

The EU initiated the modernisation process in June 2019 and put a first broad proposal on the table at the OECD, following which the Participants agreed to modernise the Arrangement in 2020. The March 2023 announcement is thus the culmination of more than two years of negotiations and consultations. The modernisation was needed because the financial terms of the Arrangement were outdated and were no longer adapted to market needs in a changing, global financial landscape.

The main purpose of the Arrangement on Officially Supported Export Credits is to provide a framework for the orderly use of officially supported export credits by fostering a level playing field to encourage competition among exporters. This would be based on quality and prices of goods and services exported rather than on the most favourable officially supported financing package.

Governments provide officially supported export credits through Export Credit Agencies (ECAs) in support of national exporters. Such support takes the form of either ‘official financing support’ or ‘pure cover support’, such as export credit insurance or guarantee cover.

Malaysia’s Mortgage Securitiser Cagamas Berhad Continues Issuance Momentum with Two Transactions in April and May 2023 Totalling RM700m (US$154.3m)

Kuala Lumpur – Cagamas Berhad, the National Mortgage Corporation of Malaysia, one of the most prolific issuers of Sukuk, continued its issuance momentum into 2023 with the successful pricing of two Sukuk issuances in April and May 2023 as part of hybrid Sukuk/conventional bond transactions.

On 20th April Cagamas announced the successful conclusion of an aggregate RM1.7 billion equivalent worth of issuances, comprising RM300million 3-month Conventional Commercial Papers (CCPs), RM410 million 3-year Conventional Medium Term Notes (CMTNs), RM500 million (US$110.22 million) 3-year Islamic Medium Term Notes (IMTNs), SGD60 million 1-year Singapore Dollar Fixed Rate Medium Term Notes (SGD EMTNs) and SGD90 million 2-year SGD EMTNs.

“We are pleased with the successful conclusion of our issuances in both domestic and international markets, as demand for Cagamas’ RM and SGD denominated papers continue to remain resilient despite the lingering financial market uncertainties. The 3-year CMTNs and IMTNs were successfully concluded via a book building exercise and garnered a healthy bid-to-cover ratio of 2.1 times. This allowed the Company to tighten the pricing by 3 basis points (bps) from an initial pricing of 3.93% to 3.90%. The book building exercise saw participation from a diversified pool of investors, mainly from FIs, asset managers and insurance companies. The CCPs and SGD issuances were priced via a private placement exercise,” stressed Cagamas President/Chief Executive Officer, Datuk Chung Chee Leong.

In the second transaction on 2nd May, Cagamas raised an aggregate RM499 million equivalent worth of issuances, comprising RM200 million (US$44.09 million) 2-year Islamic Medium Term Notes (IMTNs) and SGD90 million 3-year Singapore Dollar Fixed Rate Medium Term Notes (SGD EMTNs).

Datuk Chung once again welcomed the successful conclusion of the second “issuances in both domestic and international markets, as demand for high grade papers continue to gain traction amid uncertainties in the United States banking sector, coupled with expectations of further rate hikes albeit at a softer pace. Conclusion of the SGD issuance brings the total cumulative year-to-date SGD denominated issuance to SGD470 million while the 2-year IMTNs were priced via a private placement exercise. Total funds raised by the Company to-date in 2023 stands at RM6.34 billion.”

Proceeds raised from both issuances will be used to fund the purchase of housing loans and house financing from the domestic financial system, “indicating that Cagamas, being the financial intermediary between the fixed income and mortgage market, continues its role as one of the viable funding options for Financial Institutions (FIs) in Malaysia,”

These transactions follow the successful closing of a combined RM715 million (US$162.39 million) worth of issuances on 13th March 2023, comprising 1-year Variable Rate Notes (VRNs), 3-year Islamic Medium-Term Notes (IMTNs) and 5-year IMTNs. Proceeds from the issuances will be used to fund the purchase of house financing from the domestic 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. The papers which 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’ 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 (US$81.23 billion) worth of corporate bonds and Sukuk.

IILM Continues Consecutive Monthly Auction in April/May 2023 with an Aggregate US$1.56bn Reissuances of Short-Term A-1 Rated Sukuk over Three Tenors

Kuala Lumpur – The International Islamic Liquidity Management Corporation (IILM), an international organisation that develops and issues short-term Sharia’a-compliant financial instruments, successfully launched its fourth and fifth Sukuk issuances of 2023 on 4th April and 2nd May with the reissuance of an aggregate US$1.56 billion short-term Sukuk in two auctions across three different tenors of one, three, and six-month respectively.

This follows the reissuance of a similar US$1.09 billion in an auction in early March 2023 across three different tenors of one, three, and six-month. The auction on 4th April 2023 comprised a reissuance of US$740 million short-term Sukuk across three tranches and was priced as follows:

  • US$200 million of 1-month tenor certificates at a profit rate of 4.8%
  • US$320 million of 3-month tenor certificates at a profit rate of 5.0%
  • US$220 million of 6-month tenor certificates at a profit rate of 5.0%.

According to IILM, the auction generated a robust demand from both Primary Dealers and investors with a combined orderbook of US$1.70 billion, representing an average bid-to-cover ratio of 231%.

Dr Umar Oseni, Chief Executive Officer of IILM, commented that the transaction “witnessed a healthy coverage ratio across all tenors. Despite the uncertain global market environment coupled with the Federal Reserve raising interest rates for the ninth time in a row just two weeks ago, the IILM’s short-term cross-border Sharia’a-compliant liquidity instruments continue to be in demand among global investors in the Islamic financial services industry.”

The auction on 2nd May 2023 comprised a reissuance of US$820 million short-term Sukuk across three tranches and was priced as follows:

  • US$200 million of 1-month tenor certificates at a profit rate of 5.00%
  • US$300 million of 3-month tenor certificates at a profit rate of 5.17%
  • US$320 million of 6-month tenor certificates at a profit rate of 5.19%

According to IILM, the auction generated a robust demand from both Primary Dealers and investors with a combined orderbook of US$1.63 billion, representing an average bid-to-cover ratio of 199%.

Both Sukuk transactions were executed under IILM’s US$4 billion short-term Sukuk Issuance Programme. IILM Sukuk are rated “A-1” by S&P Global and “F1” by Fitch Ratings. Further to the above two reissuances, the IILM has achieved year-to-date cumulative issuances totalling US$4.35 billion through fifteen 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. Since its inaugural issuance in 2013, the IILM has issued a total of US$92.85 billion through 208 short-term Sukuk issuances ranging from 2-week to 12-month tenor, “reflecting the organisation’s ability to provide high quality Sharia’a compliant instruments and reliable offerings to both Primary Dealers and investors, as well as offering stability to the global Islamic liquidity market.”

The IILM’s short-term Sukuk programme has a current outstanding issuance size amounting to US$3.51 billion. The IILM’s short-term Sukuk is distributed by a diversified network of 10 primary dealers globally, namely Abu Dhabi Islamic Bank, Al Baraka Turk, Boubyan Bank, CIMB Islamic Bank, Dukhan Bank, First Abu Dhabi Bank, Kuwait Finance House, Maybank Islamic, Qatar Islamic Bank, and Standard Chartered Bank. The IILM short-term Sukuk programme is rated “A-1” by S&P and “F1” by Fitch Ratings

Share this post