Kuwait’s Islamic banks face an unconventional future
Just as it comes to terms with the fallout of the global economic crisis, the Islamic sector must prepare for political instability. Dominic Dudley reports.
ONE OF THE most troubling episodes faced by Kuwait’s Islamic finance industry could at last be on the way to being resolved. The Investment Dar, a Shariah-compliant finance company, defaulted on a $100 million sukuk in April 2009 and has been trying to come up with a restructuring plan for its debts of more than KD1 billion ($3.6 billion) ever since. A vote by creditors was due before the end of March on the latest plan, which would involve their injecting a further KD20 million into the business over the next year. In return, they would gain an additional 10% stake and their debts would be repaid over the following six years.
Previous restructuring plans have failed to gain the backing of sufficient creditors but if they approve this one the plan could be finalized by the end of June. A source close to the bank, who did not want to be named given the sensitive nature of the discussions, hopes that it will go through, if only because it is the least worst option.
"It looks as if the majority [of creditors] will approve the plan, because the alternative is not pleasant for anyone," he says.