KUALA LUMPUR, Sept 3 The World Bank plans to
raise as much as $500 million worth of Islamic bonds, or sukuk,
this year to help fund an immunisation programme, one of several
initiatives from the multilateral body in the Islamic finance
The World Bank, acting as treasurer of the International
Finance Facility for Immunisation (IFFIm), would help issue the
sukuk, said Michael Bennett, head of derivatives and structured
finance at the World Bank's treasury department.
IFFIm has previously raised money from retail investors in
markets such as Australia and Japan through so-called "kangaroo"
and "uridahsi" bonds. It could soon add sukuk to the lexicon of
"Right now we're thinking $300 million to $500 million, we
are still talking to the market on what the right size should
be," said Bennett on the sidelines of an industry conference.
The World Bank has hired Standard Chartered and
National Bank of Abu Dhabi to arrange the transaction,
which could happen as early as this month although a specific
timeframe has yet to be finalised, said Bennett.
"We've been having investor conversations in the Gulf,
Malaysia and tomorrow it will be Brunei."
IFFIm, rated AA by Standard & Poor's, is backed by nine
countries including France and Britain, it issues bonds designed
to roll forward future donor pledges into cash-in-hand today to
finance its immunisation efforts.
Since 2006, IFFIm has raised $4.5 billion through bonds, its
last issuance was a $700 million bond in June of last year.
Because those pledges are not interest-based, they could be
used to structure a sukuk, which follow religious principles
such as bans on charging interest and pure monetary speculation.
The World Bank has been engaged in Islamic finance for years
and its private lending arm, the International Finance Corp.
, is also considering a return to the sukuk market.
Other units like the International Bank for Reconstruction
and Development (IBRD) are limited in their direct use
of sukuk to fund projects.
But the World Bank is increasingly considering using sukuk
in other ways, such as adapting them to be used as "green bonds"
to fund projects to increase energy efficiency and expand use of
IBRD is now advising the Dubai government on developing a
funding strategy for the emirate's green investment programme,
which could include sukuk, said Bennett.
"This likely will require raising funds in a variety of
different ways - with green sukuk being just one of the options
This could help close the gap between ethical and Islamic
investing, two sectors which have largely developed
independently from each other.
Western institutional investors such as pensions have long
favoured green bonds, while investors in the Middle East and
southeast Asia require sharia-compliant alternatives to
In the long term, the World Bank is also exploring partial
credit guarantees to be used for sovereign sukuk issues, said
The World Bank, through IBRD, offers partial guarantees to
sovereigns, their agencies and other state-owned entities; Such
a programme could be used to help developing countries that have
struggled to tap the sukuk market in the past.
A sovereign sukuk insurance product has been developed by
the Saudi-based Islamic Development Bank, with the
Manila-based Asian Development Bank also considering a
product of its own.
(Reporting by Al-Zaquan Amer Hamzah and Bernardo Vizcaino;
Editing by Simon Cameron-Moore)