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Euromoney innovations in Islamic finance 2016: Khazanah

M$100 million ($18.2 million) sustainable and responsible investment sukuk (Ihsan)

Innovations Islamic 2016 196w
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Lead manager: CIMB Last year one of Euromoney’s awards went to the IFFIm sukuk which funded immunization programmes: a rare example of Islamic finance being used to achieve a social good.

This year we reward Ihsan – a vehicle of Khazanah, the Malaysian sovereign wealth fund – for a small but intriguing deal designed to support the transformation of schools, under the Yayasan AMIR trust schools programme. This is a non-profit scheme that aims to increase access to quality education in Malaysia’s government schools.

The interesting thing is the way that the performance of the underlying charity is linked to the investor. It is a model the Malaysians are calling ‘Pay-for-success’. “The social impact of this pay-for-success structure is measured using a set of predetermined key performance indicators, which are assessed over a five-year observation timeframe,” says Dato’ Mohd Izani Ghani, chief financial officer at Khazanah.

Social obligation

These KPIs are closely monitored. If they are met, the sukuk holders forgo 6.22% of the nominal value due under the sukuk at maturity and that money stays with the schools, “as part of their [sukuk holders’] social obligation in recognizing the positive social impact generated by the trust schools programme,” says CIMB.

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