Saudi Arabia is the Largest IsDB Group Supporter and the Group Has Provided US$5.5 Billion for Saudi Private Sector Projects and US$19.4 Billion in Investment and Export Insurance

Dr Bandar Hajjar, the Chairman of the Islamic Development Bank (IsDB) Group, commended the gracious patronage of the Custodian of the Two Holy Mosques, King Salman bin Abdulaziz, and His Crown Prince, His Highness Prince Mohammed bin Salman, and their unlimited support for the IsDB Group. He stated that the Government of the Custodian of the Two Holy Mosques had always provided all facilitations necessary for the Bank through an uninterrupted series of initiatives. Chief among these are the successive increases in the Bank’s capital and support for its structure until it became a full-fledged group capable of enhancing its role in socio-economic development in member countries.

Dr Hajjar said that these laudable positions were consistent with the orientations of the Kingdom of Saudi Arabia, its interest in promoting joint Islamic action and its sustained endeavours to develop cooperation among the peoples of the Islamic world. He noted that Saudi Arabia had been providing the IsDB with strong support ever since the Bank was nothing more than an idea, until it became a full-fledged international development institution working diligently to help achieve socio-economic development in member countries and Muslim communities in non-member countries, in accordance with the teachings of the glorious Islamic Sharia.

Support for the IsDB during Establishment Phases

Dr Hajjar added that the year 1973 was a milestone in the history of the Bank, when the first meeting of the Finance Ministers of Islamic States was held. The meeting was inaugurated by the Custodian of the Two Holy Mosques, the late King Fahd bin Abdulaziz, who was then the second Deputy Prime Minister, in confirmation of the Saudi Government’s support for the idea of establishing an international financial institution that would contribute to promoting socio-economic development in member countries. During that meeting, a declaration of intent to establish the Islamic Development Bank was signed. The second meeting of the Finance Ministers of the Organisation of Islamic Cooperation (then the Organisation of the Islamic Conference) followed in Jeddah in 1974, during which the Finance Ministers approved the Bank’s instruments.  A few months later, the ratification process was completed.

Concerning the first meeting of the IsDB Board of Governors, Dr Hajjar stated that the Custodian of the Two Holy Mosques King Salman bin Abdulaziz, then Governor of the Riyadh Region, inaugurated the meeting in Jumada II 1395H (July 1975G) in Riyadh. It was in that meeting that the first Board of Executive Directors (BED) of the Bank was elected and a President appointed for the Bank.

He pointed out that the Kingdom contributed approximately 27% of the capital of the Bank which, upon establishment, had 22 member countries, and an authorised capital of 2,000 million Islamic dinars, or approximately US$3,000 million (one Islamic dinar is equivalent to one Special Drawing Rights (SDR) unit of the International Monetary Fund (IMF)). The Kingdom of Saudi Arabia has maintained its share as the highest shareholder of the Bank’s capital since the Bank’s inception, representing to date nearly one quarter of the total subscribed capital.

Speaking of the Bank’s establishment phase, Dr Hajjar noted that the Kingdom of Saudi Arabia graciously hosted the Bank’s headquarters, and that, before his death, the late King Faisal bin Abdulaziz allocated his private palace in Jeddah to be a temporary headquarters for the Bank until the construction of a permanent headquarters. Also, the Kingdom donated the plot of land on which the Bank’s current headquarters was built, and contributed 50 million Saudi riyals for the construction and establishment of the Bank’s edifice, in addition to the 18 million Saudi riyals that the Kingdom had already contributed for the construction of the temporary headquarters of the Bank.

Concerning the establishment of the  IsDB Group member institutions, Dr Hajjar stated that the Kingdom had been supporting the Bank’s growth and development and was behind the initiatives that strengthened its role and expanded its activities into a full-fledged group with specialised institutions, namely the Islamic Research and Training Institute (IRTI), the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC), the Islamic Corporation for the Development of the Private Sector (ICD) and the International Islamic Trade Finance Corporation (ITFC), in addition to numerous funds supporting the Bank's work.

He added that the Kingdom had done all that was possible for the IsDB Group to be one of the key supporters of the growth and development of the Ummah. The Kingdom of Saudi Arabia has generously provided all material and moral assistance that helps the Bank Group fulfil its role, and has been behind every initiative aimed at the Group’s expansion and development so that it may have all the capabilities that would help it achieve the goal for which it was established.

Financing by the IsDB and IsDB Group Members

Dr Hajjar pointed out that the Kingdom's great interest in joint Islamic work was the prime reason for it to be the largest shareholder in the Bank’s capital, with a share of up to a quarter. This is in addition to the Kingdom’s contributions to IsDB Group institutions and funds established upon its initiative within the framework of the Bank Group to support joint Islamic action. These funds include the Al-Aqsa and Al-Quds funds, also the Islamic Solidarity Fund for Development (ISFD) aimed at fighting poverty in member countries. which the  Kingdom of Saudi Arabia proposed the Fund as an idea and supported its capital with US$1 billion, in addition to other initiatives rolled out by the Kingdom that would take long to talk about.

Answering a question about what the IsDB has provided to the Kingdom, he said that it is well known that the Kingdom uses its own resources to establish its development projects, thereby achieving major developmental and civilisational advancement in various fields. Therefore, the IsDB Group has opted for Public-Private Partnership (PPP) projects, or the financing of projects of the Saudi private sector with which the Group has managed to establish an exemplary and integrated win-win partnership; for while the Bank Group finances many Saudi private sector programmes and projects, it also benefits from and uses the capabilities and expertise of the Saudi private sector to support the movement of investment and commercial and economic exchange with member countries.

Dr Hajjar points out that the total financing approved by IsDBG for the Kingdom of Saudi Arabia since 1974 amounts to approximately US$5,449 million, including US$1,325 million from the IsDB, US$469 million in ICD approvals for private sector projects, US$716 million in ITFC business operations, and US$ 2,939 million from various funds.

In addition, the ICIEC has approved insurance programmes (investments, exports, imports and banks in the Kingdom) in the amount of US$19,391 million.

He stated that the cumulative value of IsDB approvals, since its inception, in favour of the Kingdom of Saudi Arabia covered a total of 437 projects, including 374 completed projects financed by the IsDB . As of July 2020, there are 63 active IsDB-financed projects in the amount of US$680.7 million. Total cumulative disbursements of IsDBG as of July 2020 amounted to US$2,559 million.

Trade Financing (66.6%) and Ijarah (24.1%) are the predominant mode of IsDB financing to Saudi Arabia, representing 90.7% of the cumulative approved portfolio, while grants used to finance Technical Cooperation Programme/small technical assistance operations represent 1% of the portfolio. As for the remaining 9.2% of the financing, it consisted of loans, Istisna'a agreement and equity participation.

Dr Hajjar stated that the industry and mining sector received 61.9% of the Bank's cumulative financing, as demonstrated by the large PPP projects financed. The energy sector is the second beneficiary of IsDB cumulative financing, with 10.8% of the total financing, also concentrated in PPP projects, followed by the agriculture sector, with 9.1%, and the finance sector, with 5.3%.

Public-Private Partnership Projects

Dr Hajjar stresses that, among IsDB member countries, the Kingdom of Saudi Arabia is the largest beneficiary of PPP financing. To date, the Bank has approved US$1,061 million for 10 PPP projects in the Kingdom of Saudi Arabia, representing nearly 19% of the total IsDB PPP approved portfolio. Of these 10 projects, 9 have been completed, while one is still under implementation. The completed projects consist of one project in the energy sector, one in the transport sector and 7 projects in the industry and mining sector.

He added that PPP financings had been approved using the Ijarah mode of financing in accordance with structured financing without sovereign guarantees. He highlighted that PPP projects completed and partially funded by the IsDB in the industry, transport and energy sectors included the following:

  • Rabigh Refinery Project: On 27 November 2004, the IsDB approved a contribution to this project in the amount of 99.50 million Islamic dinars (equivalent to US$142.0 million). The project aims to increase Aramco's production capacity in quantity and quality to meet the increasing demand.
  • SABIC Chemicals Project (Yansab): IsDB contribution to this project was approved on 6 June 2006. An amount of 101.36 million Islamic dinars (equivalent to US$125.00 million) was allocated to this project, which aims to establish a state-of-the-art petrochemical complex in order to increase the production and manufacturing capacity of various oil derivatives to meet the increasing demand from Europe and Asia.
  • Project to expand the Hajj Terminal at the King Abdulaziz International Airport in Jeddah: IsDB contribution to this project was approved on 10 October 2014, in the amount of 67.74 million Islamic dinars (equivalent to US$105 million) to partly cover the project’s cost.
  • The Industrial Complex for the Production of Fertilisers "Ma’aden": IsDB contribution to this project was approved on 6 January 2008, with an amount of 61.47 million Islamic dinars (equivalent to US$100 million). The project helps achieve a strategic objective of the Kingdom: increasing its non-oil exports and achieving economic diversification.
  • The Jubail Refinery Project (Saudi Aramco): Funding for the project was approved on 13 March 2010, with an amount of 78.06 million Islamic dinars (equivalent to US$120 million). The project aims to increase Aramco's production capacity to meet the increasing demand.
  • Sadara Petrochemical Project (Saudi Aramco): The IsDB approved its contribution to this project on 10 February 2013, with an amount of 78.0 million Islamic dinars (equivalent to US$120 million). The project aims to increase Aramco's capacity in the oil industry in an effort to create added value for oil derivatives, such as ethylene and propylene, for which the demand is constantly on the rise.
  • Waad al-Shamal Phosphate Project (SABIC Complex): The IsDB approved its contribution to this project on 21 December 2013, with an amount of 78.4 million Islamic dinars (equivalent to US$120 million). The project will enable SABIC to produce nearly 3.7 million tonnes of various fertilisers and chemicals, in addition to helping achieve economic diversification in the Kingdom and creating approximately 1,600 jobs.