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Thursday, 23 May 2013

IDB increases its capital from $ 45 bn to $ 150 bn

The Islamic Development Bank Group has decided to increase its authorized capital from $ 45 billion (30 billion Islamic dinars) to $ 150 billion (100 billion dinars) on the recommendation of the two extraordinary Islamic summits held in Makkah.

The capital increase will enable IDB to meet the growing development requirements of its 56 member countries and carry out its development mission in a more efficient manner, an official statement said.

The decision was taken by IDB’s board of governors at their meeting in Tajikistan’s capital Dushanbe. Minister of Finance Ibrahim Al-Assaf chaired the meeting.

The meeting also increased the bank’s subscribed capital from 18 billion Islamic dinars to 50 billion Islamic dinars. The decision reflects the bank’s strong financial position.

At its annual meeting in Dushanbe, IDB also announced it would immediately tap the financial market with a $ 1 billion offering of sukuk or Shariah-compliant bonds.

The five-year offering is rated Triple A by each of the three major rating agencies (Standard & Poor’s, Moody’s and Fitch), and will be dually listed on the London Stock Exchange and Bursa Malaysia.

The benchmark $ 1 billion offering comes amid strong demand and limited supply of the highest quality fixed-income securities, in part because a number of large governments have recently lost their Triple A status. There has also been growing demand for Shariah-compliant investments.

"The tenets of Islamic banking have stood the test of time," said Ahmad Mohamed Ali, president of the IDB Group. "Our emphasis on equity, risk-sharing and partnership enforces discipline on the financial system, allowing us to lift more of our people out of poverty."

The IDB has been designated as a zero-risk weighted multilateral development bank by the Basel Committee on Banking Supervision and the Commission of the European Communities.

Saudi Arabia, which holds 23.6 percent of capital, has the largest stake in the Jeddah-based bank, followed by Libya with 9.5 percent, Iran 8.3 percent, Nigeria with 7.7 percent and the UAE 7.5 percent. The next four biggest holders are Qatar (7.2 percent), Egypt (7.1 percent), Turkey (6.5 percent), and Kuwait (5.5 percent).

IDB provides project financing to diverse regions of the world, including a number of less developed countries. Although energy, transportation, and water and sanitation projects make up about 60 percent of the bank’s portfolio, it recently stepped up its commitments in agriculture, education, health and other social services.

Meanwhile, Thomson Reuters, the world’s major provider of intelligent information for businesses and professionals, and the Islamic Corporation for the Development of the Private Sector (ICD), the private sector development arm of the IDB yesterday announced the joint development of the Islamic Finance Development Indicator — a single, composite numerical measure representing the overall health and growth of the Islamic finance industry worldwide — on the sidelines of the the IDB annual meetings here.

The ICD Thomson Reuters Islamic Finance Development Indicator expands the scope of Thomson Reuters’ universe of Islamic finance content, research and news analysis to develop a much needed unbiased and reliable multi-dimensional barometer of the development of the Islamic finance industry.

Russell Haworth, managing director, Middle East and North Africa, Thomson Reuters, said: "Thomson Reuters has been at the forefront of some of the major market moving measures in the world, including the Thomson Reuters/University of Michigan surveys of US consumers, and the Times Higher Education (THE) rankings of universities. We are proud to continue providing our expertise in developing high impact indicators to measure the development of the Islamic finance industry."

Khaled Al-Aboodi, chief executive officer, ICD, said: "As the leading Islamic finance institution supporting private sector development across the Islamic world, we recognize that the industry requires effective holistic measures to focus our efforts to facilitate and ensure inclusive financial sector development. The ICD is proud to be at the forefront of innovation, along with Thomson Reuters to facilitate such a significant milestone for the development of the Islamic financial services industry."

Sayd Farook, global head, Islamic Capital Markets, said: "There is no one unique indicator representing the health of the Islamic finance industry in aggregate, including its socio-ethical objectives. As a result, professionals, mass media and consumers rely for their information on misrepresentative or worse, one-dimensional proxies such as the size of Islamic banking assets or sukuk.

(Arab News / 23 May 2013)

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