Islamic Development Bank looks to sukuk for Yemen reconstruction

The Islamic Development Bank wants to use Islamic bonds to help finance the reconstruction of countries ravaged by conflict, with the World Bank as a potential joint issuer, the head of the multilateral lender said.
Refugee and reconstruction financing is a priority for the Jeddah-based IDB, which last month launched an initiative with the World Bank and United Nations to help more than 15 million people displaced across the region.
Work is now underway to identify specific projects for the initiative, with a priority on war torn Yemen, which could see the IDB and World Bank as issuers of the sukuk.
"We need to finalize this with the World Bank, but most likely it will be a joint issuance", IDB president Ahmad Mohamed Ali said on the sidelines of an industry conference in Kuwait.
The IDB, which operates to promote economic development in Muslim communities, has 56 member countries including Saudi Arabia, Libya and Iran as its largest shareholders.
The reconstruction initiative would ask donor countries to provide financial guarantees for certain projects, while also seeking grants to cut the cost of financing for countries hosting the bulk of refugees. Sukuk would be a novel element of the initiative and a break from their predominantly commercial nature, marking the first time such instruments are used to finance reconstruction of a war-torn region.
Work is also underway to establish a new infrastructure institution which could have capital of about $1 billion, similar to previous infrastrcuture funds which the IDB has launched, Ali said, although there is no firm launch timeframe. The institution would be the newest member of the IDB group, which includes insurance, trade finance, research and private sector arms.
The AAA-rated IDB also increased the ceiling of its sukuk programme to $25 billion from $10 billion in June, as it aims to expand operations to meet the needs of member countries.