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30 May 2023

OIC to set up bank ‘worth $100bn’

By VM Sathish


The Islamic world’s biggest IPO could be worth $100 billion (Dh367bn) if plans to form the largest Muslim bank with a capital base of $111bn get the green light.

The proposed Al Emmar Bank being set up by a group of Islamic countries to finance major infrastructure projects aims to target private sector investors to subscribe to most of the bank’s proposed capital.

The Organisation of Islamic Conference (OIC), an inter-governmental body with 57 member states, is launching Al Emmar Bank to finance the long-term development of ports, free trade zones and other ventures in member countries.

Such financing is presently dominated by the Western financial institutions.

Al Emmar will probably emerge as one of the largest development banks in the world. At present the Islamic Development Bank (IDB), with an authorised capital base of $45bn, is the biggest in the OIC area.

“Al Emmar Bank’s paperwork has been completed and very soon this bank, with a private capital of $100 billion for long-term infrastructure projects, will be established,” said OIC Secretary-General Professor Ekmeleddin Ihsanoglu of Turkey.

There will be additional funding of $1 billion in administration shares and $10 billion in public investment shares, said a report by the OIC’s Economic Co-operation Standing Committee. A sukuk or Islamic bond will provide additional cash for the investment.

Al Emmar’s launch follows an announcement by Saudi Arabia of plans to establish a $900bn Public Investment Fund, said to be the world’s largest sovereign fund.

Trade in the OIC region will receive a boost with the launch by the IDB this month of the Islamic Trade Finance Corporation with a capital base of $3bn and subscribed capital of $750 million. The corporation aims to increase the level of trade among OIC countries from the current 14 per cent to 20 per cent in 2015.

Al Emmar Bank is part of a 10-year action plan drawn up by the OIC and the Islamic Chamber of Commerce and Industry to encourage private sector investment.

Other initiatives include the establishment of a free trade area across member states and the formation of a World Businessmen Council to enhance intra-Islamic trade. The Islamic Chamber of Commerce has set up the International Islamic Company for Exploration of Investment Opportunities and Promotion of Intra-Trade with capital of $100m.

A spokesman said: “One of the constraints in the trade is the lack of information on investment opportunities. The new firm will focus on publicising and establishing economically viable commercial and industrial projects in order to provide job opportunities to the labour market of the member states.”

A $10bn poverty alleviation fund with contributions from OIC countries is being set up. And an international organisation is being formed to channel zakat (Islamic charity) into the development of the under-privileged member states.

King Abdullah bin Abdulaziz of Saudi Arabia has contributed $1bn to the poverty alleviation fund and Kuwait has given $300m.

The OIC plans tourism development and it will include setting up a cross-border network of wildlife parks, reserves and sanctuaries across West Africa where there are nine member states.

Development banks

  - The Islamic Development Bank, based in Saudi Arabia, funds 
    projects in OIC member countries. It has authorised capital of $45
    billion (Dh165bn) and subscribed capital of $22.5bn

  - Al Masref in Bahrain was launched in 2006 as a commercial and
    investment bank with a capital base of $5bn, which will rise to
    $10bn in the first five years. It competes with Western banks for a
    share of the long-term project finance market

  - The European Bank for Reconstruction and Development was
    established in 1991. Its share capital is $29.4bn

  - The International Bank for Reconstruction and Development, part
    of the World Bank Group, has a capital base of $11 billion

  - The African Development Bank has an authorised capital base of
    $33 billion

  - The Inter American Development Bank, owned by 47 member
    countries, has ordinary capital of $101bn