The Republic of Philippine Finally Completes its Inaugural 5.5-year US$1bn Sukuk Wakala/Ijara/Tawarruq in December 2023 as it Targets More Issuances in the Future to Tap Investors from the GCC

Manila – After so many years of speculation about an imminent sovereign Sukuk issuance, the Government of Philippines, through the Bureau of the Treasury, finally entered the international Sukuk market with the issuance of the country’s inaugural Sukuk – a 5.5-year US$1 billion Rule 144A / Regulation S Hybrid Sukuk on 29 November 2023. The transaction closed on 6 December 2023.

According to the Kawanihan Ng Ingatang-Yaman (Bureau of the Treasury), the Philippines successfully priced its Sukuk issuance utilizing real estate assets under the Ijara (leasing) and Wakala (agency) structures, together with a Commodity Murabaha (Tawarruq) aspect.

The Bureau of Treasury had mandated Citigroup, Deutsche Bank, Dubai Islamic Bank, HSBC, MUFG, and Standard Chartered Bank to act as Joint Bookrunners and Joint Lead Managers for the transaction, and to arrange a series of investor calls and meetings, resulting in a successful roadshow on the 27 and 28 November.

The Sukuk issuance also comes after the Philippine Investor Roundtable in Doha and the Philippine Economic Briefing in Dubai in September 2023.

The debut Sukuk, issued by ROP Sukuk Trust on behalf of the obligor, the Republic of Philippine (ROP), was met with strong demand, with the orderbook oversubscribed 4.9 times. This allowed the Republic to price its 5.5-year Sukuk at T (Treasuries) + 80 basis points (bps), with a profit rate of 5.045% per annum, representing a 35bps compression from the initial price guidance of around T+115 bps.

ROP Sukuk Trust, which is administered by Land Bank of the Philippines – Trust Banking Group, is a legal entity in the Philippines set up solely for the purpose of participating in the transactions to which it is a party. It is also the trustee.

The net proceeds of the certificates from the transaction will complete the Republic’s external commercial funding this year which will be used for general purposes, including but not limited, to budgetary support.

According to the Philippine Finance Secretary Benjamin Diokno, “the success of our inaugural Sukuk issuance affirms the Republic’s significant standing in the international capital markets and underscores investors’ conviction in our financial inclusion agenda. We hope this transaction will create positive momentum for Islamic banking and finance in the Philippines, and we look forward to the active participation of all stakeholders. This achievement follows the success of the US$3 billion triple-tranche conventional bond issued in January 2023, further attesting to the Republic’s solid standing in the international financial markets and the continued support from investors.”

The landmark maiden Sukuk issuance is part of the Republic’s agenda to promote the development of Islamic banking and finance in the country. The Sukuk issuance, says the Bureau of Treasury, allows the Republic to diversify its global investor base and tap on Islamic-focused investors across the Middle East and marks the establishment of an active, liquid reference curve for other Philippine issuers to access the Sukuk market in the future.

“This milestone transaction illustrates the Republic’s ability to leverage the stable market conditions and access the international capital markets. The transaction attracted strong interest, not only from a wide range of high-quality Islamic investors but from others as well, showcasing investors’ confidence in the Republic’s credit profile,” added the Bureau.

Not surprisingly, investors from the Middle East accounted for 30% of the final US$4.9 billion order book spread across 183 accounts, followed by Europe with 37%, Offshore US with 19%, and Asia with 14%. Fund and asset managers dominated the allocation accounting for 60%, banks 24%, central banks, official institutions and agencies 8%, pension funds and insurers 7%, and others 1%.

The Sukuk certificates were assigned a rating of Baa2 by Moody’s Investors Service, BBB+ by Standard & Poor’s, and BBB by Fitch Ratings, and are listed on the Singapore Exchange Securities Trading Limited and Nasdaq Dubai for trading.

At the bell ringing ceremony marking the listing of the certificates on Nasdaq Dubai on 12 December 2023, Finance Secretary Benjamin Diokno commented: “The listing of the ROP’s maiden US$1 billion Sukuk issuance in Nasdaq Dubai affirms the Philippine Government’s commitment to further its ties with the Gulf Cooperation Council. This marks a significant step towards enhancing the Islamic finance market in the Philippines, bearing in mind its importance in unlocking the potential of Southern Philippines and in the deepening of economic ties with the Arab world.” Southern Philippine especially the Mindanao Province is majority Muslim populated, where Islamic banking is starting to take off in a more organised way.

Similarly, Hamed Ali, CEO of Nasdaq Dubai and DFM stressed that the Philippine issuance “not only serves as an opportunity to deepen our ties with the Philippines but also marks a key milestone in our joint efforts to broaden Islamic capital markets. Capitalizing on a substantial and diverse investor base, Dubai’s capital markets offer unique exposure and access to both regional and international investors. We are committed to extending this partnership further in the aim we collectively achieve the full potential of our collaboration.”

With a total debt issuance value of US$127.41 billion, comprising US$42.30 billion in bond listings and US$85.11 billion in Sukuk issuances, Nasdaq Dubai cements its position as a leading exchange for fixed income listings, especially for Sukuk listings.

IsDB Board Approves US$2.12bn in Financing for New Development Projects in Various Sectors to 16 Member States at their 353rd Board Meeting in Jeddah in December 2023

Jeddah – The Board of Executive Directors of the Islamic Development Bank (IsDB) approved US$2.12 billion in financing for new development projects in Member States at their 353rd Board Meeting in Jeddah in December 2023.

The meeting, chaired by IsDB President and Group Chairman, Dr Muhammad Al Jasser, approved financing for 16 projects that support socio-economic development and promote sustainability in member countries in key strategic sectors such as transport, energy, health and education, in addition to youth skills development, entrepreneurship and employment.

Dr Al Jasser also confirmed that IsDB is working to deepen the Sukuk market with more green, sustainability, or ordinary Sukuk issuances to enable the Bank to finance more projects.

This latest round of financing comprises:

i)  An €803.3 million (US$845.57 million) financing facility to Indonesia to contribute to its “Strengthening Indonesia’s Health Care Referral Network Project”, whose objective is to enhance the physical and service capacity of the health referral system in Indonesia, ensuring that everyone has equal access to quality healthcare services in all districts, cities, and provinces.

ii)  A €187.84 million (US$204.00 million) financing facility to Morocco towards the “Construction of Guercif-Nador Highway Project” which aims to improving the connectivity of the Oriental region and the Nador West Med Port complex by completing the construction 104 km of highway including 17 bridges and 53 flyovers by 2029.

iii)  A €136.86 million (US$144.00 million) financing facility to Burkina Faso towards improving the living environment of the population and supporting transport sector development.

iv) A US$106 million financing facility to Uganda towards improving the living environment of the population and supporting transport sector development.

v)  A €55 million (US$58 million) financing facility to Mali towards modernising the country’s electricity transmission grid through expanding the high voltage transmission infrastructure.

vi)  A €64.30 million (US$70 million) financing facility for Chad to support the higher education sector.

vii) A €25.24 million (US$27.13 million) financing facility to Togo to support the higher education sector.

viii) A US$16.90 million financing facility to Djibouti towards the Integrated Urban Development Project in Bouloas to improve the livelihoods of people living in slum areas through developing basic infrastructure.

ix) A US$79 million financing facility to the Kyrgyz Republic towards improving access to affordable, resilient, and energy-efficient affordable housing, as well as to support Sharia’a mortgage development in the country.

x) A US$40 million financing facility the Maldives towards supporting sustainable and green economic transformation through improved access to Islamic finance facilities.

xi)  A US$200 million financing facility to Pakistan towards the reconstruction of core multi-hazard resilient housing units to the populace affected by the 2022 floods in Sindh province.

xii) A US$27 million financing facility to Tajikistan towards the development of the international transit traffic potential of Tajikistan.

xiii) An aggregate US$300million financing facility to Türkiye towards reconstruction of the earthquake-affected areas in the south east of the country comprising an US$100 million facility to support the economic recovery of earthquake-affected industrial firms and SMEs in various sectors; and an US$200 million facility towards rehabilitation of health facilities and services to improve the quality of life of the affected population.

Alkhorayef Water and Power Technologies Co. Upsizes its Islamic Finance Facility from Riyad Bank to SAR544m (US$145.05m)

JeddahAlkhorayef Water and Power Technologies Co. signed an Islamic financing facility agreement with Riyad Bank for SAR450 million (US$119.98 million) on 25th December 2023, but upsized the facility a week later by SAR94 million to SAR544 million (US$145.05 million) on 2nd January 2024.

In a disclosure to Tadawul (the Saudi Stock Exchange), Alkhorayef said that the proceeds will be used for project financing of Operations and Maintenance for The Manfouha Sewage Treatment Plant (PACKAGE 5) in Riyadh. The facility which has a tenor of 8 years maturing on 25th December 2031, is covered by bank guarantees, and a promissory note, which together amount to the value of financing obtained.

In a separate transaction, Tanmiah Food Company secured a new long-term Islamic credit facility amounting to SAR450 (US$119.98 million) from Banque Saudi Fransi to support its ongoing strategic expansion plans on 19th December 2023. The 7-year facility is guaranteed by a promissory note from Tanmiah to the value of the facility.

SAMA Issues Rules for Regulating Buy Now Pay Later (BNPL) Companies in the Kingdom as 7th BNPL Firm Receives Authorisation

Riyadh – The Saudi Central Bank (SAMA) published “Rules for Regulating Buy Now Pay Later (BNPL) Companies,” in December 2023 as part of its role in supervising and controlling BNPL companies.

The BNPL framework is also part of SAMA’s continuous efforts to develop the financial sector as a whole and empower the Fintech sector in particular. Under the rules, BNPL activity is defined as “a type of financing that allows a consumer to purchase goods or services without a term cost payable by the consumer.”

The rules aim to regulate the licensing of BNPL companies and set minimum standards and procedures required to offer BNPL services in the Saudi market. Additionally, said SAMA, the development of these rules will contribute to the growth and sustainability of the sector while safeguarding consumers’ rights.

The rules include various provisions related to licensing requirements, internal regulatory measures such as internal policies and procedures, information security standards and measures to combating financial crimes. Additionally, they also comprise regulatory obligations designed to safeguard consumers, and the establishment of ceilings for activities and credit, as well as provisions pertaining to supervision and compliance,

SAMA also approved the licensing of Jeel Pay to provide BNPL solutions in December 2023, bringing the number of authorised BNPL companies in the Kingdom to seven, bringing the total number of licensed/permitted FinTech companies to 58.

This decision said SAMA is to support the finance and FinTech sectors by enhancing their operational efficiency and innovative financial solutions to promote financial inclusion in Saudi Arabia.

SRC Extends its Mortgage Refinancing Agreement with Al Rajhi Bank by SAR5.8bn (US$1.55bn) Bringing the Total Value of its Refinancing Portfolio with the Bank ibn January 2024 to SAR10.8bn (US$2.88bn)

Riyadh – The Saudi Real Estate Refinance Company (SRC), the Sharia’a compliant mortgage finance and securitisation company owned by the Public Investment Fund (PIF), the Saudi sovereign wealth fund, extended its refinancing agreement in January 2024 with Al Rajhi Bank, the world’s largest Islamic bank by mortgage assets and market cap, with an additional SAR5.8 billion (US$1.55 billion) bringing the total value of refinancing agreements between the two to SAR10.8 billion (US$2.88 billion).

The original portfolio purchase agreement signed with Al Rajhi Bank was on 19 March 2023 to refinance SAR5 billion (US$1.33 billion) of the Bank’s real estate financing portfolio. The deal, the largest signed in the Saudi banking industry of its kind, reflects the ongoing efforts by SRC to actively support further development in the residential real estate finance sector by expanding its refinancing portfolio, and its solutions to create a stable secondary real estate market in the Kingdom.

This is the latest agreement in a series of similarly significant deals by SRC and others such as the Saudi Home Loans Company (SHLC), one of the largest Islamic mortgage finance companies in the Kingdom, to support mortgage financiers and originators in order to broaden Saudi citizens’ access to more affordable and flexible home financing solutions that suit their needs.

SHLC for instance in early 2023 signed two Tawarruq finance facilities totalling an aggregate SAR815 million (US$ 217.11 million). The first facility was for SAR500 million (US$133.19 million) with a 5-year tenor provided by Arab National Bank. The second facility a 3-year SAR315 million (US$83.91 million) facility – comprising SAR300 million in Tawarruq Finance and SAR15 million in the form of a Treasury Product – was provided by Riyad Bank.

The continued collaboration between SRC and Al Rajhi Bank, as highlighted by this new agreement, says the company pinpoints its pivotal role in enhancing growth capabilities of banks and financiers through offering liquidity, capital management, and balance sheet de-risking solutions that will lead to an increase in the origination of new home loan assets, making home financing more accessible.

According to Majeed Fahad Alabduljabbar, the new CEO of SRC, “the extension of our partnership with Al Rajhi Bank speaks volumes about our combined efforts to take part in further growing the Kingdom’s housing market. As we continue to deepen our ties with leading financial institutions, our objective remains clear: to establish a benchmark secondary housing finance market in the Kingdom. The extension of this agreement marks a significant stride in advancing the goals of the Vision 2030 Housing Programme. This initiative aims to facilitate increased accessibility to home financing, thus fostering greater rates of home ownership.”

There is no doubt that SRC is setting the pace in the Islamic mortgage finance and securitisation sector in the OIC countries, although Malaysia’s Cagamas Berhad (the National Mortgage Corporation of Malaysia) has an impressive track record since 1986 in both conventional and Islamic mortgage securitisation financed through the regular issuance of Sukuk and bonds, which are listed and traded on Bursa Malaysia. The Cagamas model is well regarded by the World Bank as the most successful secondary mortgage liquidity facility.

The Corporation 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, Cagamas has cumulatively issued circa RM413.76 billion (US$87.91 billion) worth of corporate bonds and Sukuk. Proceeds raised from Cagamas issuances are similarly used to fund the purchase of housing loans and financing from the domestic financial system.

For SRC, it is a steep learning curve. Backed by the Saudi sovereign wealth fund, it has made tremendous progress over the last five years incorporating several innovations, incentives and partnerships. In November 2023, it successfully closed its latest Sukuk offering – a dual tranche SAR3.5 billion (US$930 million) Mudaraba/Murabaha Sukuk. (see separate article above). Last year, SRC also lowered the mortgage benchmark curve (the Long-Term Financing Rate –LTFR-) by 26 basis points for mortgage tenors from 20 to 30 years.

SRC was established in 2017 PIF after obtaining a license from SAMA (Saudi Central Bank) to operate in the market and as part of the government initiatives to support the Vision 2030 Housing Programme, through the growth and sustainability of housing finance and establishing a secondary housing finance market in the Kingdom.

UAE Government Prioritises Green and Sustainable Islamic Finance and Sukuk Market Development as Total Banking Market Share Tops 23% or AED845bn (US$230.07bn) in FY 2022

Abu Dhabi/Dubai – The total value of green and sustainability-linked bonds and Sukuk registered with The Securities and Commodities Authority (SCA) of the UAE reached AED15.45 billion (US$4.21 billion) during the first 11 months of 2023.

Mohamed Ali Al Shorafa, Chairman of the SCA Board, in an interview with Emirates News Agency (WAM) during COP28 in Dubai in December 2023, affirmed the UAE’s commitment to a sustainability approach especially in the fixed income capital markets segment through the issuance of Green and sustainability-linked bonds and Sukuk.

“Issuing Green bonds and Sukuk is one of the transformational projects in supporting the efforts to make the UAE the new global economic hub for the next ten years. The SCA’s decision to exempt companies wishing to list their Green or sustainability-linked bonds or Sukuk in the local market from registration fees for 2023, marked a significant start in the growing demand for the issuance of these Sukuk and bonds,” he added.

Performance agreements for issuing Green bonds and Sukuk were signed by federal government entities in 2022, which according to Dr Maryam Al Suwaidi, Chief Executive Officer of the SCA, CEO, “represent forward looking quality projects that will enhance the country’s competitiveness, and greatly impact all sectors over short periods and ensure the implementation of the new government sustainability action model of the UAE government.”

In December 2023, the Central Bank of the UAE (CBUAE) also issued the UAE Islamic Finance Report 2023 which highlights the sustainable Islamic finance activities of Islamic financial institutions (IFIs) across the Emirates. The report comes in line with the UAE’s Year of Sustainability and its recent hosting of COP28. The report analyses the performance of various Islamic finance sectors, initiatives and activities globally and locally, with a specific focus on sustainability.

Khaled Mohamed Balama, Governor of CBUAE, emphasised in the Report that the development of the Islamic finance sector is instrumental for the UAE’s sustainable growth and its achievement of sustainable development goals.

The Islamic banking sector, he noted has become an integral part of the UAE’s financial industry, accounting for 23% of total banking assets within the UAE in 2022, equivalent to AED845 billion (US$230.07 billion). Islamic banking windows, in addition to the Takaful market and Sukuk issuances, accounted for 25% of total Islamic banking assets in the UAE, equivalent to AED214 billion (US$58.27 billion).

“Islamic banks play a crucial role in the development and provision of sustainable finance and in meeting the sustainability objectives of the wider financial sector, in accordance with the UAE’s regulatory, supervisory and risk management directives. This is further strengthened by the issuance of the Guiding Principles Regarding Sustainability in Islamic Financial Institutions by the Higher Sharia’a Authority. We will continue our efforts to support the development of the Islamic and sustainable finance sectors in the UAE to enhance their stature and participation within the wider industry,” he added.

Malaysia’s EXSIM GROUP Successfully Prices and Closes its Inaugural RM365m (US$77.37m) ASEAN Green Sustainable and Responsible Investment (SRI) Sukuk Musharakah in December 2023

 Kuala Lumpur – Malaysian residential developer EXSIM Group priced and closed its inaugural Green issuance – a 4-year RM365 million (US$77.37 million) ASEAN Green Sustainable and Responsible Investment (SRI) Sukuk Musharakah on 11 December 2023. The transaction was arranged and managed by United Overseas Bank (UOB) Malaysia Berhad and was distributed via private placement to institutional investors.

The Sukuk was issued under EXSIM’s ASEAN SRI Sukuk Framework which was established in November 2023.

The ASEAN Green SRI Sukuk Musharakah, rated AA3 with a stable outlook by RAM Holdings Bhd, is also supported by a tranche of unrated Islamic Commercial Papers amounting to RM85 million (US$18.02 million).

UOB Malaysia chief executive officer Ng Wei Wei commented: “We are delighted to continue supporting EXSIM Group, a long-standing customer of UOB Malaysia, in their growth and sustainability journey. It is an honour to be entrusted with the company’s inaugural sustainability issue under their newly established Asean SRI Sukuk Framework. The issuance received an overwhelming response from investors, with the total order exceeding 3.9 times its issuance size. The overwhelming response of the issuance reflects investors’ growing demand for quality green investments and their confidence in EXSIM’s green development projects.”

The proceed from the Sukuk according to EXSIM Group will be used to acquire EXSIM Group’s latest eligible assets, namely the beneficial interests in two of their development projects, the D’Clover and D’Terra Residences.

These residential development projects in Damansara Perdana have received provisional Gold certifications from GreenRE, the Malaysian Green Certifier and Second Opinion provider.

Al Rajhi Bank Launches Sign Language Training Programme for Employees at 35 Branches to Enhance Neurodiversity, Disability and Cultural Inclusivity

Riyadh – Saudi Arabia’s Al Rajhi Bank, the largest Islamic bank in the world in terms of assets under management and market capitalisation, has enhanced its neurodiversity and disability empowerment corporate culture with the successful completion of its latest innovative training programme in sign language for its branch employees.

This initiative in December 2023, is a first of its kind for the bank and underscores its commitment to inclusivity and customer service excellence. 

In a strategic move to enhance accessibility for all customers, including those with visual, hearing, and motor disabilities, Al Rajhi Bank trained over 35 staff members from 22 branches across nine cities – Riyadh, Jeddah, Mecca, Medina, Qassim, Al-Khobar, Dammam, Yanbu, and Taif.  To facilitate easy access, branches equipped with sign language-trained personnel are now listed on Al Rajhi Bank’s website and mobile application. This enables customers to easily locate and access services tailored to their specific needs.

Majid Al Rajhi, General Manager of Retail Banking, commented on the initiative: “At Al Rajhi Bank, we are driven by a passion to serve all segments of society. This training program represents our commitment to enhancing the banking experience and customer satisfaction through innovative and inclusive solutions.”

This pioneering initiative is part of Al Rajhi Bank’s ongoing efforts to contribute to Vision 2030. “By empowering individuals with disabilities, the bank aims to foster independence and societal integration. This aligns with our core values of community service, national loyalty, and commitment to building a brighter future,” added Majid Al Rajhi.

ECI CEO Raja al Mazrouei Stresses Importance of Takaful-based Credit and Investment Insurance with 30% Market Share of GGC Region’s Export Credit Guarantees in 2021 and Growing

Dubai – Takaful-based export credit and investment insurance is an are an integral part of portfolio of Etihad Credit Insurance (ECI), especially in the context of the growing Islamic finance sector in the UAE, which commands a significant share (23% in 2022) of the banking industry, according to Raja al Mazrouei, CEO of ECI.

ECI offers both conventional and Sharia’a-compliant de-risking solutions. “As the country diversifies its economy and enhances its non-oil exports, the need for Sharia’a-compliant financial instruments becomes even more pronounced,” she explained in an interview with ICIEC Magazine’s COP28 Special Edition conducted by this author.

Al Mazrouei agreed that the culture of credit and investment insurance in the UAE and the GCC region is still in its developmental stages. Currently, the market penetration of these services is relatively modest, primarily due to a lack of awareness, perceptions of high costs, and the complexity of insurance products.

According to the recent Aman Union report, despite these challenges, the UAE, under the support of Etihad Credit Insurance, has carved out a leadership position responsible for 30% of the region’s export credit guarantees in 2021, with a predominance of short-term contracts.

“We recognize the potential of Takaful,” she explained, “to not only provide security and compliance with Sharia’a principles for our clients but also serve as an instrument for new market penetrations, particularly beneficial for non-oil sector expansion. By offering conventional and Takaful-based solutions, including trade credit insurance, investment insurance, and surety insurance, all aligned with Sharia’a principles, we ensure inclusivity and support the financial preferences of businesses that contribute to the UAE’s economic diversification. To date, we have facilitated a suite of Takaful products to 18 corporates, illustrating our capacity and dedication to meet the growing market demand, which stands at a 30% share for Takaful within our portfolio.”

The demand for Takaful products reflects the UAE’s commitment to economic innovation and its respect for cultural and financial practices prevalent in the region. The data indicating the uptake of conventional versus Takaful-based solutions is dynamic and reflects a nuanced market. “While I cannot provide specific breakdowns, I can affirm that the growth in the Takaful segment is robust, mirroring the overall expansion of Islamic finance. We continuously evaluate our offerings to ensure they are competitive and in sync with market dynamics, reaffirming our commitment to the economic vision of the UAE. In this context, partnerships and collaboration are very important,” she added.

Looking ahead, to widen the spread and reach of credit insurance across member countries, it’s crucial to embark on a multifaceted approach. In essence, through combined efforts in education, simplification, cost reduction, and strategic partnerships, the GCC can elevate the profile and adoption of credit and investment insurance, fostering a more secure business environment conducive to economic development. Moreover, governments in the region could incentivize the use of such insurance through subsidies or by mandating it for specific business transactions, such as international trade.

Partnerships, she stressed, are central to ECI’s strategic approach, serving as an instrument for UAE-based businesses to tap into global markets and nurture a robust trade finance ecosystem. “Our partnerships are carefully curated to encompass mutual benefits, leading to more resilient and sustainable support for businesses engaged in global trade.”

ECI’s standout collaboration is with ICIEC, the multilateral insurer of the IsDB Group “to leverage synergies to enhance the reach and effectiveness of our Sharia’a-compliant solutions. This partnership enriches our risk management framework and amplifies our collective expertise in Islamic finance, thereby facilitating the expansion of UAE businesses into new markets while adhering to Islamic principles.”

This collaboration ensures that UAE businesses are well-equipped to navigate the regional trade landscape with minimized risks. Additionally, engaging with global industry organizations such as MIGA and the Berne Union broadens ECI’s perspective, capabilities, and understanding of global trade challenges, and provides UAE businesses with the confidence and backing they need to pursue cross-border ventures. Such synergistic partnerships have multifaceted outcomes ranging from risk mitigation, which encourages favourable financing terms, to fostering innovation and skill development that fortify the local business landscape.

“Moreover, our collaborations provide invaluable insights into cultural nuances and regulatory landscapes, enabling us to tailor trade finance solutions to local and international needs and to ensure that these businesses, particularly SMEs, are empowered to compete on the international stage with a solid risk management foundation,” she concluded.

ICIEC Provides 12-year €194m NHSFO Policy to African Development Bank to Cover a Partial Credit Guarantee to Standard Chartered Bank to Finance ESG Projects in Côte d’Ivoire

Cairo – The Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC), the Sharia’a-compliant multilateral insurer of the IsDB Group, has provided a €194 million Non-Honouring of Sovereign Financial Obligations (NHSFO) insurance cover to the African Development Bank (AfDB).

The AfDB is extending a Partial Credit Guarantee (PCG) to Standard Chartered Bank (SCB) for a loan to the Government of Côte d’Ivoire, aimed at financing projects under the country’s Environmental, Social, and Governance (ESG) Framework.

“This strategic collaboration among ICIEC, AfDB, and the Government of Côte d’Ivoire demonstrates a robust commitment to ensuring the successful financing and execution of vital ESG projects in Côte d’Ivoire,” stressed Oussama Kaissi, CEO of ICIEC. The Corporation’s role is to provide additional insurance cover for a portion of a loan guaranteed by AfDB to SCB for financing projects in Côte d’Ivoire. Specifically, ICIEC is to cover 48.5% of the €400 million guaranteed by AfDB under its PCG, equating to €194 million.

The NHSFO cover became effective on 19th December 2023 and has a 12-year tenor. The projects selected by the ESG Committee and categorized under eligible social and green projects will correspond to various UN SDGs, which include social categorized and Green projects aligned to SDGs 1, 3, 4, 6, 7, 9, 10, 11, 13, 14 and 15.

Projects selected to be financed under SCB’s ESG loan include: i) Water & Sanitation: Drinking water supply to Abengourou and the surrounding town from the Comoé River (€38.7 million); ii) Affordable Housing through the provision of 12,000 social housing units (€15.2 million); iii) Healthcare infrastructure through the upgrading of health facilities (€15.7 million); iv) Renewable energy projects such as the Boundiali Solar Powerplant (€2.7 million); v) Conserving terrestrial and aquatic biodiversity through the Rural and Pastoral Land Management Support Project (€2.7 million).

The above projects aims to support growth and sustainable development in Côte d’Ivoire, aligning with several UN Sustainable Development Goals (SDGs), particularly in areas such as renewable energy, affordable housing, water and sanitation, and health infrastructure.

Seasoned Banker Mohamad Safri Takes Over as New CEO of IILM as the Corporation Successfully Closes its First Auction of 2024 with an US$840m Three Tranche Re/issuance of Short-Term A-1 Sukuk

Kuala Lumpur – The appointment of seasoned banker, Mohamad Safri Shahul Hamid, as the new Chief Executive Officer of The International Islamic Liquidity Management Corporation (IILM), effective 1 January 2024, could not be timelier.

Mr. Safri joins the IILM after spending 13 years at CIMB Bank Group, where he had served in various capacities, including as Deputy CEO of CIMB Islamic and as a Senior Managing Director in the Bank’s Public Sector Finance Group. He has a strong credit background having served as one of the Group Credit Committee members at the Bank for eight years, as well as a Senior Analyst at the Malaysian Rating Corporation Berhad.

He succeeds Dr Umar Oseni, who serving in the role since 1 January 2020. The IILM was established on 25 October 2010 by central banks and industry multilateral organisations to develop and issue Sharia’a-compliant financial instruments to facilitate effective cross-border liquidity management. The current members of the IILM are the central banks of Indonesia, Kuwait, Malaysia, Mauritius, Nigeria, Qatar, Turkey, the United Arab Emirates, as well as the multilateral Islamic Corporation for the Development of the Private Sector, the private sector funding arm of the Islamic Development Bank Group.

With his over 30 years of experience in banking including many years in Sukuk origination and liquidity management, Mr Safri is well placed to lead the IILM proposition to its logical next level especially in terms of upscaling, reach and geographic expansion.

In its first transaction of 2024 and under the leadership of Mr Safri, the IILM successfully completed the reissuance of an aggregate US$840 million short-term Sukuk across three different tenors of one, three, and six-month respectively. A feature of the auction was the participation of several new investors from a number of new jurisdictions.

The auction on 16th January 2024 comprised an re-issuance of US$840 million short-term Sukuk across three tranches and were priced as follows:

i)   US$250 million of 1-month tenor certificates at a profit rate of 5.40%

ii)  US$290 million of 3-month tenor certificates at a profit rate of 5.40%

iii) US$300 million of 6-month tenor certificates at a profit rate of 5.3%

With the January 2024 Sukuk reissuance, the IILM has successfully issued a total US$101.78 billion through 237 series in total issuances since the organisation’s inception in 2010, and inaugural Sukuk issuance in 2013. The IILM achieved cumulative issuances totalling US$11.52 billion across 36 US dollar-denominated short-term Sukuk series in January-December 2023 and crossing the US$100 billion mark in total issuances since the organisation’s inception.

The IILM’s Sukuk reissuance in January witnessed a competitive tender among Primary Dealers and investors from the markets across the GCC region as well as Asia, with a strong orderbook in excess of US$1.93 billion, representing an average bid-to-cover ratio of 230%. According to CEO Mohamad Safri: “Today’s successful issuance reflects the markets’ healthy appetite and confidence in the IILM’s short-term Islamic papers. Despite persistent market uncertainty arising from the impending decision by the Federal Reserve on rate cuts, the IILM’s Sukuk continue to gain momentum into the new year with strong demand for high quality cross-border Sharia’a-compliant liquidity instruments. The IILM is also pleased to have new investors from multiple jurisdictions participating in the IILM Sukuk auction for the first time, which bodes well for the growth of Islamic finance globally.”

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 above 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.

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.

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