Saudi Arabia

JEDDAH: International Islamic Trade Finance Corporation (ITFC) is scheduled to sign deals on Thursday exceeding $1 billion to support strategic commodities for a number of its member countries, CEO of ITFC Hani Salem Sonbol told Arab News.
The deals target the socioeconomic and trade development of these countries.
“The ITFC work is very diverse,” Sonbol told Arab News in an exclusive interview on the sidelines of the 42nd Islamic Development Bank (IDB) annual meeting that concludes Thursday. “We cover all aspects. Because we came to believe that financing alone will not help member countries.”
The Jeddah-based ITFC, which is an autonomous entity within the IDB, has 57 member countries from Suriname in South America to Indonesia in Southeast Asia.
The total IDB group trade financing since inception is $60 billion, out of which the ITFC contributed $36 billion to the member countries.
The main sectors that the ITFC supports are the energy and the agricultural sector. Each country is supported according to its need.
“We customize solutions,” Sonbol said, adding “We don’t have one size fits all.”
The business model adopted by the ITFC is to respond to the changing needs of member countries and the new challenges facing them. The model entails blending trade finance and trade development aspects.
“We don’t have shelf products, except for direct financing, ‘Murabaha’ financing, which is a cost-plus-profit arrangement in Islamic finance,” he said, adding that each country needs a program designed to fit its specific needs.
Two-thirds of the supported member countries are in Africa. Earlier this week, the ITFC signed a three-year $450 million framework agreement with the government of Burkina Faso, which Sonbol described as “one of the major clients.”
The agreement aims to enhance the country’s ability to export agricultural commodities such as cotton and also import its needs from the basic strategic commodities like crude oil and refined petroleum products as well as agricultural input.
The largest portion of the ITFC’s portfolio is to enhance the energy sector in the member countries; at almost 60 percent. This includes green energy, Sonbol said.
“What is new now is the ITFC is aware of the changes that new types of energy actually exist and that’s why we also try to innovate our products and programs to support renewable energy, green finance, and all these environment-friendly products,” he said.
There are new items on the ITFC agenda today. Digitization is one of them. Renewable energy, climate change, which is directly linked to trade finance, is another. Food security and an important sector that the ITFC is supporting, which is the agricultural sector, are also on the agenda.
Other programs are related to capacity building, promotional trade, and business-to-business (B2B) contracts. “Recently we had a very important B2B between African cotton producers and Bangladeshi cotton importers. We try to facilitate trade through our programs, build capacities in member countries,” Sonbol said.
As there is a regional move toward diversifying the economy to adjust to the recent oil crises, there is a move to invest in the SMEs industry.
The ITFC is designing new programs for SMEs to help meet challenges in areas like access to finance and capacity building.
“They need knowledge and advice so we support with advisory services,” Sonbol said, adding that the ITFC is currently working with the Saudi Ministry of Commerce to develop the SME sector in the Kingdom.
Boosting SMEs is among the goals in the Saudi Vision 2030 and they are described as being “among the most important agents of economic growth; they create jobs, support innovation and boost exports,” the Saudi Vision states.
Sonbol said that this program could be replicated in other countries in the future.
“We have been supporting SMEs in the private sector in general and we have achieved almost $10 billion of financing to this important sector.”
He added that the sector plays a major role in the diversification of the economy, similarly in Morocco, Tunisia or Pakistan.

Originally published on www.arabnews.com

JEDDAH, Saudi Arabia — The finance ministers of Guyana and Suriname, Winston Jordan and Gilmore Hoefdraad, will lead their respective delegations to the 42nd Islamic Development Bank (IsDB) meeting, which begins Sunday, May 14 to 18 in Jeddah, Saudi Arabia. The alternative governor of Suriname to the Islamic Bank, Dr Anwar Lall Mohamed, will also be part of the Surinamese delegation.

Currently, Guyana has filed six projects for financing at the IsDB, and other projects are in the pipeline; however, Guyana is concerned about the “slow pace” of the bank’s review and approval of its project proposals and will use its presence in Jeddah to push forward these projects.

According to Mohamed, Paramaribo is robustly working to advance and commence pending projects with the bank, including, among others, the healthcare strengthening project; detailed design of the new academic hospital, two education projects and the work program for 2017-2020.

Suriname has a longer history with the Organisation of Islamic Cooperation (OIC) and the IsDB, whereas Guyana was the second country in the Americas to join the multilateral organizations.

Guyana and Suriname share many similarities and have huge development potential, Mohamed said.

In many areas of development, Guyana is ahead of Suriname and in other areas, Suriname is ahead of Guyana. Both countries are cooperating in “reverse linkage” or technology transfer on rice with Malaysia and “reverse linkage” with Indonesia on livestock, Mohamed noted.

“By and large our two neighbouring member-countries have an excellent cooperative spirit that we share with each other in development of our countries. We are two member countries of the OIC that are strengthening south-south cooperation,” he added.

With the future development in the oil sector, Guyana will become one of the important players in the oil industry. Suriname also has the potential to find vast quantities of oil off its coast. However, it is yet tap a major reserve.

Intensive preparations are under way for the annual meeting of the Islamic Bank group under the theme ‘Youth Economic Empowerment’.

The agenda of the meeting of governors includes a youth summit, aimed at shaping the future of youth and enhancing youth engagement in socio-economic development. Participants include senior officials and major youth influencers, and youth groups of different specializations from member countries, according to an Islamic Bank press release.

“Inclusive human development is a key element of our ten-year strategic framework. The 42nd annual meeting under the theme ‘Youth Economic Empowerment’, comes as a major occasion to achieve this by sharing experiences and best practices on education initiatives, and strengthening partnership with the private sector on youth empowerment,” said Dr Abdulhakim Elwaer, IsDB Group spokesperson.

“The annual meeting will offer a broad platform for decision makers from all our member countries to discuss the challenges and opportunities in education and skills development, and recommend strategies to provide youths with the relevant skills and competencies to meet the demands of the 21st century labour market,” Elwaer added.

The meeting will give a chance to youth from member countries to take part in the workshops and different events in which high-level experts from private and public sectors, academia and the civil society will participate.

In recent years, the IsdB has offered assistance in creating a medical education and research institute in Jakarta, Indonesia; supported education initiatives in Senegal and Somalia; provided electronic education facilities for two million children in Syria; and helped build better schools in Togo and Tajikistan.

Originally published on www.caribbeannewsnow.com

Saudi Electricity Company (SEC) has announced the results of a special meeting of the holders of the Saudi Electricity Sukuk 3.
Saleh Al-Awajji, SEC chairman chaired the meeting at the company’s head office in Riyadh.
The company will purchase SR1,269 million in aggregate nominal value of sukuk (equivalent to 18.13 percent of the aggregate nominal value of the sukuk as on May 10). The new purchase date occurring in May 2022 has been added in respect of the remainder of the sukuk.
Ziad Al-Shiha, CEO of SEC, said: “The company’s success in achieving the first sukuk rollover in the Saudi local sukuk market affirms its pioneer role as the largest Islamic sukuk issuer from the Saudi business sector.”
He said that the rollover of the sukuk instead of issuing a new one is sensible for both the company and the sukuk holders. It provides advantages when compared to a new issuance in terms of an expedited timeline and simplified documentation.
Al-Shiha added: “The SEC has a large portfolio of projects under development, and it follows a diversified and balanced financing strategy to meet the investment requirements in these projects in addition to the financing dues at the same time.
He said: “I am happy with the majority of sukuk holders who decided to retain their investment in this high-rated credit instrument as a gesture of confidence in the company, its business model, its board of directors and its executive management.”
The company has plans to visit China in the coming days to meet with Chinese companies and banks to discuss cooperation and financing opportunities. The SEC is looking forward to expanding its partnership with Chinese companies in its projects while undertaking mega investments.
This is part of the company’s plan to expand its financiers and investor base in China.

Originally published on www.arabnews.com

After wowing the markets with its landmark US$17.5bn sovereign bond, the KSA repeated the trick on the Islamic finance side, issuing the largest sukuk in history and pricing effectively flat to the conventional sovereign curve.

Background

In April 2017, Saudi Arabia was looking to capitalize on its ground-breaking US$17.5bn conventional bond issued last autumn, and to widen its accessible investor base by utilising the sukuk market via a follow-on offering from a newly established Trust Certificates Programme.

On 12 April, the KSA priced its first dollar-denominated Islamic bond sale, raising US$9bn in dual tranche sukuk – a billion more than what the government planned initially – drawing bids in excess of US$33bn.

Despite coming during the Easter Break in Europe, it was the world’s largest and most liquid sukuk deal to date.

Transaction Breakdown

On Tuesday 4 April, the Kingdom announced a series of investor meetings to be held in the UAE (Abu Dhabi and Dubai) and London. Given the extensive global roadshow conducted late in 2016, in addition to Asian non-deal roadshow exercises, it was deemed not necessary to revisit all global centres, however investor conference calls were offered to investors as required.

Following the meetings with Islamic and conventional investors in Abu Dhabi and Dubai, initial price thoughts were announced on the morning of Tuesday 11 April as the roadshow drew to a close.

Initial price thoughts were MS+115bp area, and MS+155bp area, on 5 and 10-year tranches, respectively. In London, a book size update was released to the market at close of business, with the deal generating over US$17.5bn, demonstrating immediate strong demand.

The orderbook continued to grow overnight as Asian and Middle Eastern accounts added orders, and the following morning they stood in excess of US$25bn. It was at this time that official price guidance of MS+105bp area for the 5-year and MS+145bp area for the 10-year was released.

The transaction ultimately launched and priced at the tight end of final price guidance, MS+100bp and MS+140bp, with a final orderbook in excess of US$35bn, largest ever for this type of instrument.

Despite the large size of the deal, it priced at a minimal new issue premium to the KSA’s outstanding conventional curve and was more than two times larger than the previous largest global Islamic bond.

In terms by allocations for the 5-year tranche, MENA accounts took 51% of the notes, with US (22%), European (15%), and Asian (12%) accounts also all seeing healthy demand. About 42% was allocated to fund managers, another 36% to banks, 2% to pension funds, while another 20% was placed with official institutions.

About 55% of the 10-year tranche was allocated for MENA accounts, and the rest was split between Europe (23%), the US (15%) and Asia (7%). Banks got the bulk of the 10-year notes (56%), while another 35% was placed with fund managers, 7% with official institutions and the remaining 2% was snapped up by insurance and pension funds.

Originally published on www.bondsloans.com

JEDDAH, Saudi Arabia, May 1, 2017 

JEDDAH, Saudi Arabia, May 1, 2017

Aiming to Connect Education to Labour Market Requirements.Intensive preparations are under way for the 42^nd Annual Meeting of the Islamic Development Bank Group (IsDB) in Jeddah, Saudi Arabia, to be held on May 14-18, 2017, under the theme, ‘Youth Economic Empowerment’, and attended by more than 2000 participants.

The Annual Meeting will offer a significant opportunity to explore ways to help the Group’s 57 member countries connect education to labor market requirements. The agenda of the meeting includes a Youth Summit, to be held May 15-16 at the Jeddah Hilton Hotel, aiming at shaping the future of youth and enhancing youth engagement in the socio-economic development. Participants include senior officials and major youth influencers, and youth groups of different specializations from member countries.

“Inclusive human development is a key element of our 10-Year Strategic Framework. The 42^nd Annual Meeting under the theme, ‘Youth Economic Empowerment’, comes as a major occasion to achieve this by sharing experiences and best practices on education initiatives, and strengthening partnership with the private sector on youth empowerment,” said Dr. Abdulhakim Elwaer, IsDB Group spokesperson.

“The Annual Meeting will offer a broad platform for decision makers from all our member countries to discuss the challenges and opportunities in education and skills development, and recommend strategies to provide youths with the relevant skills and competencies to meet the demands of the 21st century labor market,” Dr. Elwaer added.

The World Economic Forum, in its 2016 report on ‘Future of Jobs’, has pointed out that in many countries, the most in-demand jobs or specializations did not exist 10 or even five years ago, and that the pace of change is set to accelerate and will not stop, estimating that 65 per cent of children entering primary school today will ultimately end up working in completely new job types that do not yet exist.

In line with the theme of the Annual Meeting, IsDB is looking to chart the path towards youth economic empowerment in all its member countries through workshops and flagship events, led by top-level panelists from the government, private sector, academia and the civil society.

The Annual Meeting will give a chance to youth from member countries to take part in the workshops and different events in which high-level experts from private and public sectors, academia and the civil society will participate.

Apart from career based education, key sessions will cover major topics of current relevance such as social media, youth health, agricultural entrepreneurship and Islamic finance.

During the last 43 years, IsDB has been a major contributor to education in a number of countries. In recent years, it has offered assistance in creating a Medical Education and Research Institute in Jakarta, Indonesia; supported education initiatives in Senegal and Somalia; provided electronic education facilities for 2 million children in Syria; and helped build better schools in Togo and Tajikistan.

Originally published on www.finance.yahoo.com

WHAT is the total volume of foreign currency sukuk issued in Saudi Arabia and Malaysia in Q1 2017? The figure for Saudi Arabia, my research shows, is US$13.75 billion (RM59.69 billion) comprising US$10.75 billion from three US dollar issuances by the Saudi Government, Islamic Development Bank and DAAR, the realty developer, and one issue in Saudi riyals (equivalent to US$3 billion) by Saudi Aramco, the world’s largest oil company.

In contrast, according to Securities Commission of Malaysia (SC) data, there were no foreign currency sovereign and corporate sukuk issued in Malaysia in 2017 to date.

The Finance Ministry of Malaysia, reportedly, is planning to issue an international sukuk this year. SC data shows there were six corporate ringgit sukuk issued in Malaysia in the first two months of 2017.

Is the dominance of sukuk issuance shifting from Kuala Lumpur to Saudi Arabia?

The defining development in April 2017 is the entry of Saudi Arabia as a sovereign issuer with a record debut US$9 billion sukuk, on the back of the US$3 billion maiden sukuk by Saudi Aramco. This, and other developments such as an escalated role by the International Monetary Fund (IMF) in the Islamic finance space and the Bank of England’s endorsement of a Wakalah-based central bank depository fund to help syariah-compliant banks in the UK, could be game changers for the development of the Islamic capital market (ICM).

The Saudi sovereign sukuk is the single largest US dollar sukuk to date and was oversubscribed to the tune of US$33 billion, indicating huge appetite for such certificates, which are as attractive to Western pension funds as they are to investors in the Muslim world.

Sukuk dominance for the short-to- medium term will continue to be out of Malaysia, whose Islamic financial architecture including capital market regulation and facilitation, and liquidity releasing secondary trading, is light years ahead of Saudi Arabia and other countries, and whose Malaysia International Islamic Finance (MIFC) platform until recently attracted a spate of foreign issuers from the GCC, Turkey and Japan to issue sukuk in the ringgit market.

It is the economic impact of the recent fall in crude oil prices and the volatility in the value of the ringgit against the US dollar that has temporarily dampened this development.

The size of the Malaysian ICM, according to SC, totalled RM1.692 trillion in 2016 accounting for 60 per cent of the total Malaysian capital market of RM2.84 trillion.

Total sukuk outstanding in 2016 was RM661.08 billion, which is 56.36 per cent of total bonds and sukuk outstanding.

Similarly, total sukuk (government and corporate) issuance amounted to RM129.45 billion in 2016, giving it a 53.81 per cent market share of total bond and sukuk market in Malaysia, which also accounts for 60 per cent of the total global sukuk market.

Malaysia should welcome the developments in Saudi Arabia. The business case is clear. Not only is there huge potential for cooperation, but Kuala Lumpur could also promote its sukuk architecture model as the universally preferred and proven choice. The world lacks high quality sukuk such as the sovereign Saudi one, which also qualify for inclusion in the High Quality Liquid Assets (HQLA) universe of the Basle III Liquidity Coverage Ratio standard. Investors are screaming for such papers to invest in.

Malaysia’s Employees Provident Fund (EPF), the public pension fund with assets in excess of RM700 billion, in January launched a dedicated Islamic pension fund, Simpanan Syariah, with a fund size of RM100 billion to be increased to RM150 billion in 2018.

EPF needs syariah-compliant assets to invest in under the above scheme and for asset allocation diversification purposes. The Saudi sukuk is music to the ears of EPF chief executive officer Datuk Shahril Ridza Ridzuan. It would also help if the Saudis open up direct investment by foreign accounts in their domestic sukuk.

The Saudi sukuk is also the only sukuk which includes a disclosure in the prospectus on credit risk retention requirements, to comply with the US Dodd-Frank Act, following its introduction by the US Congress after the 2008 financial crisis to reduce risk-taking.

This could be important for the further globalisation of sukuk in the US and Western markets.

Sukuk, as a fundraising instrument, is unique to Islamic finance, but its application as an alternative ethical financing tool is universal, irrespective of ethnicity or creed. Its importance as a potential infrastructure development and urban regeneration mode of financing has, in recent years, been recognised by the G20, IMF, World Bank, the International Finance Corporation (IFC) and the Basel Committee Banking Supervision.

Its proliferation is confined to issuers in traditional markets in Asia and the Middle East and North Africa region, with the odd sovereign issuances by the UK, Luxembourg and South Africa, and corporate ones by Goldman Sachs, HSBC, Nomura, General Electric and Tesco (in Malaysia). The World Bank and IFCG have also issued sukuk to fund projects in member countries.

It is one of the vagaries and mysteries of the contemporary Islamic finance industry that it has failed to unleash the power of sukuk as an exemplary financing instrument in the aftermath of the 2008 financial crisis.

The reasons are manifold, among others, lack of confidence of Muslim countries, poor economic governance and management, the dearth of public policy commitment to Islamic finance and sukuk, regulatory and legal framework gaps and deficits, and misguided asset allocation strategies.

Also, the fact that Islamic finance is still a nascent industry in its fifth decade, compared with the 200-year history of conventional finance.

Originally published on www.nst.com.my