Thursday, Aug 04, 2022
MARC Ratings has affirmed its financial institution (FI) ratings of AAA/MARC-1 on Islamic Development Bank (IsDB). The rating agency has concurrently affirmed its AAAIS rating on the Sukuk Wakalah programme of up to RM400 million issued by Tadamun Services Berhad, a trust established by IsDB. The ratings outlook is stable.
The FI ratings incorporate IsDB’s preferred creditor status as a multilateral development bank (MDB) established by the Organisation of Islamic Cooperation (OIC), strong support from its key shareholders to subscribe to callable capital, and its sound liquidity and low leverage positions. As per its mandate, IsDB continues to provide financial support for development projects of OIC member countries and Islamic communities in non-member countries.
For 2021, IsDB registered a growth of 4.2% y-o-y in total gross financing to ID16.9 billion, primarily driven by Istisna’a financing for utilities, transportation, and telecommunications projects. Its financing book is concentrated in developing countries in Asia and Africa, accounting for 55.4% and 42.6% of the total net financing exposure as at end-2021. IsDB’s country exposure is well within its policy parameters for a single country at 15%, as well as top five at 40% of total financing and investments.
We note IsDB has maintained strong capitalisation levels with paid-up capital of ID6.2 billion as at end-2021; impairments have remained very low with overdue instalments of 0.96% of total financing. Provisioning coverage is healthy at about 236%. The MDB’s healthy liquidity position as reflected by its liquid assets-to-total borrowings ratio of 50.9% mitigates refinancing risks. Assets with maturities of less than 12 months were about 3.7x of liabilities with similar maturities. Despite a y-o-y increase from 160.4% to 166.0%, IsDB’s leverage remains low relative to its MDB peers. Going forward, its leverage will be moderated by capital contributions under the sixth General Capital Increase, commencing in 2023.
Contacts:
Farhan Darham, +603-2717 2945/ farhan@marc.com.my
Haziq Najmuddin, +603-2717 2965/ haziq@marc.com.my
Mohd Izazee Ismail, +603-2717 2947/ izazee@marc.com.my