IBR Credit Rating, Promotion of Islamic Financial Services...

IDB Credit Rating

In 2011 (the tenth consecutive year), the rating agency Standard & amp; Poor's confirmed the assignment of IDB's high credit rating: long-term AAA and A-1 + in the short term with a stable outlook. Moody's also confirmed for the sixth time in a row the highest possible rating of Aaa for long-term foreign currency bonds and the Prime-Ι rating for short-term securities with a stable outlook. In addition, IDB maintains Fitch's highest rating of Aaa for long-term securities and F1 + for short-term bonds issued in foreign currency for five consecutive years.

The confirmation of these ratings by leading world rating agencies reflects the confidence in the stable development of the IDB, related to the support of the participating countries, the balanced management of the bank by the board and the board of directors, and the strategy of the conservative financial model in accordance with best business practices that meet the principles The Koran. In particular, the IDB group does not seek to maximize profits, the principle of fairness and rendering assistance to poor clients is the basis for the activities of all units of the group.

Promoting the development of Islamic financial services

The IDB group played a leading role in the creation and support of the development of the following financial organizations that meet the requirements of Islam:

• The organization of accounting and audit of Islamic financial institutions (AAOIFI) - was founded in 1990, headquartered in Bahrain;

• The Council of Islamic Banks and Financial Organizations (GCBAFI) - was founded in 2001, headquartered in Bahrain;

• Liquidity Management Center (LMC) - 2011 (Bahrain)

• International Islamic Financial Market (IIFV) - 2011 (Bahrain)

• International Islamic Rating Agency (IIRA) - 2002 (UAE);

• Islamic Financial Services Council (IFSB) - 2003 (Malaysia);

• International Islamic Center for Dispute Resolution and Arbitration (ICRA) - 2005 (UAE);

• International Islamic Liquidity Management Corporation (IILMC) - 2010 (Malaysia).

As of the end of 2011, IDB had holdings of shares (ownership interests) in 32 Islamic banks and financial institutions in 21 countries, the total value of which amounted to 250 million rials.

Sukuk bond issue program

In 2005, IDB conducted the issue of medium-term securities in order to become an active issuer in the international capital markets of special Sharia-compliant (sukuk) bonds. The total volume of the issue was initially $ 1 billion, the placement was held on the Luxembourg Stock Exchange. As part of this subscription, IDB issued bonds for $ 550 million. The full redemption of the issue was held in June 2010. The total limit for the subscription in September 2010 was increased to $ 3.5 billion.

In 2011, IDB issued Sukuk bonds worth 60 million euros in private placement and $ 750 million in public offering. The total volume of the issue is $ 2.9 billion. Thus, for future periods within the program, it is possible to issue additional bonds worth $ 0.6 billion.

Reform of the IDB

The IDB Group successfully completed the first phase of its reform, which began in 2007, and is now in the second phase.

Phase 1 provided the following objectives:

• medium-term strategy of the IDB Group;

• organizational structure;

• key management modules.

Phase 2 provides for reform in the following areas:

• policies for operations and procedures;

• the policy of development of human capital (people and competences);

• business processes;

• knowledge management.

The goal of the reform is to transform the bank into an effective organization. For this purpose:

• a five-year development program with well-defined key performance indicators (KPIs);

• Creation of a new unit (development of cooperation and capacity), led by a new vice-president;

• the introduction of a new system for personnel management, including career development programs, a new compensation structure, etc .;

• Implementation of the first phase of SAP ERP in the field of finance, budget control, personnel and procurement.

Implementation of the Partnership Strategy of the Participating Countries (MCPS)

In 2011, the IDB Group launched the Partnership Strategy of the participating countries, a new business model designed to strengthen the partnership between the IDB Group and the participating countries. The key task is to ensure that the long-term plans of the IDB Group and the development plans of the participating countries are in line. The Strategy determines the economic situation of the country and the priority sectors of the economy in which the IDB Group can most effectively focus its resources.

By the end of 2011, the IDB Group completed the development of strategies for six countries (Indonesia, Mali, Mauritania, Turkey, Uganda, Pakistan), four more strategies - for Kazakhstan, Malaysia, Morocco and Senegal - are being finalized. Next, the development of strategies for another six countries (Bahrain, Egypt, Kuwait, Niger, Syria, Tunisia).

Partnership. The IDB Group is building partnerships with other organizations to work together to develop the member countries of these institutions that are common members. To this end, several memorandums of understanding were signed, mainly with African and Asian countries. In 2011, several partnership initiatives with various regional organizations were implemented (Table 15.4).

Table 15.4. Some IBR co-financing operations

Partner

Number of countries

Number of projects

Share of IDB, $ mn

Share

co-financing party, $ mln

Total cost of the project, mln USD

Arab Foundation

Economic and social development

2

2

308

308

615

Arab Bank for Economic Development in Africa

2

3

ND

ND

ND

The Kuwait Foundation

2

2

350

304

654

Trusteeship Fund for International Development

1

1

150

30

180

Saudi Arabia Development Fund

1

1

150

80

230

Asian Development Bank *

6

8

1200

2200

4000

* The framework agreement between IDB and ADB, signed in 2011, implies the contribution of IDB in the amount of $ 2.5 billion and $ 3.5 billion

Source: Islamic Development Bank Group in Brief. Rajab. 2011. June. P. 12.

It should be noted that the main countries - the founders of international organizations (Saudi Arabia, Kuwait and the United Arab Emirates) - are extremely cautious in involving other Islamic countries in these organizations, preferring to interact with national boards of directors. This is reflected in Table. 15.4, which shows the number of countries participating in joint financing of international Islamic organizations. Only the Asian Development Bank is represented by six countries. Recent events in the Middle East countries clearly confirm the correctness of this approach.

Summary

• A whole group of Arab and other Muslim countries over the past three decades has made great strides in socio-economic development through the intensive receipt of petrodollars. This allowed them to invest large financial resources in a new type of banking activity - Islamic banking, based on the principles of the Holy Qur'an. Already in the mid-1970's. In the last century, a number of Arab countries began to form state, private and mixed financial institutions, which soon became international. They were based on the conceptual provisions stemming from the Qur'an and related to trade.

• In accordance with the principles set forth in the Qur'an, it is not allowed to extract profit from the money sums lent (which usually occurs in lending operations). The mechanism for using monetary assets rests on the share ownership of property owners in profits and losses relating to a business enterprise. Thus, loans are non-interest-bearing, the lender's income is formed at the expense of entrepreneurial profit, in the absence of the lender, the lender suffers losses, like the recipient of such a loan.

• The above principled provisions are fully distributed in Muslim countries to banks and other organizations that perform banking functions. The main difference between Muslim banks and all other banks is the refusal of loan interest. This allows them to replace the traditional "money price" criterion, which is subject to numerous, including speculative, exposures, to a more adequate category of "capital efficiency". Thus, debt financing is excluded, since the funds raised by the rate of profit are channeled directly to the relevant sectors of the economy.

• At present, banks, guided by Islamic principles, operate in more than 70 countries around the world. This indicates their competitive ability in comparison with conventional banks. Corporations such as IBM, General Motors, Alcatel, etc. are resorting to these banks. Such large banks and lending institutions as Chase Manhatten , Goldman and Sacs , JP Morgan , etc., open Islamic structures in their structures. Citibank in 1997, established in Bahrain a subsidiary Islamic bank, and after the global crisis, such banks were established in many countries of the East. In total there are more than 450 financial institutions of this type in the world with a total capital of $ 150 billion and total assets of more than $ 1 trillion (2011). Their net profit in 2011 was over $ 15 billion, return on assets was 1%, and the profitability of bank-controlled capital was 12%.

• All this indicates that behind the Arabic names are the well-known mechanisms of the most diverse forms of monetary circulation from ancient times. They are reflected in the holy book of Muslims - the Koran, which encourages a person in his active business activities, but condemns greed, the desire to cash in on the misery and misery of others.

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