IsDB Debuts Sukuk Worth $US1.5bln

Jeddah — In a recent development that highlights the global reach and scale of Islamic finance, the Islamic Development Bank (IDB) is poised to raise $1.5 billion through the issuance of a five-year sukuk, or Islamic bond, according to a document released by the arrangers. The issuance reflects the bank’s strategic move to capitalize on the current market conditions and to further bolster its financial position.

The IDB, which has been a cornerstone in the Islamic finance world, aims to price the sukuk with a deal that will carry pricing of 50 basis points over mid-swaps. This is congruent with the final guidance that was disseminated earlier and is a tighter range compared to the initial guidance which was in the mid-to-high 50s basis points over the same benchmark that was released on Wednesday.

Sukuk are financial instruments that comply with Islamic law, which prohibits interest. They are akin to bonds but they offer returns to investors through various contracts associated with tangible assets or services.

The deal has garnered considerable attention, and according to the same document, the offering has already received orders exceeding $1.5 billion from investors. A noteworthy detail is that $243.8 million of this amount stems from the joint lead arrangers and affiliated entities.

A consortium of international and regional banks, including Boubyan Bank, CIMB, Emirates NBD Capital, Gulf International Bank, JP Morgan, Natixis, and Standard Chartered, is orchestrating the sukuk offering. Their involvement underscores the significance of the issuance and the broader potential of the Islamic finance sector.

The funds raised through this sukuk issuance will likely be allocated toward the IDB’s various development projects and initiatives in member countries. These projects often encompass infrastructural development, education, health, and fostering economic development by Islamic principles.

The successful pricing and oversubscription of the sukuk also spotlight the robust appetite among global investors for Sharia-compliant financial instruments. It is an indicator of the continuous maturation and internationalization of Islamic finance, a sector that the Islamic Development Bank has been instrumental in nurturing.

As a multilateral development financial institution, IDB’s role in socio-economic development within its member countries is significant. This sukuk issuance is not only a reflection of IDB’s continued commitment to that role but also an exemplification of the innovation and dynamism that Islamic finance continues to offer to the broader global financial market.