The Islamic Development (IDB) has increased the ceiling of its Islamic bonds (sukuk) programme to $25 billion from $10 billion, as it aims to expand its across member countries, the Jeddah-based lender said on Tuesday.
An expanded programme would support the AAA-rated bank's aim to issue one sukuk publicly every year with a minimum size of $1 billion, while keeping pace with growing investor requests for private placements.
IDB sukuk are highly sought after by banks since the is designated a zero risk-weighted institution by the Basel Committee, the international banking supervisory body. This means its paper can be used to manage capital adequacy on bank balance sheets.
The programme has now been expanded three times since it was set up in 2005 - the IDB raised $4.4 billion in 2014 and last tapped the market in March with a $1 billion deal.
Most IDB sukuk have been issued with maturities of 5 to 7 years, but the lender wants to build a wider yield curve. This would help price longer-dated infrastructure transactions which the IDB wants to promote.
The bank, which operates to promote economic development in Muslim communities, has 56 member countries including Saudi Arabia, Libya and Iran as its largest shareholders.
The IDB also approved development projects worth a combined $450 million, including a $200 million energy project in Mozambique and $70 million to finance the import of agricultural equipment in Kazakhstan, it said in a statement.
In 2013, the IDB than tripled its authorised capital to $150 billion. It provides financing, loans and technical assistance for development schemes which follow Islamic principles, such as bans on interest payments and pure monetary speculation.
(Reuters / 10 June 2015)---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com