Emad Al Thaqeb (centre), AGM for Finance Sector, KFH
Islamic finance key to plan projects Local banks liquidity exceeds plan estimate: KFH

KUWAIT CITY, June 7: Kuwait Finance House (KFH) AGM for Finance Sector Emad Al-Thaqeb stated Islamic banking institutions, including KFH, have accumulative experience in financing major local and overseas developmental projects, not to mention their strong financial coverage that allows them to meet the financing requirements for the Kuwaiti development plan.

It is worth noting that KFH took part in the Role of Islamic Finance in Developmental Projects Conference that began yesterday under the patronage of His Highness the Prime Minister Sheikh Nasser Al-Sabah. The conference is organized by Al-Yousra Human Development Company. Al-Thaqeb mentioned that the Central Bank of Kuwait took into consideration the requirements of this phase by recommending an increase in the margin of loans in return for deposits at local banks that ranges from 85-100%.

If this recommendation is followed, long term deposits will increase; thus enabling banks to offer more loans and to fulfill the requirements of the development plan. At the same time, the local banking apparatus currently has liquidity that exceeds the financial requirements of the annual development plan that is estimated to be KD 3.75 billion.

Moreover, Al-Thaqeb said that the local and regional experiences show that Islamic banks, including KFH, can use savings perfectly, which stipulates the creativity of a secondary sukuk market and the ability of those banks to finance. He added that KFH has also financed international projects in the fields of power, oil, petrochemicals, water desalination, and the issuance of sukuk.

Furthermore, he remarked that the credit decision to finance contracting companies to execute the development plan is based on the project that will be financed, especially projects with suitable regular cash flow that do not have advanced technology. He went on to say that contractors must be specialized in this kind of business, to have experience in major projects, and to have one main contractor only, in addition to the quality and balance of his financial status.

Contractors must also have the ability to finance their project by 25% of the project, and to offer acceptable guarantees that are not less than 15% of the amount of financing required.

He stated that there are potential challenges for this developmental challenge, such as lack of economic legislations that are required by the development plan; the absence of cooperation between the two authorities; the overlapping of concerned authorities; and the long period of time necessary for paper work. Kuwait needs a strong private sector that can trigger growth instead of depending on governmental financing.

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