In the pursuit of progress and advancement, infrastructural development remains at the core of every nation. Civilizations continue to upgrade basic necessities to sustain and enhance societal living conditions. In line with the tenets of Shariah, Islamic finance has always been a main player in contributing towards these fundamental provisions. NABILAH ANNUAR provides an overview of Islamic financial transactions that have materialized over the past year in infrastructural funding.
Asia
In August last year, Malaysia’s national infrastructure financing entity DanaInfra Nasional issued the third installment of its retail Sukuk worth RM100 million (US$27.11 million). Earlier in May, Islami Bank Bangladesh, a partner organization of the IDB provided BDT10 billion (US$125.34 million) for the construction of the Padma bridge project.
Africa
Kenya in December 2014 set a target to issue its debut Sukuk in the next financial year as the parliament is currently considering a recommendation by its finance committee to double the government’s external debt ceiling to US$28 billion to fund the construction of a new railway, port, roads and power plants.
Americas
Last month, Brazilian property developer Ritz Property and construction company G5, through its partnership (Ritz-G5), announced that it now offers an Islamic investment avenue in its Natal-based premium residential project, Majestic Village. The Brazilian premium residential project is the first independent investment product to be eligible for Shariah compliant funding. Majestic Village is a 75-hectare serviced land plot condominium development in Parnamirim, an up-and-coming residential area in Natal. The project is designed to appeal to the domestic market and Brazil’s rising middle and upper class population of over 90 million.
Middle East
With an estimated US$375 billion-worth of infrastructure projects in the pipeline (according to EC Harris), Saudi Arabia has made quite a number of financing deals in the past year. Bank Albilad last month signed an agreement with Waad Holding Company to finance the construction of the company’s academy schools project in Jeddah city. At an amount of SAR150 million (US$39.96 million), the project reportedly represents one of the largest deals in the sector.
In November 2014, Saudi Kayan Petrochemical Company, an affiliate of Saudi Basic Industries Corp (SABIC), signed two Islamic financing deals with National Commercial Bank and Samba Financial Group totalling SAR2.63 billion (US$700.82 million) to fund an increase in working capital, as well as the completion of factories under construction. In August, Uyoun Al-Raed Commercial Company procured a SAR1.97 billion (US$525.22 million) Murabahah financing package for the construction of the Mall of Arabia. Similarly, Emaar Economic City obtained a SAR2 billion (US$533.17 million) Murabahah financing facility from Saudi British Bank to fund residential and infrastructure projects in King Abdullah Economic City.
In Qatar, a Shariah compliant financing facility of over QAR3.65 billion (US$1 billion) for Qatar’s Gold Line Metro Rail project was concluded last December. The transaction (completed for a joint venture comprising Greece-based Aktor, India’s Larsen and Toubro, YapiMerkeziInsaatVeSanayi of Turkey, SezaiTurkesFeyziAkkaya Marine Construction (STFA) of Turkey, and Al Jaber Engineering of Qatar), is the largest infrastructure syndication in the state. In Oman, Ahlibank’s Al Hilal Islamic Banking Services provided Muttawar Omani Company with a financing facility of over OMR20 million (US$51.81 million) for the construction of its Lamar Bausher project, a high-end mix use residential and commercial project.
IDB
The IDB is no stranger to the global community. As a multinational organization, it has funded countless projects worldwide. Recently in January it approved US$189.4 million in new financings for development projects in several member countries and a number of Muslim communities in non-member countries. The grant included: (1) US$136 million to Cote d’Ivoire’s road and transport sector for the construction of a 130-kilometer road connecting the capital Yamoussoukro to the city of Tiebissou and (2) US$16.5 million to Djibouti for the Regional Submarine Telecommunications Project.
Last year, it allocated EUR200 million (US$211.59 million) to the development of rural wastewater works in Iran. In Suriname it contributed US$60 million to the construction of the Academic Medical Hospital of Suriname. In Morocco, Islamic financing for a power project near the port of Safi, was agreed in October with part of the US$2.6 billion financing provided via a structured Islamic tranche from the IDB.
Last August, IDB announced the approval of US$987 million in funds for economic and social development projects in member countries including Oman, Uzbekistan, Lebanon and Yemen. The bank distributed US$198 million to Egypt for the development of Assiut Oil Refinery and US$226.8 million for Sharm El Sheikh International Airport, while projects in Uganda received US$10 million in funding.
IDB also signed agreements worth US$100 million with the government of Sudan, to fund the construction of an electricity carrier line between Babanousa and Adliya and for the Delta Toker agricultural project. Earlier in April, the IDB provided US$141.45 million to be put towards the development of health, education and water supply infrastructures, including construction of reservoirs, schools and the purchase of new school equipment in Kaduna State, Nigeria.