eProcurement in the Public Sector: Story, Myth and Legend

1
FORUM SUR LA PROMOTION DES NVESTISSEMENTS EN A.
C.
IDB GROUP MODES OF FINANCING (Tuesday, 20
June 2006)
2
INDEX

• General
• 2. The Group
• 3. Project Financing
• 4. Trade Financing
• 5. Specific Funds
• 6. Conclusion

3
IDB at a Glance

• Started operations in Oct. 1975
• To foster econ. social development in
  conformity with Sharia
• Membership
• Share Capital
• A Group
• 3 Regional Offices
• Finance

4
Organization
5
Financing Activities

• Projects
• in Member Countries grant, loan, equity,
  leasing, istisnaa, inst. sale
• in non Member Countries grant/loan for social
  sector
• Emergency assistance (MCs /non MCs)
• Trade imports, exports, assist. for WTO
• Capacity Building training, research,
• scholarship (MCs /non MCs), etc

6
Net Financing of IDB Group in 1425H (2004-2005)
(in million US)
7
Project Financing in 1425HSector Distribution
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VISION

To be the leader in fostering socio-economic
development in member countries and Muslim
communities in non-member countries in conformity
with Shariah.
9
MISSION STATEMENT
We are committed to alleviating poverty,
promoting human development, science and
technology and Islamic banking and finance, and
enhancing cooperation amongst member countries,
in collaboration with our development partners.

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STRATEGIC OBJECTIVES

- Poverty alleviation - Promotion of
cooperation amongst member countries. - P
romotion of Islamic financial industry and
institutions
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PRIORITY AREAS
1. Human development 2. Agricultural
development and food security 3.
Infrastructure development 4. Private sector
development 5. Intra-trade among member
countries 6. Research and development in
Islamic banking and finance.

12
INDEX

• General
• 2. The Group
• 3. Project Financing
• 4. Trade Financing
• 5. Specific Funds
• 6. Conclusion

13
IDB GROUP(Members Affiliates)
IDB
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IDB GROUP(Members Affiliates)
IDB
ICIEC
ICD

• ICD (Islamic Corporation for Development of
  Private Sector)
• To provide financing for the private sector
• Subscribed capital IDB (50), MCs (30), Public
  financial institutions (20)
• Financing in 2004 105 million for 18 projects

IRTI
BADEA Exp. Scheme.
Al Aqsa Fund
Al Quds Fund
15
IDB GROUP(Members Affiliates)
IDB
ICIEC
ICD

• ICIEC ( Islamic Corporation for Insurance of
  Investment and Export Credit)
• To provide insurance and re-insurance services to
  cover commercial and political risks related to
  investments and exports.
• Subscribed capital ID 130 million (IDB 50
  MCs 50)
• At end 1425H 76 policies in force for a
  commitment of 335 million

IRTI
BADEA Exp. Scheme.
Al Aqsa Fund
Al Quds Fund
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IDB GROUP(Members Affiliates)
IDB
ICIEC
ICD
IRTI

• IRTI (Islamic Research and Training Institute)
• Research studies
• Seminars and conferences
• Training programmes
• Various data bases (experts, awqaf)
• Prize in Islamic Economics and Banking
• Newsletter

BADEA Exp. Scheme.
Al Aqsa Fund
Al Quds Fund
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Harnessing Financial Resources for the Ummah

• Share capital
• Sukuk New experience, building on AAA rating
• Waqf
• World Waqf Foundation.
• Awqaf Property Investment Fund
• Specific funds (Infrastructure fund, etc)

18
INDEX

• General
• 2. The Group
• 3. Project Financing
• 4. Trade Financing
• 5. Specific Funds
• 6. Conclusion

19
MODES OF FINANCING

• Loan
• Technical Assistance
• Leasing
• Instalment Sale
• Equity
• Istisnaa
• Line of financing
• Murabaha
• Profit sharing

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ORDINARY LOAN

• Long term financing for development Projects.
• Agriculture, Irrigation, Economic
  Infrastructure, Social Infrastructure etc.
• 29 of Operations Plan are loans.

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ORDINARY LOAN (Continued)

• TERMS AND CONDITIONS
• Amount usually not more than ID7Million per
  project, but possibility to go beyond
• Interest free, only service fee to cover
  administrative expenses (max.2.5).
• Repayment in equal semi-annual installments.
• Repayment period 15 - 25 years
• Grace Period 3 - 7 years

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LDMC LOAN

• For least member countries to finance components
  not covered by ordinary loan
• - Reduced admin. exp. max.0.75
• - Repayment period 30 years
• - Grace period 10 years

23
TECHNICAL ASSISTANCE

• OBJECTIVES
• - Development of institutions (Capacity Building)
• - Development of human resources (training)
• - F.S., Detailed Design, Supervision, etc
• - Preparation of sectoral studies
• - Research

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TECHNICAL ASSISTANCE(contd.)

• FINANCING
• As a component of the Project.
• As a separate Operation.
• -T.A Loan
• 16 years incl. 4 years of Grace
• -T.A Grant (Max. ID300,000)
• Technical cooperation grant

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ORDINARY FINANCING

• TERMS AND CONDITIONS
• - Up to 15 years incl. 3 years of gestation
• - Mark-up fixed at 6 p.a.
  or floating
• - 15 rebate on mark up for timely repayments
• - Maximum financing per project is ID70M
• - Government Guarantee or First Class Bank
  Guarantee or other acceptable security.

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ORDINARY FINANCING LEASING

• - Refers to the rental arrangements for the
  financing of capital goods, equipment and other
  fixed assets.
• - IDB, the lessor, provides the required assets
  to be leased for a given period of time against
  payment of fixed periodical rentals

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ORDINARY FINANCINGINSTALLMENT SALE

• - Bank purchases Machinery or Equipment and
  re-sells them to Beneficiary .
• - Beneficiary makes payment at deferred dates.

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ORDINARY FINANCINGISTISNAA

• Istisnaa is contract between a beneficiary (the
  buyer) and a manufacturer (the seller) to produce
  a given product, with given specifications, at a
  determined price, and a fixed date of delivery.

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LINES OF FINANCING

• IDB extends Lines of Financing to
• National Development Financing Institutions
  (NDFIs)
• Islamic Banks.
• Governments.
• To promote the Growth and Development of SMEs
  and Micro-Enterprises in Industry, Agriculture
  and Services.

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PROJECT CYCLE

• Identification / official request
• Programming
• Preparation
• Appraisal
• Approval
• Implementation (agreement, procurement,
  disbursement)
• Post-evaluation

31
IDB INTERVENTIONS IN CENTRAL AFRICA
32
INDEX

• General
• 2. The Group
• 3. Project Financing
• 4. Trade Financing
• 5. Specific Funds
• 6. Conclusion

33
TRADE OPERATIONS

• Import Trade Financing Operations (ITFO)
• Export Financing Scheme (EFS)
• 3. Trade Cooperation and Promotion Program (TCPP)

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I T F O
TRADE OPERATIONS
Purpose Promote imports from
member countries. Eligible goods
Developmental goods Instrument
Murabaha Tenor 6 months to
30 months depending on the type of
goods.
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I T F O
TRADE OPERATIONS
Mark-up LIBOR of currency plus a
Spread. Rebate 30 on the Spread
only for repayments on due dates. Security
Bank guarantee acceptable to IDB
or Insurance (ICIEC) or acceptable
alternatives How to apply through IDB
Governor or directly to IDB
36
E F S
TRADE OPERATIONS
Purpose Promote exports of
member countries of EFS scheme
Eligible Goods All developmental goods
with a minimum of 30 domestic
input. Instrument
Murabaha Istisna'a Tenor From 6
to 120 months
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E F S
TRADE OPERATIONS
Mark-up LIBOR plus a
Spread. Rebate 30 on the Spread
only for repayments on due dates.
Security Bank guarantee acceptable
to IDB or Insurance (ICIEC) How to
apply Through designated National Agencies
in the exporting country
38
TC PP
TRADE OPERATIONS
Trade fair participation Trade mission Seminars
Workshops Training courses Market studies
39
IDB Trade Finance Operations in Malaysia

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ITFO Approvals for Malaysia in 1421H-1425H

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EFS Approvals for Malaysia in 1421H-1425H

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INDEX

• General
• 2. The Group
• 3. Project Financing
• 4. Trade Financing
• 5. Specific Funds
• 6. Conclusion

43
IDB INFRASTRUCTURE FUND
- Equity capital targeting infrastructure
investments in member countries. - Established
in Bahrain - Asian Regional Office in Brunei
Darussalam - Limited partnership targeted at US
1 billion and complementary finance facility
targeted at US 500 million. - IDB as principle
sponsor and founder committed US 150 million
(total amount committed so far is US 981
million)
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OTHER FUNDS

• -Unit Investment Fund
• -Islamic Banks Portfolio
• -Awkaf Properties Investment Fund
• FOR
• Trade and project finance
• Syndication
• Public and private sectors

45
OTHER FUNDSDURATION OF FINANCING
SHORT TERM 3-8 MONTHS - Trade Financing
(Murabaha) MEDIUM TERM 3-5 YEARS -
Installment Sale. (5
years) - Istisnaa (shipment)
(3 years pre-shipment) LONG TERM 5-15
YEARS - Installment Sale
(8 Years (UIF) - Istisnaa (Project
Finan.) (8 years project) -
Leasing/purchase lease back (12 yrs IBP 15
Yrs UIF) - Equity participation
(Unlimited)
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OTHER FUNDS PRICING

• COMMERCIAL BASIS (DIFFERENT FROM ORDINARY
  OPERATIONS)
• FIXED VS VARIABLE RATE FINANCING
• FACTORS AFFECTING PRICING

SECURITIES GUARANTEES

• BANK GUARANTEES
• INSURANCE COVER\CORPORATE GUARANTEES
• CLEAN FINANCING
• GOVERNMENT GUARANTEE

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INDEX

• General
• 2. The Group
• 3. Project Financing
• 4. Trade Financing
• 5. Specific Funds
• 6. Conclusion

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SELECTION OF SOURCE

• BENEFICIARY (PUBLIC, PRIVATE)
• AMOUNT
• SCHEDULE
• CURRENCY
• GUARANTEES
• ACCEPTABLE TERMS CONDITIONS

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IDB Partners

• Member Countries
• Governments and public corp.
• Private Sector.
• Muslim Communities in non Member Countries.
• Regional and international organizations
• NGOs.

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IDB Partners (contd.)

• Other financiers
• Multilateral development banks.
• Regional banks and funds.
• National agencies.
• Islamic banks
• Contractors, Consultants, Suppliers in Member
  Countries

51
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Together We Build A Better Future
Thank You
52
OUR WEBSITE

• www.isdb.org

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IDB Membership

• From 22 at inception to 56 including 28 least
  developed countries or treated as such.

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Member Countries

• 1.4 billion inhabitants
• over 29 million km2
• The largest Kazakhstan (2.7 million km2)
• The most populated Indonesia (212 million
  inhabitants)
• The smallest (300 km2) and least populated
  (270000 inhabitants) Maldives

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IDB Capital
ID 1 SDR 1
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MAIN SHAREHOLDERS( Subscribed Capital)