COVID-19 Measure: Read Full Magazine Here. Commercial opportunities for the Islamic finance sector include tapping into emerging global liquidity pools seeking aligned products and increasing tactical alignment with development bank funders.
The focus of Islamic finance products and services should be on the evaluation of wider societal impact rather than an overly legalistic analysis of Shari’ah compliance. Islamic financial institutions should build capabilities. Compared to 5 years ago, there are now more knowledge resources to access whether that be from peers, regulators, global initiatives, etc.
With assets expected to reach US $3.8 trillion in 2022, through its adeptness at innovative financial structuring Islamic finance is particularly well placed to create innovative instruments that drive capital towards the SDGs.
The Islamic Corporation for the Development of the Private Sector (ICD) is a multilateral development financial institution and is a member of the Islamic Development Bank (IsDB) Group. ICD was established in November 1999 to support the economic development of its member countries through the provision of finance for private sector projects, promoting competition and entrepreneurship, providing advisory services to the governments and private companies, and encouraging cross border investments. ICD is Rated A2’ by Moody’s, ‘A-’ by S&P and, A+ by Fitch. ICD establishes and strengthens cooperation and partnership relationships with an aim to establish joint or collective financing. ICD also applies financial technology (Fintech) to make financing more efficient and comprehensive.
Ayman Amin Sejiny is the CEO of the Islamic Corporation for the Development of the private sector (ICD), the private sector arm of Islamic Development bank Group. Ayman is highly accomplished financial industry leader. He served as Chief Executive Officer of Ibdar Bank BSC, Bank Alkhair, Barclays Capital Saudi Arabia and as the Chairman of Open-Silicon, Inc and Bahrain Financing Company Group as well as a Board member of Unicorn Bahrain. Ayman Sejiny has in-depth knowledge and more than 28 years’ experience in investment and corporate banking in the local, regional and international markets. He held a senior role in a number of regional and international financial institutions, including Citi Bank and ABN AMRO affiliate in Saudi Arabia (Saudi American Bank “SAMBA” and Saudi Hollandi Bank). Ayman Sejiny is Board and C-Level performer with vast experience in innovating financial processes and products. Ayman holds a BA in Finance from Eastern Michigan University, United States.
Sejiny is a board member of Kidana Development Company, a joint-stock company owned by the Royal Commission for Makkah Al-Mukarramah and the Holy Sites, and a member of the investment committee of the King Abdullah Foundation (Almadena Almonawara).
Saying the above, Ayman Amin Sejiny stresses the need to understanding the challenges involved and to exploring meaningful ways forward. Furthermore, with almost three decades experience in leading roles across banking and Islamic finance, Ayman Amin Sejiny shares his views on the key areas Islamic finance and the new plans and strategies of ICD for the year 2022.
BL: What is the role of ICD as part of the IsDB Group?
Ayman A. Sejiny: As the private sector arm of the IsDB Group, our strategic goal is to be the catalyst for private sector development in our 55 member countries. ICD actively seeks to identify opportunities that could function as engines for growth and nurture these opportunities through a range of financial products and services. Overall, in line with its mandate and expertise, ICD aims to fulfil two purposes:
• Support the private sector development in member countries including small, medium and large private enterprises via direct and indirect provision of financial products and services.
• Strengthen the Islamic finance ecosystem within member countries as enabling environment for private sector growth including access to suitable financial products and services, availability of required infrastructure and an enabling regulatory environment.
BL: What are your comments on Sukuk?
Ayman A. Sejiny: The Sukuk, as an alternative, means to mobilize medium to long-term savings and investments from a large investor base. It was, and continues to be, an important source capital needed to meet the increasing demand for sustainable infrastructure development across the globe.
The Sukuk issuance process is yet to be streamlined to compete with the for issuing bonds. This tends to push issuers to seek other avenues when they need to raise financing quickly. Therefore, the challenges related to the standardization of Sukuk in its documentation and structures, as well as standardization in Shari’ah principles in addition to high transaction costs are the first barriers to Sukuk development.
ICD plans to continue growth momentum for its fixed income products post-COVID-19 economic recovery. ICD has signed three mandates with member countries during Covid-19 and co-arranged many sukuk deals for its corporate clients. ICD has seen an increasing demand from sovereigns and corporates who were willing to explore alternative financing methods such as sukuk. Over a period of six months, ICD managed to assist the Republic of Maldives to raise US$500 million. Despite the downgrade at the time of tapping the debt market, Maldives’ recent issuance is expected to be eligible for J.P. Morgan Emerging Markets Bond Index (EMBI).
ICD is pioneering developmental role in Emerging & Frontier Markets. Despite regulatory challenges, ICD has assisted at least six sovereigns with their debut sukuk issuances. In recent years, the ICD has focused its work in Africa and Central Asia. The ICD has advised several governments on their debut sales of Sukuk, including Senegal, Jordan, Togo, Mali, Maldives and Ivory Coast. ICD hopes to attract private companies to the market as well. In 2021, the ICD advised the Maldives, an archipelagic state in the Indian subcontinent of Asia, on setting up a US$1.0 billion Sukuk Program.
In April 2021, Maldives issued a US$200 million, 9.875% coupon five-year sukuk to fund a tender offer for its outstanding US$250 million 7% July 2022 bonds. In late April, ICD successfully closed a US$100 million tap sale (“1st tap”) for Maldives. The sovereign in September managed to raise $200 million from sukuk tap despite a recent ratings downgrade by Moody's. Deal statistics show the issue was oversubscribed three times over, with investors from pension funds, banks, hedge funds, and asset managers from America, Europe, Nordic countries, Asia, and the GCC. The investor buy-in was a vote of confidence for the Maldives and its efforts to manage the effects of the pandemic. This is an outstanding achievement by all the lead arrangers especially after the recent downgrade by Moody’s to Caa1.
BL: How can SMEs gain better access to finance?
Ayman A. Sejiny: Bank loans are still the most common source of external finance for many SMEs in most of our member countries, which often rely on traditional debt to fulfill their startup’s cashflow and investment’s needs to grow and innovate.
From an SME point of view, financial institutions require comprehensive business and financial plans, but many SMEs seeking funding struggle to submit all required documents and information. Therefore, improving financial literacy for SMEs is crucial, especially in terms of strengthening their capability in the area of business and financial management. ICD through its advisory services arm specializes in assisting conventional financial institutions open Islamic windows as well as assists existing Islamic banks and Non-Banking Financial Institutions with development of Islamic products catering to local and regional markets. ICD advisory team has completed 43 such assignments and currently has 12 new assignments.
BL: What is your vision for the Kingdom’s current and future economy?
Ayman A. Sejiny: On the back of Vision 2030, I believe that Saudi Arabia is on the right path in terms of developing and diversifying the economy. To make further progress and successfully build a resilient economy, it requires impactful investments which focus on serving the needs of inclusive and sustainable development. In this regard, the private sector as a driver of change has the power of innovation and ability to create many of the solutions needed to address the challenges. Therefore, the private sector involvement in the national agenda is advisable.
BL: What is the strength of ICD?
Ayman A. Sejiny: We are the only Islamic multilateral development bank in the globe serving private sector development. Our dual mandate of supporting private sector development and strengthening the Islamic finance ecosystem makes us a unique institution in the world.
ICD possesses a wide range of financing instruments and advisory solutions to support the sustainable development path of its member countries by channeling them to the private sector agencies.
To date, ICD has a network of more than 100 local and regional financial institutions in 55 member countries. Coupled with our newly launched Bridge digital platform, our large geographical reach will enable us to reach target end-beneficiaries efficiently.
Last, but not the least, the ICD is truly south-south Multilateral Development financial institution, where our shareholders are our member countries where we operate and extend our services like financing, asset management and advisory solutions (including sukuk issuance).
BL: How did Covid-19 impact your business? What did we learn?
Ayman A. Sejiny: At the height of the pandemic, many investee companies of ICD faced issues related to timely collection of client financing and eventually having some predicted non-performing financing (NPF). In this regard, ICD’s equity team worked on an emergency plan to support those investee companies through additional equity injections and extending lines.
The COVID-19 pandemic has highlighted the fragility of many businesses and markets across the globe. In a very short time, the context in which we are operating has changed drastically. The COVID-19 crisis is undoubtedly an opportunity for financial intermediaries to transform themselves and improve their long-term position. In any scenario, banking executives must prepare for the next normal to be very different from that of the past ten years.
For financial institutions, I believe we have learned to be more agile to adapt to the evolving pandemic situation and the uncertainty it brings. This means having to be more technological savvy and digitally responsive to changing consumer behaviours and demand.
The COVID-19 pandemic has also put significant emphasis on the role of stress testing within risk management. Stress testing should form an integral part of the overall governance of any financial institution.
We have also shifted our priorities to focus more on building resilience, which also means ensuring our operations are aligned with the Environmental, Social and Governance (ESG) themes and the overall global development agenda.
