International Finance Corporation Extends Maiden US$50m Murabaha Financing Facility to ADIB Egypt to On-lend to Local MSMEs, Corporates and to Fund Islamic Mortgages in Egypt

Cairo – The International Finance Corporation (IFC), the private sector funding arm of the World Bank Group, extended a US$50 million Murabaha facility in the form of a subordinated loan to Abu Dhabi Islamic Bank (ADIB) Egypt in July 2023.

This is the first such Murabaha financing facility extended to an Islamic bank in Egypt by the IFC. According to the Corporation, the proceeds of the financing will be used as on-lending by ADIB Egypt for credit facilities to local MSMEs (a mix of Micro and SMEs), for Islamic housing finance, consumer credit facilities and for corporate finance to local companies.

The facility says the IFC “consists of a subordinated Murabaha financing to Abu Dhabi Islamic Bank Egypt. This Tier 2 capital instrument is intended to add diversity to the Bank’s capital base and long-term growth prospects.” The Murabaha financing has a tenor of 5 years.

ADIB Egypt is an Egypt based Islamic bank that started its operations after the acquisition of the National Bank for Development (NBD) in 2007 by a consortium comprising Abu Dhabi Islamic Bank and Emirates International Investment Company.

ADIB offers a broad range of banking solutions that cater to the needs of corporate and retail customers through a network of 70 branches and a team of over 2,000 employees and experts. In order to integrate further services, the Bank established an Investment Banking arm, ADIB Capital Egypt; a leasing company, ADIB Finance; and an asset management arm, ADIB Invest.

ADIB Egypt is listed and trading on the Egyptian stock exchange with a free float of 28.4 per cent.

Securities Commission Malaysia Issues Comprehensive Guidelines on Technology Risk and Cyber Security Management to Promote Sound Risk Management Practices Among Capital Market Entities

Kuala Lumpur The Securities Commission Malaysia (SC) issued Guidelines on Technology Risk Management on 1st August 2023 which aims to promote robust and sound technology risk management practices among capital market entities regulated by the Commission.

The Guidelines, which will be effective from Q3 2024 to allow sufficient time for capital market entities to familiarise and meet with their requirements, will be applicable to all capital market entities licensed, registered, approved, recognised or authorised by the SC. They effectively set out the SC’s expectations on capital market entities when they manage their technology risk. Capital market entities however are encouraged to comply with the requirements of the Guidelines as soon as possible.

According to the SC, “The Guidelines are issued to promote technology risk management among capital market entities. The outcome desired by the SC for the Guidelines is two-pronged, that is for all capital market entities to have a robust and sound framework which promotes strong oversight and management of technology risks, and ultimately for the capital market to be cyber resilient.”

In formulating the Guidelines, the SC has taken into account feedback received from the Public Consultation Paper on The Proposed Regulatory Framework on Technology Risk Management, which was published last year.

Among the requirements set out in the Guidelines include the establishment and implementation of an effective technology risk framework, technology project management, technology service provider management and cyber security management by capital market entities. The Guidelines also include several appendices relating to guidance notes on risk identification, mitigation and reporting, and on the adoption of artificial intelligence (AI) and machine learning (ML).

Saudi Council of Ministers Approve Establishment of Independent Insurance Authority to Enhance the Industry’s Efficiency, Contribution to Non-oil GDP and to Ensure its Stability While Protecting Policyholders’ Interests

Riyadh – The Saudi Arabian Council of Ministers gave approval to the Saudi Central Bank (SAMA) in August 2023 to establish a standalone Insurance Authority.

According to SAMA Governor, Ayman Al-Sayari, “the establishment of an independent Insurance Authority tasked with regulating and supervising the insurance sector in the Kingdom is expected to enhance the sector’s efficiency, increase its contribution to the non-oil GDP and adherence to the latest global trends in the industry.”

The decision to set up an Insurance Authority, he added, “reflects the Saudi leadership’s commitment to unlocking the full potential of the insurance sector to be a vital pillar of the national economy and its role in fostering robust risk management systems.”

The new Insurance Authority will continue to expand on SAMA’s mandate of developing the insurance sector and enabling its players to support the stability of the sector, while ensuring the protection of beneficiaries and policyholders’ interests. The Authority will also continue efforts in enhancing the regulatory, legal and technical frameworks of the insurance sector. These efforts include keeping pace with the latest FinTech developments, introducing innovative services and products, launching initiatives to bolster the financial positions of insurance companies, and developing specialized technical expertise among national professionals.

The establishment of the Insurance Authority is timely because it also coincides with the approval in June 2023 by SAMA of InsurTech Rules, following a public consultation via the National Competitiveness Centre’s Public Consultation Platform. This initiative is part of SAMA’s continuous efforts to enhance the insurance sector for the latter to provide quality services commensurate with developments in the insurance industry in general and insurance technology services in particular.

The InsurTech Rules govern the underlying business and its activities comprehensively, ensuring the protection of clients, and promoting fair competition in the offering of solutions and services to support the stability and development of the sector. The goal of the Rules is to enable InsurTechs to perform flexibly in an innovative-based regulatory framework, which covers basic pillars such as practitioners’ obligations, the accuracy of client information, and codes of conduct. They aim to protect clients’ rights and ensure compliance and control.

Under the new InsurTech Rules, an Insurtech Company shall comply with the Saudi Central Bank Law, the Cooperative Insurance Companies Control Law (Takaful Law) and its Implementing Regulation, the Anti-Money Laundering Law and its Implementing Regulation, the Law on Combating Terrorist Crimes and its Financing and its Implementing Regulations, and the Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) Guide issued by SAMA, the Electronic Transactions Law and its Implementing Regulation, the Anti-Cyber Crime Law, complying with requirements related to information security, Personal Data Protection Law, along with the Instructions issued by SAMA related to the Insurtech Activities, Financial Consumer Protection Principles and Rules, and any other relevant laws and regulations.

SAMA defines Insurtech Activities as “any solutions or services fully provided or designed by the use of technology within the scope of the Insurance Activities.” The InsurTech Rules aim to: i) Define the regulatory and supervisory framework and concepts of practicing Insurtech Activities. ii) Protect the rights of Insurtech Companies’ Clients. iii) Develop and encourage Insurtech Activities.

SAMA says in a statement that it reaffirms its commitment to supporting and facilitating the growth of the insurance sector and regulating the relationship between InsurTech companies and clients; preserving the rights of all parties involved.

The insurance including the Takaful (Cooperative Insurance) market in the Kingdom is nascent albeit steadily growing for cultural reasons which impeded market penetration and has resulted in low premium income. With the structural reforms in Saudi society and the economy relating to compulsory health insurance for expatriates, compulsory motor insurance, and the rise of credit and investment insurance following the establishment of Saudi Eximbank in 2020, the sector is rapidly changing.

The biggest boost for the insurance sector will inevitably come from the Saudi Arabia Vision 2030 strategy for diversifying its economy involves multiple mega-projects such as NEOM City that will create huge opportunities for insurers, innovative wrap products, while at the same time driving rapid development of the sector.

Al Khobar-based Rawabi Holdings Closes SAR7.17bn (US$1.91bn) Multi-currency Term and Revolving Credit Facility in one of the Largest Private Sector Syndicated Financings in Saudi Arabia

Al Khobar – A consortium of Saudi-based banks closed a SAR7.17 billion (US$1.91

billion) multi-currency term and revolving credit syndication facility for the Al-Khobar-based Rawabi Energy Group on 24th August 2023. The facility denominated in Saudi riyal and US dollar tranches, according to the company is “one of the largest private sector syndicated financings in Saudi Arabia.”

HSBC was mandated as the sole structuring bank and with Gulf International Bank, joint global coordinators of the transaction. Participants in the syndication comprised some of the Kingdom’s largest Islamic banks including Saudi Awwal Bank, Gulf International Bank Saudi Arabia, Saudi National Bank, Alinma Bank, Riyad Bank, Bank Al Jazira and Al Rajhi Bank. The UAE’s First Abu Dhabi Bank (FAB) also participated in the syndication. No details about the pricing, tenor and segmentation of the currency allocations were given.

According to Abdulaziz Al-Turki, Chairman of Rawabi Energy, a subsidiary of Rawabi

Holding Group, the transaction was oversubscribed by 1.33 times the initial order. The proceeds from the facility will be used by the company to further boost its growth plans, to refinance existing debt and for general corporate financial purposes.  

“We are delighted to receive this level of support on our debut dual-currency syndicated transaction from the local and regional banking community. This transaction demonstrates the strong partnership we have with our financiers, who have supported our growth over the years and played a key role in positioning Rawabi Energy as a national champion. “This transaction streamlines our existing finances and provides us with the required funding for further growth. With our industry leadership, commitment and growth plans, we will continue to deliver and achieve, aligning with Saudi Arabia’s Vision 2030. The facility also allows us to diversify our funding sources,” commented Al-Turki.

Rawabi Energy was set up as a closed joint stock company in 2020 to consolidate Rawabi Holding’s energy services operations into integrated onshore and offshore oil and gas field services. Its subsidiaries include Rawabi Vallianz Offshore Services (RVOS), Rawabi Oil & Gas (ROG) and United Safety Ltd in Canada.

Central Bank of UAE Successfully Closes Two Auctions of T-Sukuk in July and August 2023 Raising an Aggregate AED12.9bn (US3.51bn)

Abu Dhabi – The United Arab Emirates, represented by the Ministry of Finance (MoF) as the issuer, in collaboration with the Central Bank of the UAE (CBUAE) as the issuing and paying agent, held two auctions of the recently-introduced Islamic Treasury Sukuk issuance programme (T-Sukuk) – one on 3rd July and the other on 23rd August 2023.

According to the CBUAE, the second auction of the UAE T-Sukuk programme witnessed a strong demand through the eight primary dealers, with bids received worth AED6.9 billion (US$1.88 billion), and an oversubscription by 6.2 times. The strong demand was across both the two-year and three-year tranches. The success is reflected in the attractive market driven prices, which was achieved by a spread of 0 to 5 basis points (bps) over US Treasuries with similar maturities. The second auction added the CBUAE followed the practice of re-opening the T-Sukuk which helps in building up the size of individual Sukuk issues over time and improves liquidity in the secondary market.

The third auction of T-Sukuk in August 2023 similarly witnessed a strong demand through the eight primary dealers, with bids received worth AED6 billion (US$1.63 billion), and an oversubscription of 5.5 times. The strong demand was on both the two- and five-year tranches. The success is reflected in the attractive market driven prices, which was achieved by a spread of zero to two basis points over US Treasuries with similar maturities.

The third auction also witnessed the issuance of the first dirham-denominated Islamic Treasury Sukuks with a five-year maturity, which achieved very strong results and was oversubscribed by 6.6 times.

The aim of the Islamic T-Sukuk programme is to contribute to building a local currency Sukuk market, developing the UAE dirham denominated yield curve, diversifying funding sources, boosting the local financial and banking sectors, providing safe investment alternatives for local and foreign investors, strengthening the local debt capital market, and developing the investment environment, as well as supporting sustainable economic development.

Saudi EXIM Extends SAR600m (US$159.95m) Sharia’a-compliant Export and Pre-export Working Capital Financing to Riyadh Cables

Riyadh – Saudi Arabia’s national export credit and investment insurer, Saudi Eximbank (Saudi EXIM) extended a SAR600 million (US$159.95 million) Sharia’a compliant credit facility to the Abha-based Riyadh Cables Group Co. on 15 August 2023.

The proceeds of the facility, which matures on 30 April 2024 said Riyadh Cables in a disclosure to Tadawul (the Saudi Stock Exchange), will be used for Export & Pre-export Working Capital financing requirements. The facility is guaranteed by a promissory note offered by Riyadh Cables covering 100% of the value of the credit.

“Our global strategy encompasses several key elements aimed at enhancing the Kingdom’s non-oil GDP growth and fostering trade with targeted markets,” explained Eng. Saad Alkhalb, CEO of Saudi EXIM. This strategy includes supporting especially SMEs, strategic sectors such as agri-business and food security, pharmaceuticals, renewable energy, construction materials etc.

The aim, he added, is also to prioritise targeted markets for Saudi exporters through collaboration and partnerships with local and international financial and other institutions by offering tailored financial solutions addressing the unique needs of buyers, ensuring access to necessary funding for procuring the Kingdom’s products.

The launch of Saudi EXIM in 2020 came as an outcome of Saudi Vision 2030’s programmes and initiatives that aim to motivate Saudi exports and enhance the supply chains. In a very short time, Saudi EXIM was able to establish itself as an essential part of growing exports, having provided covered exports worth over US$2.8bn and US$3.2bn in loans to Saudi exporters since inception.

In the space of three years, it has established itself as an ambitious institution resolute in supporting the Kingdom’s international trade, assisting domestic exporters, and fostering sustainable economic growth.

Cagamas Berhad Signs Housing Finance and Mortgage Securitisation MoU with Mortgage Refinancing Company of Uzbekistan to Develop Primary and Secondary Markets in the Central Asian Country

Kuala Lumpur – Cagamas Berhad, the National Mortgage Corporation of Malaysia, signed a Memorandum of Understanding (MoU) with the Mortgage Refinancing Company of Uzbekistan (UzMRC) on 25th August 2023 to collaborate in developing viable housing finance models, including for the affordable housing market, leading also to the growth of a secondary mortgage finance market in Uzbekistan.

The Cagamas model is well regarded by the World Bank as the most successful secondary mortgage liquidity facility and Corporation is the second largest issuer of debt instruments, both conventional and Sharia’a compliant issuances, after the Government of Malaysia and the largest issuer of AAA-rated corporate bonds and Sukuk in the market.

The MoU was signed by Cagamas’ President/ Chief Executive Officer, Datuk Chung Chee Leong and its Uzbekistan counterpart, UzMRC Chief Executive Officer/Managing Director, Murodjon Farmanov at Cagamas HQ during a visit by an Uzbek delegation to Malaysia. The signing ceremony was witnessed by Cagamas Chairman, Dato’ Bakarudin Ishak, the former Head of Islamic Banking and Assistant Governor at Bank Negara Malaysia, and the Deputy Minister of Economy and Finance of Uzbekistan, Adiz Boboev.

“This MoU,” explained Datuk Chung, “enables Cagamas to share its wealth of experience in housing finance and capital market instruments to be mutually exchanged between Malaysia and Uzbekistan. The implementation of the MoU is also aimed at paving the way for greater collaboration as well as enhancing interlinkages in areas of mutual interest between both countries.”

He further added, “Supporting newly established secondary mortgage corporations through our common membership in the International Secondary Mortgage Market Association (ISMMA) exemplifies the cooperation and synergistic efforts of its member countries to achieve a mutual objective, which is to enhance the stability of the housing finance and mortgage markets.”

ITFC Leads US$40m Syndicated Murabaha Facility for Prime Bank in Bangladesh to Support the Growing Trade Finance Business of the Bank for SMEs and the Corporate Sector

Dhaka – The International Islamic Trade Finance Corporation (ITFC), the trade fund of the Islamic Development Bank (IsDB) Group, arranged a Syndicated Murabaha Financing Facility of US$40 million for Prime Bank Limited in Bangladesh on 24th August 2023.

The financing facility will support the growing trade finance business of Prime Bank for SME and Corporate segments. According to the Corporation, through this strategic partnership, ITFC will be supporting the key sectors of the economy by availing vital foreign currency to support the global trade of Bangladeshi importers and exporters.

Prime Bank’s Managing Director and CEO Hassan O. Rashid and ITFC’s Chief Operating Officer (COO) Nazeem Noordali signed the Financing Agreement in a signing ceremony at Prime Bank Headquarters in Dhaka, Bangladesh.

“Our partnership with Prime Bank Limited marks a significant step towards supporting the growth of SMEs and facilitating the import of vital raw materials in Bangladesh. Enabling private sector development is pivotal for the nation’s economic advancement, and our commitment to empowering SMEs with access to trade facilities underscores the core tenets of ITFC’s strategic vision. This strategic move also empowers SMEs to seamlessly integrate into global value chains,” stressed Mr Noordali.

“We are very delighted to conclude the Syndicated Murabaha Financing Facility with ITFC which will expand our capacity to conduct cross-border trade business. The support from ITFC has strategic value and significance for Prime Bank. This will strengthen our existing bilateral relationship with ITFC and the other syndication partners” added Mr Rashid of Prime Bank.

ITFC is very active in Bangladesh. This latest transaction follows the US$1.4 billion annual financing plan signed in May 2023 in Jeddah by ITFC and the Government of Bangladesh. The financing plan is dedicated to facilitating the importation of petroleum products by Bangladesh Petroleum Corporation (BPC) for the period between July 2023 till June 2024.

Since its inception in 2008, the ITFC has approved over US$16 billion for the Government of Bangladesh to support the country’s energy security.

Malaysia’s Mortgage Securitiser Cagamas Berhad Continues Issuance Momentum with Aggregate RM1.03bn (US$220m) of Sukuk Issuances Transaction in Second Half July 2023 as New CEO Set to Take Over

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 on 25th July 2023 of an aggregate RM1.03 billion (US$220 million) equivalent worth of funds raised, comprising RM300 million (US$64.66 million) 3-month Islamic Commercial Papers (ICPs) and RM735 million (US$158.41 million) 1-year Islamic Medium-Term Notes (IMTNs).

This is Cagamas’ second transaction in the month following the RM3.21 billion (US$710 million) worth of funds raised on 6th July 2023, which comprised a total of RM390 million 3-month funding via Conventional Commercial Papers (CCPs), RM100 million multi tenure ASEAN Sustainability Bonds, RM1.36 billion (US$300 million) multi tenure Islamic Medium Term Notes (IMTNs), RM850 million 3-year Conventional Medium Term Notes (CMTNs) and SGD150 million (RM511.95 million equivalent) 1-year Singapore Dollar Medium Term Notes (SGD EMTNs).

“Cagamas’ fund-raising activities continue to gain momentum with the successful conclusion of the funding exercises in an improved domestic market condition,” stressed Datuk Chung Chee Leong, President/Chief Executive Officer of Cagamas, who is retiring on 30 August 2023 after 11 years at the helm.

“Proceeds raised from the issuances will be used to fund the purchase of Islamic home financings from the domestic financial system, reflecting continued provision of liquidity by the Company to the domestic banking system. The IMTNs were successfully concluded via a book building exercise that allowed the Company to tighten the pricing by 5 basis points (bps) from an initial price guidance of 3.79% to the final 3.74%, which registered a 40 basis points (bps) spread against the Malaysian Government Securities with a final book-to-cover ratio of 1.89 times. The issuance attracted subscription from a diversified range of investors including financial institutions, asset management and insurance companies. The ICPs were privately placed out,” he added.

The new issuances bring the total funds raised in 2023 thus far by Cagamas to RM14.01 billion (US$3.02 billion). The Islamic 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.

Datuk Chung Chee Leong is succeeded by Kameel Abdul Halim as the new President/Chief Executive Officer of Cagamas effective 11 September 2023. Kameel, said the Corporation, has more than 25 years of experience in the financial services industry with a wide range of expertise in commercial banking, development finance and investment banking to lead Cagamas on its next phase of growth.

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 RM408.46 billion (US$89.95 billion) worth of corporate bonds and Sukuk.

IILM Continues Consecutive Monthly Auction in August 2023 with an US$1.15 billion Reissuance of Short-Term A-1 Rated Sukuk over Three Tenors

Kuala Lumpur – The International Islamic Liquidity Management Corporation (IILM), an international organisation that issues short-term Sharia’a-compliant financial instruments, successfully launched its eighth series of Sukuk issuances of 2023 on 1st August with the reissuance of an aggregate US$1.15 billion short-term Sukuk in three tranches across three different tenors of one, three, and six months respectively.

This transaction follows the seventh series of Sukuk issuances of 2023 on 11th July with the reissuance of an aggregate US$790 million short-term Sukuk in three tranches across three different tenors of one, three, and six months respectively.

The auction on 1st August 2023 comprised a reissuance of US$1.15 billion short-term Sukuk across three tranches and was priced as follows:

  1. US$300 million of 1-month tenor certificates at a profit rate of 5.35%
  2. US$450 million of 3-month tenor certificates at a profit rate of 5.63%
  • US$400 million of 6-month tenor certificates at a profit rate of 5.72%.

This latest auction, according to the IILM, marked the 10-year anniversary of the inaugural IILM Sukuk issuance in 2013. According to the Corporation, the auction generated a robust demand from both Primary Dealers and investors with a combined orderbook of US$1.89 billion, representing an average bid-to-cover ratio of 165%.

Dr Umar Oseni, Chief Executive Officer of the IILM, commented: “We are indeed pleased with today’s auction that saw the 6-month tenor, especially, fully covered within the first five minutes, reflecting investors healthy appetite for the tenor. Today’s auction is also made more meaningful as it marks 10 years since the IILM issued its inaugural short-term Sukuk in August 2013.”

The Sukuk transaction was executed under IILM’s US$4 billion short-term Sukuk Issuance Programme. The Programme and 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$7.49 billion through 24 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$94.99 billion through 214 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.

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