A group of Kuwaiti investors led by the International Investment Group (IIG) are creating an Islamic investment bank in Bahrain to take advantage of the growth of the Middle East’s capital markets.
Investors Bank, which will have paid-up capital of $30 million, will be the second new Islamic bank set up in Bahrain this year.
‘The GCC is going through a very interesting time of privatisation. Governments are very supportive of the capital markets and those markets can do with all the support they can get [from investment banks]. This part of the world is very under-served by big players,’ says Ahmed al-Janahi, executive vice-president of IIG and general manager of its Bahrain representative office.
Investors Bank, which will have authorised capital of $100 million, is still in the process of formation. It has applied to the Bahrain Monetary Agency (BMA) for a licence but has not begun to recruit staff or appoint a chief executive.
‘We’re targeting the end of this year [for the bank to start operations] if everything goes according to plan,’ says Al-Janahi. So far, the bank’s four founder shareholders have paid $10.5 million into its share capital, with the rest of the money to be raised in a private placement.
The founders are: IIG, the Awqaf Investment Office of Kuwait’s Awqaf & Islamic Affairs Ministry, Pearl of Kuwait Real Estate Company and Fahd al-Sultan & Sons. IIG will have a significant equity stake in the bank, but not a majority shareholding.
The new bank will provide IIG and other clients with Islamic investment banking services including corporate advice, the arrangement of initial public offerings (IPOs) and investment in equities.
IIG itself has experience in this area: it has bought into privatised companies in Kuwait and arranged IPOs for family-owned companies in the emirate. The bank will cover the Gulf and other parts of the Middle East where there are active capital markets, such as Egypt, as well as the Far East. ‘We’ll also be doing the normal investment activities in the US and Europe, but in an Islamically acceptable way,’ says Al-Janahi.
Bahrain is the location of choice for an Islamic bank in the Arab world because there are already many Islamic financial institutions based there. The country’s conventional offshore banking industry has declined in the last decade, and the authorities are keen to promote Islamic banking instead.
A similar venture to Investors Bank, First Islamic Investment Bank, was set up by Kuwaiti and Saudi interests in Bahrain earlier this year and raised $100 million from investors in the Gulf and Southeast Asia through a private share placement. The difference between the two banks appears to be that Investors Bank wants to focus on the Gulf from the start, while First Islamic’s priority is to create a private equity business in the US and Asia (MEED 26:9:97).