SARAJEVO - Saudi-based Islamic Development Bank (IDB) plans to issue $5 billion in Islamic bonds, or sukuk, over the next five years to finance its programmes, the bank chairman said.
“This year we will first have a $500 million issue and it may be followed by another $500 million. Hopefully every coming year we are planning an equivalent of $1 billion,� Ali told Reuters late on Monday.
“I am not sure about the timing because there are many factors ... Hopefully it will not take time since this is very important for IDB and a number of member countries,� he said after the opening of a luxury shopping and business centre in Sarajevo in which the bank holds a stake.
The global credit crunch and the slowing of economies in key Islamic financial centres are putting pressure on the $1 trillion Islamic bond industry, its biggest test since it began 30 years ago.
The value of sukuk issued globally in 2008 has fallen more than 56 percent from 2007 to $14.9 billion, according to Standard & Poor’s.
Ali said he expected 2009 issue would be priced higher and that the new sukuk would increase the IDB’s 2009 financing programme by 15 percent.
Helping poorest
Ali said the IDB, which aims to foster economic and social development in its 56 member states, had a number of programmes to help alleviate poverty.
He said the board of the Islamic Solidarity Fund already had approved micro-finance and training schemes and that the bank was preparing a special programme for Africa.
“We hope we can liquidise up to $500 million for each one of them (member countries) -- $100 million from the fund itself and $400 million to be mobilised from other partners.�
The bank said in November it was seeking resources to increase its 2009 lending to help its member states deal with the financial crisis, wanting to lend more than the $4.8 billion it lent in 2008 to relatively poor Muslim nations.
Ali said they were not the only place member states could go to for help.
“We do not feel left alone. Hopefully, with the outcome of the G20 summit and allocation of funds for international financing institutions, including the IMF (International Monetary Fund) and the World Bank, there will be a benefit for our member countries.�
The bank, whose largest shareholder is oil-exporter Saudi Arabia, began a capital raising programme in 2006 which, once completed, will boost paid-in capital by 50 percent.