Most SMEs unaware of Islamic financing options

PETALING JAYA: A recent survey conducted by Bank Negara Malaysia revealed that almost 60% of small and medium enterprises (SMEs) are not aware of the availability of Islamic business financing facilities.

“Indeed, most SMEs adopted conventional financing. Some may still have the misconception that Islamic finance is only for Muslims. Today, we hope to dispel this and create more awareness about what Islamic finance is and has to offer,” Bank Negara Malaysia (BNM) assistant governor Adnan Zaylani Mohamad Zahid said in his welcoming speech at the inaugural Islamic Finance Rendezvous Series hosted by the Penang state government today.

According to him, Islamic banking assets stood at RM874 billion or 30.4% of total banking assets as at end September last year, with an annual growth of 10% over the past three decades.

At the end of the third quarter last year, takaful contributions amounted to RM1.7 billion with market penetration at 15%. Adnan said that growth of Islamic finance in Malaysia has been resilient and supportive of social and economic developments.

“What underlies this growth is the robust foundation and building blocks that the government and BNM, together with the industry, have worked towards, namely in infrastructure development, institution building, robust regulatory framework and product development. We are now at a stage where we view that the foundations are solid and the industry is ready to deliver solutions to meet your needs,” he added.

Adnan said there is now a wide ranging spectrum of Islamic financial products to meet the needs of businesses such as supply chain finance, which enables businesses particularly SMEs, to leverage on the creditworthiness of their anchor suppliers or buyers who are mainly multinational companies, to obtain financing at a more affordable rate which may not be possible through direct approach with banks.

There is also coverage in takaful products at competitive prices, which for example include coverage for loss or damage to goods shipped on all types of conveyances from manufacturing to trading while the Investment Account Platform (IAP) offers more competitive financing terms and variations in financing structures for ventures. To date, the IAP has supported eight ventures worth RM161.3 million.

In addition, there is sukuk as an alternative form of financing for businesses, such as green sukuk for green businesses. To date, five green sukuk have been issued by Malaysian solar companies to finance solar power projects, amounting to RM866.8 million since July 2017.

“At the national level, the government is indeed supportive of the role of Islamic finance as an important tool to assist businesses and SMEs to flourish. Developing Islamic finance and the growth of SMEs are key national strategies, as reflected in the recent 2019 Budget,” said Adnan.

He said the SME Shariah-Compliant Financing Scheme of RM1 billion was established to strengthen SMEs by offering lower financing costs with a 2% reduction in financing rate.

“Sukuk issuers also benefit from the three year extension of the double tax deduction for additional expenditure incurred for sukuk issued under Ijarah and Wakalah principles. Other cost savings for sukuk issuers include reduction in professional fees relating to due diligence, drafting and preparation of prospectus; and various fees charged by Securities Commission Malaysia and Bursa Malaysia,” he added.

MARC affirms ‘AAA’ ratings on Putrajaya Holdings sukuk

PETALING JAYA: Malaysian Rating Corp Bhd (MARC) has affirmed its “AAA” ratings on Putrajaya Holdings Sdn Bhd’s (PJH) three sukuk programmes.

The sukuk programmes are the RM370 million sukuk musharakah programme (due 2030); RM3 billion sukuk musharakah programme (due 2032); and RM1.5 billion sukuk musharakah medium-term notes (MTN) programme (due 2033).

“The ratings affirmation is mainly premised on PJH’s stable and sizeable rental income from the Malaysian government as the principal lessee of government buildings in Putrajaya under long-term lease-and-sublease agreements. The ratings also incorporate the credit strength of PJH’s government-linked major shareholders and its developmental track record as the master developer of the federal administrative centre in Putrajaya,“ MARC said in a statement.

The stable ratings outlook reflects MARC’s expectation that PJH’s credit profile would remain commensurate with the ratings and will receive continued support from its key shareholders.

As at end-October 2018, PJH had delivered 40 government building projects with a total gross built-up area of 37.5 million sq ft under the lease-sublease arrangement with the government. It currently has only one ongoing government building construction project, the Parcel F development in Putrajaya.

This project, which is being undertaken by its wholly owned subsidiary Putrajaya Bina Sdn Bhd, comprises nine government buildings and is nearing completion. The Parcel F project will generate an additional annual lease rental of about RM216 million for the group.

The rating agency said while government building projects under the lease-sublease arrangement provide assured rental streams, its non-government development projects continue to face challenging conditions given the prevailing weak property market.

“Nonetheless, PJH is less reliant on these projects to meet its financial obligations. Its annual lease rental income of about RM1.4 billion is more than sufficient to meet principal repayments of between RM500 million and RM685 million per year over the next five years.”

As of end-September 2018, the take-up rate for ongoing residential projects remained moderate, albeit with some improvement, at 42.8% (9M2017: 37.3%). During the year, PJH also launched its third Perumahan Penjawat Awam 1Malaysia (PPA1M) project in Putrajaya.

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When talking about the mainstreaming of Islamic finance, my initial thought about it is words like ‘murabaha’, ‘shariah’, ‘takaful’ and ‘zakat’ would no longer need translation because they have become familiar features of many financial transactions and agreements run by the majority of financial institutions in Malaysia these days. On a larger view, it is […]

Paramount to raise up to RM800m via sukuk

PETALING JAYA: Paramount Corp Bhd has proposed to raise up to RM800 million through its unrated Islamic medium-term notes programme.

The group told Bursa Malaysia that its wholly-owned subsidiary Paramount Capital Resources Sdn Bhd had on Dec 28, 2018 made a lodgement to Securities Commission Malaysia (SC) for the establishment of the programme based on the syariah principle of murabahah under SC’s Guidelines on Unlisted Capital Market Products under the Lodge and Launch Framework.

The sukuk murabahah programme has a tenure of up to 20 years.

Proceeds raised will be used to finance/reimburse the group’s lands acquisition, investment assets and/or property development project; working capital requirement and/or general corporate purposes as well as settlement of existing and future borrowings/financings.

Public Investment Bank Bhd is the principal adviser, lead arranger, security agent and facility agent whilst Amanie Advisors Sdn Bhd is the syariah adviser for the sukuk murabahah programme.

RAM reaffirms RHB Islamic’s AA2/Stable/P1 ratings

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Moody’s affirms Cagamas’ issuer ratings

PETALING JAYA: Moody’s Investors Service has affirmed the A3 local and foreign currency long-term issuer ratings and Prime-2 (P-2) local and foreign currency short-term issuer ratings of Cagamas Bhd, with a stable outlook.

The rating agency also affirmed the (P)A3 foreign cur-rency senior unsecured medium-term note (MTN) programme ratings of Cagamas Global PLC and Cagamas Global Sukuk Bhd, as well as the A3 foreign currency senior unsecured debt ratings of Cagamas Global PLC.

Both Cagamas Global PLC and Cagamas Global Sukuk Bhd are wholly owned subsidiaries of Cagamas Bhd, and their principal activity is to raise funds for Cagamas Bhd.

“These rating actions follow the publication of Moody’s new finance companies rating methodology, which is the primary methodology that Moody’s uses to rate finance companies globally, except in jurisdictions where certain regulatory requirements must be fulfilled prior to the new methodology’s implementation,” it said in a statement issued today.

Moody’s said it applies its finance companies rating methodology to derive Cagamas Bhd’s standalone credit assessment of baa1.

According to Moody’s, the A3 long-term issuer ratings in-corporate Cagamas Bhd’s baa1 Baseline Credit Assessment (BCA) and Moody’s expectation of a very high probability that Cagamas Bhd will receive support from the government (A3 stable) in times of need.

This expectation results in a one-notch rating uplift from Cagamas Bhd’s baa1 BCA, which reflects Cagamas Bhd’s track record of strong capitalisation, above industry average asset quality, and stable profitability.

”Cagamas Bhd’s issuer ratings and outlook are in line with the Malaysian government’s sovereign rating and outlook, and are likely to move in tandem with any movement in the sovereign’s rating and outlook,” said the rating agency.

Tabung Haji to transfer RM19.9b underperforming assets to SPV owned by MoF

KUALA LUMPUR: Lembaga Tabung Haji (TH) will transfer its underperforming assets worth RM19.9 billion to a special purpose vehicle (SPV) to be owned by the government via the Ministry of Finance, as part of its turnaround plan.

The aforesaid assets will comprise a mix of properties with a yield of less than 2% and equities with an impairment of more than 20%.

About 75-80% of the assets will be in the form of equities while 20% will be properties, including the land that was acquired from 1Malaysia Development Bhd (1MDB).

In exchange for the assets, the SPV would issue RM10 billion of seven-year sukuk and RM9.9 billion of Islamic redeemable convertible preference shares (RCPS-i).

The pilgrim fund’s managing director Datuk Seri Zukri Samat said the asset transfer, which is to be completed by Dec 31, 2018, does not involve cash transactions or government guarantees on the sukuk.

The sukuk will be non-traceable and fully subscribed by TH, as well as redeemable at any time without penalty.

“It is going to be a seven-year sukuk with a yield of 5%. Hopefully seven years will be sufficient for the SPV to rehabilitate the assets,“ he said at a media briefing today.

Zukri also clarified that the 2017 financial statements was audited by the National Audit Department while Pricewaterhouse Cooper (PWC) was roped in to conduct an independent review on the financial position of TH.

On the police reports being lodged after the PWC report and not after the findings of the National Audit Department came to light, he stressed that the group wanted to be certain on its findings before making the move.

“We wanted to make sure that we are certain. That’s why we engaged a professional as we don’t want to jump to conclusion,” he said, adding that the issue was properly investigated.

TH will be supervised by Bank Negara Malaysia from Jan 1, 2019.

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