DUSHANBE, Tajikistan, May 22, 2013 (GLOBE NEWSWIRE) -- The Islamic Development Bank's Board of Governors (BoG) today approved to more than triple the Bank's authorized capital to 100 billion Islamic Dinars (about US$150 billion) from 30 billion, reflecting the Bank's strong balance sheet and the growing economic development needs of its 56 member countries. The BoG also increased the Bank's subscribed capital from 18 billion to 50 billion Islamic Dinars.
At its annual meeting in Dushanbe, the Bank also announced it will immediately tap the public market with a US$1 billion offering of sukuk, or Sharia-compliant bonds. The five-year offering is rated Triple A by each of the three major bond 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 Islamic-compliant investments.
"The tenets of Islamic banking have stood the test of time," said Dr. 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 Bank 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, with a 23.6% stake, has the largest ownership in the Bank, headquartered in Jeddah, followed by Libya with 9.5%, Iran with 8.3%, Nigeria with 7.7% and the United Arab Emirates with 7.5%. The next four biggest holders are Qatar (7.2%), Egypt (7.1%), Turkey (6.5%), and Kuwait (5.5%).
IDB provides project financing to diverse regions of the world, including a number of Less Developed Countries that constitute part of its membership.
Although energy, transportation, and water and sanitation projects make up about 60% of the Bank's portfolio, it has recently stepped up its commitments in agriculture, education, health and other social services. IDB is also investing $250 million in a Youth Employment Support program in five member countries: Tunisia, Egypt, Yemen, Libya and Bahrain.
Last year, the Bank partnered with the Bill & Melinda Gates Foundation to provide $227 million to Pakistan for polio eradication. The Foundation paid all the associated fees and mark-ups in advance, while Pakistan benefited from concessionary financing. "Health and agriculture are the cornerstones for lifting people out of poverty," said Bill Gates, co-chair of the foundation, in a video shown at the meeting. Citing the IDB's "foresight," he said: "It is because of your generosity that we will save lives in Islamic countries."
The Bank is enlisting new partners to replicate what it calls this "triple win" financing, hoping to expand the pool of capital available for agriculture, nutrition, education, energy, infrastructure and climate projects.
Despite the increase in authorized capital and the new offering of sukuk, the Bank said it intends to maintain a conservative balance sheet. At the annual meeting, the board of governors called upon its member countries to fulfill their commitments to invest $5.4 billion in fresh capital in the Bank. The Bank also announced its intention to tap the sukuk market periodically going forward.
The Bank's debt-to-equity ratio is expected to gradually climb from its current ultra-conservative 62% to a still highly conservative 100%. Other major development banks are much more highly leveraged, carrying debt amounting to between two and three times equity capital.
The joint lead managers of the new sukuk offering are Barwa Bank, BNP Paribas, CIMB, HSBC, NCB Capital, and Standard Chartered Bank, and the offering will be governed by English law.
"This capital increase will allow the bank to finance more and bigger projects in our member countries," stated Mr Davlatali Saidov, the chairman of IDB Board of Governors during the 38th Annual Meeting that approved the capital increase. "It reflects the confidence of our owners in the Bank's management and in the potential to make positive contribution to Islamic communities around the world."