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Islamic Development Bank to finance African infrastructure projects

The Islamic Development Bank (IDB) has approved a multi-million-dollar package of financing to boost infrastructure investments in seven African nations.

Burkina Faso, Cote d’Ivoire, Senegal, Mali, Guinea, Tunisia and Suriname – will benefit from a share of the total $805 million worth of finance deals for investments in energy, housing, agriculture and water supply. A share of the total will also go to Latin America, the IDB said.

IDB president Dr Bandar Hajjar signed the agreements with the finance ministers of the beneficiary countries on the sidelines of the World Bank Group’s annual meeting in Washington DC.

Under the terms of the agreements, Cote d'Ivoire will receive $265m for the Cocody Bay project and vocational training. Cocody Bay, in Abidjan, includes development of a marina, port works and construction of dams and transport infrastructure.

Mali will receive $166m for the country’s Sirakoro power plant project and Burkina Faso will receive $104m for a power project in that country.

Guinea is to receive $16m for a rural water supply project and Tunisia will receive $80m for agricultural development. Senegal and Suriname will receive a total of $173 for housing projects.

Hajjar said: "These infrastructure projects will go a long way to addressing the

development challenges of our member countries. They will greatly contribute in creating employment and providing an enabling environment for the growth of the public and private sector.”

Last year, Burkina Faso, Cote d’Ivoire, Mali and Senegal were among West African states that signed an agreement with the private sector arm of the IDB to help finance small and medium-sized businesses (SMEs) through a $100 million Islamic fund.

That move followed Cote d’Ivoire’s debut XAF150bn ($268m) Islamic bond issuance, which was the second such transaction in the member countries of the eight-nation Economic and Monetary Union of West Africa (UEMOA). The sukuk reportedly saw a 38% allocation to investors from the Middle East region. In 2014, Senegal issued the UEMOA’s first Islamic bond.

According to a report published in 2015 by professional services firm EY (4-page / 125 KB PDF), sukuk have “opened the door to raise funds from private sector players and markets to fund public sector projects”. The report said the “broad range of sukuk structures and the access to funding is imperative in addressing infrastructural development needs”.

The report said: “African sukuk are worth considering, as they offer diverse geographical and credit exposures. Given the focus on equity-based and asset-backed financing, sukuk provide solutions to facilitate the development of communities at large.”

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