#1السلام MONETAR ر الوته رديتي مين اءوتوريتي مونيتاري بروني دار السلام AUTORITI MONETARI BRUNEI DARUSSALAM Financing an Infrastructure: Inaugural Financing Project in Brunei Darussalam BI-ADFIMI-KNKS Joint CEO Seminar on "Islamic Structured Finance: Cases of Infrastructure Project Finance in IsDB Member Countries" 12 November 2019 Jakarta, Indonesia Presented by: Nurhuaida Damit#2Disclaimer The views expressed in this presentation are those of the author(s) and do not necessarily represent the views of AMBD, the Board of Directors, or AMBD Management. The information shared in this document is permitted for use in print, electronic, or any other media, provided these are for personal use or non-commercial scholarly, educational, or scientific research or study purposes and the used material is appropriately attributed to AMBD. No written permission is required for such use. Users of the information are fully responsible for any consequences resulting from their use of the information. AMBD does not guarantee the quality, accuracy, completeness of the information. While efforts are made to verify the information provided, the information may contain typographical or other errors and should not be assumed to be error free. By using the Information, you agree that AMBD shall not be responsible for any direct, indirect, special, incidental or consequential damages or any other damages whatsoever and howsoever caused, arising out of or in connection with the use of the Information or in reliance on the Information available. 2#3Outline Introduction • Market Development Financing Mechanism Construction Phase (Istisna'a) Operation Phase (ljarah) ⚫ Issues and Challenges 3#4Introduction Population: 442,400 (2018) Area: 5,767 sq. km GDP: BND 18.3 billion / USD 13.39 billion (2018) Structure of Financial System Assets in 2018 Takaful Operators Insurance companies 3% 5% Brunei Darussalam Finance Companies 4% Conventional Banks Islamic Banks 32% 56% Source: Department of Economic Planning and Development (DEPD) and Autoriti Monetari Brunei Darussalam (AMBD) 4#5Milestones Infrastructure development Market Development Establishment of IBB Securities Sdn Bhd IBB Shares IPO Maiden issuance of Brunei Government Short-Term Sukuk Al-Ijarah BLNG/IDBB Sukuk Al-ljarah (corporate sukuk) 1993 1994 2000 2001 2005 2006 2011 2013 2015 2016 2017 2018 Establishment of Brunei International Financial Centre (BIFC) Establishment of Syariah Financial Supervisory Board (SFSB) Establishment of AMBD Securities Markets Order (SMO, 2013) SMO & SMR came into force Securities Order, Mutual Funds Order (2001) Securities Markets Regulations (SMR, 2015) Notes: IBB - Islamic Bank of Brunei, BLNG - Brunei LNG, IDBB - Islamic Development Bank of Brunei Issuance of Infrastructure Sukuk Full Signatory to IOSCO MMOU Introduction of MCB Averaging Provision Introduction of AMBD Standing Facilities Issuance of Guideline on Application to carry out Islamic Investment Business 5#6Sukuk as a Financing Mechanism Objectives of the Project: 1. Kick start and develop Brunei Darussalam's capital market; 2. Rate as benchmark for any potential domestic long-term issuances; and 3. Structure can also be used for any other potential government-related or government sukuk issuances, if required. 6#7Infrastructure Sukuk This sukuk is a hybrid sukuk and the structure is divided into two phases: 1. 2. Construction Phase (Istisna'a): The borrower procures the construction of project assets and then transfers beneficial rights of assets to Islamic financiers. As consideration, Islamic Financiers makes phased payments to the borrower. Operating Phase (Ijara): Financiers lease project assets to the borrower. In turn, the borrower makes lease payments (equivalent to debt service). Underlying Asset: The Infrastructure Project#8Structure: Construction Phase (Istisna'a) Construction company 7. AMBD finances construction company through Istisna'a, for the purpose of building the asset. AMBD will pay the construction company the cost of the project 6. SPV appoints AMBD as its representative (wakil/agent) to manage certain services in relation to maintenance of the lease assets. 5. SPV as Trustee for Certificateholders, forward leases the asset to AMBD through Ijarah Mawsufah Fi-Zimmah and receive periodic advance rentals from AMBD 2. SPV issues Sukuk to Certificateholders SPV 1. AMBD sells the beneficial ownership of the underlying asset to SPV 3. Certificateholders pay Sukuk issuance proceeds to SPV AMBD 4. SPV pays AMBD for purchase of beneficial of underlying asset 8. SPV distributes the advance rental payments to the investors. Certificateholders 8#9Structure: Operation Phase (Ijarah) Construction company AMBD 1. SPV as Trustee for Certificateholders will continue to lease the asset to AMBD through Ijarah 2. SPV as Trustee for Certificateholders to receive periodic rentals from AMBD SPV 3. SPV to distribute rental payments to the investors. At maturity, SPV pays principal + rental to investor Certificateholders#10Issues and Challenges Syariah Financial Supervisory Board Investor Internal Stakeholders Other External Stakeholders Legal Asset Documentations 10#11Bibliography AMBD Annual Report (2018), Autoriti Monetari Brunei Darussalam (AMBD). Brunei Darussalam Key Indicators (2018), Department of Economic Planning and Development (DEPD), Ministry of Finance and Economy Brunei Darussalam. 11 www.ambd.gov.bn @autoriti_monetari#12THANK YOU. 12 www.ambd.gov.bn @autoriti_monetari