Kuwait’s Al-Manar carries out first commercial Islamic securitization
Al-Manar Financing & Leasing has securitized 5.3 million Kuwaiti dinars ($17.9 million) of Investment Dar's account receivables. The deal is the first of its kind in the region for commercial Islamic financing, said a press release.
Al-Manar is the most recent company to enter the Islamic finance industry. "Islamic companies long ago deemed securitization incompatible with Sharia'a principles. However both Al-Manar and Investment Dar, along with our respective religious consultants, developed an equivalent to the securitization tool used in conventional finance institutions for the Islamic business world to utilize" said Al-Manar's Chairman Bader Al-Sumait.
Regulations from the Central Bank of Kuwait (CBK) allow finance companies to lend up-to four times their capital, and Investment Dar benefits from this deal by having more of its capital freed-up, in addition to the profits generated from the sale its receivables to Al-Manar.
Until today Islamic finance companies shyed away from utilizing Tawreeq, the term in Islamic finance that is equivalent to securitization in conventional banking and finance. This was for many reasons, the most important of which is the risk associated with consumer finance.
Though several Tawreek transactions were claimed in the past, Islamic financial companies never utilized Tawreeq for the securitization purposes; but rather only for financing purposes accompanied by 100 percent guarantees and unspecified accounts receivables.
"Islamic financial institutions now have an additional means to free-up capital while making a profit, which means they can allocate more funds for financing and investing" said Al-Sumait.
Established in December, Al-Manar Financing and Leasing is a newly established Islamic financing company with a capital of KD 30 million. — (menareport.com)
© 2003 Mena Report (www.menareport.com)
- Al-Manar Financing and Leasing elects board of directors
- Credit Agricole to raise €250 million through Islamic financing for Bahrain Financial Harbour
- Lebanon’s first Islamic bank to open for business by year’s end
- Kuwait Finance House sets up aviation investment fund
- ABC Islamic Bank grants $5 million facility to FFC