Islamic investment and finance company Investment Dar will increasingly look to the sukuk market to meet its funding needs, according to its chairman and managing director, Adnan Al-Musallam, because of limited opportunities for bank finance in Kuwait.
Investment Dar recently issued a $150 million musharaka sukuk backed by car and real estate loan receivables. “The total equity of banks in Kuwait is $10 billion, which means that we are limited to $1.5 billion from this source,” says Al-Musallam. He also believes that sukuks are cheaper than loans, despite the region’s banks being flush with liquidity.
Use of Shariah-compliant products can further benefit an issuer. “If two-thirds of a company’s financing is done in a shariah-compliant way, it is considered halal, which will boost the share price,” says Amr Abou El-Seoud, Investment Dar’s senior vice-president.
While the company is looking to Islamic finance for future funding, traditional problems remain unresolved. Lead arrangers WestLB and Unicorn Investment Bank took the sukuk far afield in a lengthy roadshow.
This yielded an investor base of 18 banks and institutional investors. Of these, one, the Landesbank Rheinland-Pfalz is German, while another, Bank Muamalat, is Malaysian.