Saudi-based IDB plans infrastructure funds for Africa and Asia

Above, the Jeddah headquarters of Islamic Development Bank. (Reuters)
Updated 11 October 2018
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Saudi-based IDB plans infrastructure funds for Africa and Asia

  • The new funds would help close a deficit in investments for projects across Africa and Asia
  • In Africa, there is an annual public gap in infrastructure investments that exceeds $87 billion

NUSA DUA, Indonesia: The Saudi-based Islamic Development Bank (IDB) plans to launch two funds focused on Africa and Asia next year, aiming to raise a combined $1 billion to help fill a gap in infrastructure investment among its member countries.
The plans from the IDB, the largest development organization in the Muslim world, follow the launch of a $500 million technology-focused fund in April of this year.
The new funds would help close a deficit in investments for projects such as transportation, energy and sanitation across the two regions, said Mohamed Nouri Jouini, vice president of partnership development.
“This is a new policy of the IDB in terms of putting a focus on thematic areas, whether its infrastructure, science and technology or other areas.”
The IDB estimates that in Africa, where more than half of its member countries are located, there is an annual public gap in infrastructure investments that exceeds $87 billion.
The bank is currently in discussions to attract financial contributions to the new funds and also for selecting external managers, Jouini said on the sidelines of the annual meetings of the International Monetary Fund and World Bank Group.
Most of the IDB’s funds have been managed internally, including its two flagship infrastructure funds, but the bank is aiming to attract external managers to help improve governance.


Saudi Real Estate Refinance Co. plans up to $1.07bn sukuk sale this year

Updated 23 April 2019
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Saudi Real Estate Refinance Co. plans up to $1.07bn sukuk sale this year

  • The plan by SRC, a subsidiary of Saudi Arabia’s sovereign Public Investment Fund, comes as it prepares to purchase more home loan portfolios
  • SRC, formed in 2017, is also keen to tap foreign institutional investors for its debt sale this year

RIYADH: Saudi Real Estate Refinance Co. (SRC), modelled on US mortgage finance firm Fannie Mae, aims to issue up to 4 billion riyals ($1.07 billion) of long-term sukuk this year, its chief executive said on Tuesday.

The plan by SRC, a subsidiary of Saudi Arabia’s sovereign Public Investment Fund, comes as it prepares to purchase more home loan portfolios from mortgage financing companies and banks to boost the Kingdom’s secondary mortgage market.

SRC, formed in 2017, is also keen to tap foreign institutional investors for its debt sale this year, Fabrice Susini told Reuters in an interview.

“Our strategy is clearly to tap the market twice this year,” he said. “We are really looking at probably issuing something between ... 2 and 4 billion riyal that we may be issuing in two tranches.

He said SRC was looking at sukuk in the 10 to 15-year range, to help minimize refinancing risks. “Generally speaking we are trying to issue as long as possible,” Susini said.

He said the company was assessing whether it could also issue bonds in currencies other than the local riyal.

In March, SRC completed a 750 million riyal sukuk issue with multiple tenors, under a program that allows it to issue up to 11 billion riyals of local currency denominated Islamic bonds.

“The rule of the game for us is, like many projects across the Kingdom, attract liquidity from foreign investors,” Susini said.

He said SRC had spent 1.2 billion riyals from its balance sheet buying mortgages from local mortgage financing companies and provided liquidity to these firms.

It has also signed initial accords with several commercial banks to acquire housing mortgage portfolios.

Saudi Arabia’s housing ministry is targeting the mortgage market to reach a total value of 502 billion riyals by 2020 from around 300 billion riyals now.

The government wants to increase activity in the real estate market as it moves to revitalize the economy and is taking steps to reform the sector as part of its 2030 reform plan.

It has been working with developers and local banks to counter a shortage of affordable housing — one of the country’s biggest social and economic problems. Saudi Arabia wants 60 percent of its nationals to own homes by 2020, up from 47 percent in 2016.

The size of real estate financing relative to its gross domestic product is 5 percent in Saudi Arabia compared to 69 percent in the United States, 74 percent in the United Kingdom and 43 pct in Canada, the housing ministry has said.

“The goal of SRC in this market was to make sure that we will be able to refinance at least around 10 percent of the market in 2020, and 20 percent of the market by 2028,” Susini told Reuters.