Saudi Industrial seeks $100m financing

By SHAHEEN NAZAR | ARAB NEWS

Published: Apr 15, 2010 02:19 Updated: Apr 15, 2010 02:19

JEDDAH: Saudi Industrial Projects Co. (Pepsi Cola Bugshan) is negotiating for $100 million financing with leading Islamic financial institutions in the Gulf region for an upcoming mega project. Mohamed H. Zakaria, senior vice president of Ahmed Salem Bugshan Group, said the group wanted to meet all its future financial requirements from Shariah-compliant institutions. This was part of a policy decision to transform its borrowings from conventional banks to Islamic banks and institutions. "So far, 60 percent of Bugshan Group's borrowings are based on Shariah principles. Our target is to make it 100 percent," said Zakaria. He said the trillion-dollar Islamic finance market offers huge potential, especially for the corporate sector. "There is financing sitting in Islamic banks but because of lack of awareness about the availability of the funds, the corporate sector is not using it. Even Islamic banks are not paying due attention to the corporate sector and, instead, are investing mostly in private equity and real estate," said Zakaria, also a senior adviser to Pepsi Cola Bugshan. Bugshan Group's Shariah-compliant borrowing began in 2007 when a $25-million Murabaha financing deal was signed for Pepsi Cola Bugshan with Islamic banks syndicated and underwritten by the Jeddahbased Islamic Corporation for the Development of the Private Sector (ICD). The loan was paid in time and more Shariah-compliant borrowings were carried out through Londonbased Islamic financial banks. "So far we have signed three deals worth $100 million with Islamic banks," Zakaria said, adding in all the deals that the group has signed, ICD, a member of the Islamic Development Bank (IDB), has played a key role. Zakaria said Khalid Al-Aboodi, CEO and general manager of ICD, was the moving force behind Bugshan Group's transformation to Shariah-compliant borrowings. "He is responsible for all our existing and new projects financing. He has been arranging the finance through local and overseas Islamic financial institutions. We owe our success in this regard to him," Zakaria said. He said unlike other institutions in the Kingdom which run on a typical bureaucratic set up, ICD maintains a corporate culture. It makes dealings easier and meets the expectations of the private sector. Bugshan Group has a majority share in the International Islamic Bank (IIB), Bahrain with a paid-up capital of $100 million and authorized capital of $200 million. Zakaria, who is one of the founding members of this bank launched in October 2003, said ICD was a strategic partner of IIB in many of its projects in the Gulf region and Europe.