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Bank Negara Malaysia Establishes Joint Committee on Climate Change for Building Climate Risk Resilience Within the Malaysia Financial Sector

Kuala Lumpur – Bank Negara Malaysia (BNM), the central bank, has established a Joint Committee on Climate Change (JC3), which “is intended to pursue collaborative actions for building climate resilience within the Malaysia financial sector.” The Islamic banking and finance system currently account for some 32 % of the overall Malaysian banking system. 

The JC3 is co-chaired by BNM Deputy Governor Jessica Chew Cheng Lian and Securities Commission Malaysia (SC) Deputy Chief Executive Datuk Zainal Izlan Zainal Abidin. Members comprise senior officials from Bursa Malaysia and 19 industry players.

According to BNM, the JC3 will be guided by three key mandates:

  1. building capacity through sharing of knowledge, expertise and best practices in assessing and managing climate-related risks;
  2. identifying issues, challenges and priorities facing the financial sector in managing the transition towards a low carbon economy; and
  3. facilitating collaboration between stakeholders in advancing coordinated solutions to address arising challenges and issues.

The JC3 held its inaugural meeting on 27 September on the sidelines of the successful Regional Conference on Climate Change in Kuala Lumpur. “The JC3 recognised the urgent need to accelerate responses towards ensuring a smooth and orderly transition to a low-carbon economy. This includes managing exposures to climate risks and facilitating businesses to transition towards sustainable practices. To take this forward, the meeting agreed to form four sub-committees focusing on risk management; governance and disclosure; product and innovation; and engagement and capacity building,” revealed BNM in a statement.

IsDB Approves US$238.1m of Project Finance in Four Member Countries Plus a US$1.11m Crowdfunding Investment for Energy Access Finance

Jeddah – The Board of Executive Directors of the Islamic Development Bank (IsDB) approved in September US$238.1 million worth of project financing for four member countries in its latest round of financing. The Board also approved the financing of a pilot project on energy access to finance through crowdfunding.

The approval was given during the 332nd session of the Board chaired by IsDB President Dr. Bandar Hajjar in Jeddah.

The approvals include:

  • US$69.1 million to Benin to support the Social Housing Project, which aims to provide access to decent housing, connecting to urban services (potable water, sewage, electricity), to more than 20,000 inhabitants by the end of 2024.
  • US$47.86 million to Cote d’Ivoire in support of the Abidjan and 11 Secondary Cities Sanitation Project, which aims to achieve a sustainable improvement in the provision of sanitation services in Abidjan and 11 secondary cities by eliminating the uncontrolled dumping of sludge. This will protect the populations and the environment against water borne diseases, sewage flooding and discharge of untreated effluents; preventing ground and surface water pollution.
  • US$20 million to the Kyrgyz Republic in support of the Irrigated Agriculture Development in Issyk-Kul and Naryn Regions Project. The project objective is to improve the livelihood of the rural population through sustainable agriculture development and water resources management. It also aims to support 13,200 farmers in providing access to improved agricultural infrastructure (irrigation and crop storage) and create 2,000 new jobs at on-farm and off-farm level.
  • US$100 million to Nigeria in support of the Malaria Elimination Project. The project’s objective is to improve the delivery and uptake of malaria prevention and treatment activities in selected states to achieve at least 80 % universal coverage of vector control, Seasonal Malaria Chemoprophylaxis, and case management in the public sector of 13 states in Nigeria. It is anticipated that during the period of the project implementation the overall burden of malaria in the country will reduce from 27 % to less than 15 %.
  • US$1.11 million for the “Unlocking Energy Access Finance through crowdfunding” Project.

According to Dr. Bandar Hajjar, President of the IsDB, “the Islamic Development Bank pays significant attention to projects that will create decent jobs, promote health and sanitation, as well as an enabling environment for the proliferation of technological advancement that will transform the economies of our member countries. We are keen to ensure self-sufficiency in food production. This is part of the strategies for the realization of the 2030 agenda for sustainable development.”

Turkish FinTech Start-up Akaunting Launches Pioneering Free Online Bookkeeping Programme for Global SMEs

Istanbul – Backed by Kuveyt Turk and Vakif Katilim, Turkey’s Akaunting has launched an innovative venture in financial and social inclusion with a free online bookkeeping programme for global SMEs s.

The strategic investment in Akaunting in September by Teknogirişim Venture Capital Investment Fund, established and managed by KT Portföy, a wholly-owned subsidiary of Kuveyt Turk Participation Bank, and Vakif Katilim is Teknogirişim’s debut investment in early-stage technology companies.

Akaunting will also use the investment received from Teknogirişim for enlarging its product spectrum and entering new markets.  Akaunting in fact is one of the start-ups from the Lonca Entrepreneurs Center founded in 2017 by Kuveyt Türk in an effort to channel technology oriented and scaleable business ideas into the country’s economy.

According to Hamit Kütük, KT Portföy’s General Manager, the establishment of Teknogirişim is a first for the banking sector.

“We, as KT Portföy, aim at making investments in early-stage technology-oriented and scalable innovative projects through Teknogirişim VCIF. We have been monitoring for a long time the progress and development of Akaunting to which Lonca Entrepreneurs Center had provided training and mentoring support. We believe that Akaunting would continue its global success at an increasing rate. During this process, we, as Kuveyt Türk, will continue to support our young entrepreneurs.”

According to Akaunting, it has become a global player with more than 90 % of its open-source users from outside Turkey.

IILM Re-issues US$1.11bn Sukuk in Three Tranches in September 2019

Kuala Lumpur – The International Islamic Liquidity Management Corporation (IILM) successfully re-issued A-1 short-term Sukuk in September 2019 amounting to US$1.11 billion in three tranches with three different tenors of 1-month, 3-months and 6-months, respectively. The reissuance comprised:

  1. US$450 million with a 1-month tenor at a profit rate of 2.10%;
  2. US$460 million with a 3-month tenor at a profit rate of 2.15%; and
  3. US$200 million with a 6-month tenor at a profit rate of 2.16%.

According to the IILM, the reissuance was well supported with demand across the three series of the IILM Sukuk reaching a bid to cover ratio of 154% for the 1-month tenor, 170% for the 3-month tenor; and 222% for the 6-month tenor.

“The profit rates achieved were 2.10% for the 1-month, compared to the indicative pricing guidance range of 2.10%-2.16%; 2.15% for the 3-month, compared to the indicative pricing guidance range of 2.16%-2.22%; and 2.16% for the 6-month, compared to the indicative pricing guidance range of 2.16-2.22%,” explained IILM in a statement.

Purchases by Islamic Primary Dealers (PDs) in the primary auction amounted to 81%, 45% and 54% for the 1- month, 3-month and 6-month Sukuk respectively.

In terms of geographical distribution, the allocation of GCC-based PDs stood at 66%, 43% and 77.5% for the 1-month, 3-month and 6-month Sukuk, whilst Asia-based PDs were allocated 33%, 11% and 22.5% respectively. The PDs based in other jurisdictions were allocated 1% and 45% across the 1-month and 3-month Sukuk respectively.

According to the IILM, the primary dealers that participated in the three auctions conducted under the competitive bidding of the Bloomberg AUPD Platform included Abu Dhabi Islamic Bank; Al Baraka Turk Participation Bank; Barwa Bank; Boubyan Bank; CIMB Islamic Bank Berhad; First Abu Dhabi Bank; Kuwait Finance House; Macquarie Bank; Maybank Islamic Berhad; Qatar Islamic Bank; and Standard Chartered Bank. 

Malaysian Sukuk Insurer Danajamin Guarantees Second Consecutive Issuance – Trinity Asia Ventures’ RM30m Sukuk Murabaha

Cyberjaya – Danajamin Nasional Berhad, Malaysia’s state-owned Financial Guarantee Insurer for bonds and Sukuk, is guaranteeing a second successive Sukuk issuance in the local market – a RM30 million (US$7.2m) Tranche 1 Sukuk Murabaha Islamic Commercial Paper (ICP) issued by Trinity Asia Ventures Berhad (TAVB), a wholly owned subsidiary of Trinity Group Sdn Bhd. In August 2019, Danajamin guaranteed up to RM160.0 million of the first issuance of RM200.0 million Islamic Medium Term Notes (IMTN) issued by Brecon Synergy Sdn Bhd under its IMTN Programme of up to RM450.0 million.

Trinity Group has established a RM2.5 billion financing programme comprising a RM1.5 billion Sukuk Musharakah IMTN Programme and a RM1.0 billion Sukuk Murabaha ICP Programme through TAVB. The RM30 million Tranche 1 ICP is the credit enhancement to Trinity Group’s RM52 million Tranche 1 Sukuk Musharakah under its Islamic Medium Term Notes Programme of RM1.5 billion.

The AA3-rated Tranche 1 IMTN marks Trinity Group’s first issuance and Danajamin’s third transaction involving the securitisation of progress billings of property development projects in Malaysia.

The Sukuk structure was structured and arranged by New Paradigm Capital Markets Sdn Bhd, a corporate finance advisory firm licensed by the Securities Commission Malaysia, whilst the Lead Arranger and Lead Manager was Alliance Investment Bank Berhad.

Mohamed Nazri Omar, Chief Executive Officer of Danajamin, stressed in a statement that Danajamin is “delighted to support Trinity Group to raise financing and help them in their pursuit to build communities and enrich lives. We hope our guarantee will propel the Group further with other quality property developments and add value to the property market with more modern property development that cares for the environment.

According to Neoh Soo Keat, Managing Director of Trinity Group, the company has completed 3,500 units of residential homes since its inception in 2004 while staying true to its brand promise of delivering projects with high value creation through its affordable luxury offerings to its customers.

“The proceeds made available from this issuance will allow Trinity Group to pursue its land-banking activities whilst ensuring the beneficial interest in the said projects [is] well protected. This allows for more efficient deployment of funds from a group treasury perspective especially in the current uncertain economic situation,” he added.

To date, Danajamin’s guarantees have assisted 41 issuances, with a total guarantee size of RM10.9 billion. The total market impact of these deals, through risk-sharing collaboration with partner banks, stands at RM21.5 billion.

Etihad Credit Insurance Launches Online Conventional and Islamic Export Trade Credit Solution for SMEs

Abu Dhabi – Etihad Credit Insurance (ECI), the federal export credit agency, revealed plans in September 2019 to launch an online conventional and Islamic export trade credit solution for SMEs. ECI launched the conventional version of SME Protect on 1 September, with the Shariah-compliant solution to follow in November.

“To be Shariah-compliant,” explained Massimo Falcioni, ECI’s CEO to Salaam Gateway, “there are principles we need to apply – not paying a premium but a contribution to a fund. We need to have a fund where all SMEs can contribute, and the profitability and losses of this fund will be reshared. In the case of losses, the fund will be refunded automatically by ECI.” 

The Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC), the export credit agency of the Islamic Development Bank (IsDB) Group, will reinsure the new SME product.

The Islamic SME Protect is the first of its kind in the Middle East and expects around 100 SMEs to apply for this policy in the first five months.

The Islamic SME Protect will help move SMEs from traditional Letters of Credit and cash-payment terms towards the most updated sales on open credit terms, and also aims to support exporters and re-exporters in their international expansion plans, as well as assisting them in entering high-growth markets.

This online solution could prove valuable for the UAE, where SMEs represent 95 % of companies and will contribute an estimated 53 % to the UAE’s GDP in 2019, according to the Federal Competitiveness and Statistics Authority (FCSA).

The federal government aims to increase this rate to around 60 % by 2021. A recent survey by ECI showed that SMEs face difficulties in payment collections, tightening liquidity, market slowdown, and an inability to penetrate high-growth markets without risk protection.

Turkish Treasury Collects 16,962 Kilogram of Gold for Latest Issuance of Gold-backed Lease Certificates (Sukuk Ijarah)

Ankara – The Turkish Ministry of Finance and Treasury collected 16,962 kilograms of gold (995/1000 purity) for issuance of gold-back lease certificates (Sukuk Ijarah) and 3,985 kilogram of gold for gold bond issuance on 18 September 2019.

The collections were from institutional investors with the value date of September 20, 2019 and the maturity date of 17 September 2021. The lease certificates were issued by Hazine Mustesarligi Varlik Kiralama A.S., wholly-owned by and on behalf of the Ministry of Finance, the obligor.

The Ministry of Finance previously issued gold-backed lease certificates in May and June this year “to diversify borrowing instruments, broaden the investor base and bring the idle gold into the economy.”

The Ministry of Finance first started selling gold bonds and gold-denominated lease certificates in December 2018. According to Finance Minister Berat Albayrak “citizens were provided with a safe investment tool for their gold savings. With the gold bond and gold-denominated lease certificate issuance through five banks, our citizens will both win themselves and contribute to the national economy.”

Saudi Arabia’s Mepco Renews and Increases Islamic Credit Facility from Samba Bank to SR100m

Jeddah – Jeddah-based Middle East Paper Co (Mepco) has renewed and increased the amount of its Islamic credit financing from Samba Bank. In a disclosure to Tadawul (the Saudi Stock Exchange), Mepco said that the financing facility was increased by SR50 million to SR100 million (US$26.7 million).

The revolving facility is secured on a promissory note equivalent to the value of the financing. According to Mepco, proceeds from the financing will go towards the company’s working capital and to meet “other business requirements”.

The company is a producer of container board and paper board that are used for a wide variety of products including processed foods, frozen foods, fresh foods, consumer durables, beverages and industrial goods.

Mepco has a production capacity of 0.5 million metric tons. The company reported a net loss of SR4 million in net profit for the three months ending June 30. It earned 176.1 million riyals in sales for the quarter, down 19.4 % from the same period last year.

The company attributed the loss to a decrease in selling prices even as sales volume rose, increase in selling and distribution expenses, impairment loss allowance on account receivables and fair value loss on derivative financial instruments.

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