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Exim Bank targets RM3b sukuk for global market

March 14, 2013

By Farah Adilla

PETALING JAYA: Government-owned Export-Import Bank of Malaysia Bhd (Exim Bank) is looking at the potential of arranging a US$1 billion (RM3.1 billion) sukuk to be made available in the global market in its effort to help local companies do business overseas.

Its managing director/CEO Adissadikin Ali said the bank aimed to raise funding based on three objectives: sources of fund should match users of fund in terms of tenure, foreign exchange neutral and the right pricing.

“In order to achieve this, we have to find the lowest, cheapest cost available. We are mindful of our mandate. We are not going after a big profit. Our mandate is to help benefit other Malaysian companies.”

He said the bank was looking at sukuk as one of its options for raising funds.

It was earlier reported that Exim Bank aimed to increase its Islamic financing contribution to total loans to 30% within the next two years from the current 20%.

Adissadikin was quoted in the report as saying that its target will be supported by higher loan disbursements, targeted to grow at least 30% annually until 2015.

He said total loan disbursements last year surpassed 30% growth, year-on-year, to exceed RM3 billion.

“In 2013, we are targeting RM5 billion in loan disbursements, driven by demand from companies to expand business overseas amid slower domestic consumption,” he told Bernama recently.

Sukuk issuance is expected to pick up this year after a little slackening trend in the last quarter of 2012.

In an e-mail interview with The Malaysian Reserve recently, CIMB Islamic Bank Bhd executive director and CEO Badlisyah Abdul Ghani said the financing needs for the growing infrastructure sector in Malaysia was expected to give a further boost to the sukuk issuance market which may see infrastructure, blue chip companies and financial institutions dominating the sukuk issues this year.

Political risks

Moving forward, Adissadikin said the bank aimed to increase its credit insurance penetration to all of its clients to mitigate the possible risks raised by cross-border transactions.

Exim Bank’s credit insurance is an insurance policy that covers non-payment resulting from the delivery of goods or services due to commercial and/or political risks.

The insurance is purchased by business entities to insure their accounts receivable from losses due to the insolvency of the overseas buyer.

“The bank encourages local businesses to go overseas but cross-border transactions might be vulnerable to commercial and political risks across the globe. Therefore, Exim Bank, on behalf of our clients, also has to be mindful of these risks and aware that these risks can also be mitigated.

“Especially after the euro-zone crisis, local businesses doing cross-border transactions started to open their eyes of the importance of this credit insurance facilities,” he added.

Exim Bank has also introduced Credit Takaful, which provides protection against the risk of non-payment by buyers as a result of commercial and/or political risks. Credit Takaful is meant for Malaysian exporters so they can be assured of receiving future payments, either from the buyers or Exim Bank by way of takaful claims.

Losses arising from commercial and political risks will be covered up to 90% and 95% respectively. Without Credit Takaful, Malaysian exporters need to absorb the loss themselves if their buyers fail to honour the payment.

On its prospects, Adissadikin said as the world was “never free of crisis”, the bank remained optimistic on the growth of local businesses doing transactions overseas, expecting “business as usual” especially in the less developed countries.

“We see demand of infrastructure development growing in less developed countries, largely contributed from the Asian continent. They will always have the resources and it is the Malaysian companies responsibility to go and develop these countries,” he said.

This content is provided by FMT content partner The Malaysian Reserve.


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