Gulf Times | 17 Feb 2010
By Santhosh V Perumal/Business Reporter
Jeddah-based Islamic Development Bank (IDB) is tapping Qatar’s sovereign wealth fund as well as other government and private entities as the bank seeks to double financing for agriculture sector in developing countries.
“We are going in for talks with Qatari institutions,” IDB vice president Abdul Aziz al-Hinai told reporters on the sidelines of a function to mark the IDB Group day, which was attended by Finance Minster HE Yousef Hussein Kamal, Qatar Central Bank governor HE Sheikh Abdullah bin Saud al-Thani and IDB president Ahmed Mohamed Ali.
IDB, in which Qatar holds 8.1% stake, would act as a middleman between those countries with financial capital and those with natural resources but lacked institutionalised structure to support and promote agriculture, al-Hinai said.
Due to the lack of institutionalised structure and proper legislations, many investors, including those in Qatar, may be reluctant to invest in agriculture in those countries, he said adding IDB, which has provided finance to the extent of more than $63bn since its inception, would act as “comfort” to those investors wishing to enter developing countries.
“We are now aggressively seeking partnerships (from Qatari institutions) for investments into agriculture,” Ali said, adding IDB was aiming to increase financing to 15% (of its total credit portfolio) from the present 7%.
IDB’s affiliate Islamic Co-operation for Insurance of Investments and Export Credits (ICIEC) will provide investment insurance to cover country risk in relation with foreign investments among member countries, he said.
Terming investments by Gulf states in agriculture as a “win-win” situation, he said for the capital-thirsty countries, it will add value to their agriculture, earn more foreign exchange and generate additional employment as well as a spill-over to the other sectors of those economies whereas for the investors it would facilitate diversification and ensure food security.
IDB had last year pledged $1.5bn for food security for three years and under the agreement, it will finance priority projects in 26 least-developed IDB member countries, whereas Food and Agriculture Organisation will provide the necessary technical support for the formulation and implementation of projects.
Of the financing portfolio of $63bn, Ali said bulk of it went to infrastructure sector and its infrastructure fund was distributed among oil and gas, steel, metals, telecom, transportation, petrochemical and power.Sheikh Abdullah said Islamic financing, which grew by 30% between 2002 and 2008, is expected to grow by 20% until 2012. However, there are certain issues such as lack of capital for mergers and liquidity management within the Islamic financial institutions.