Jeddah-based IDB targets 15% rise in loans, sukuk

The Islamic Development Bank aims to increase its lending this year by 15 percent from $4.5bn in 2008, helped by raising funds from a planned sharia-compliant bond, its president said on Monday.

"This year, actually, our plan is to increase (lending) 15 percent but probably it depends on our ability for mobilisation of resources, as you know the market is not clear," Ahmad Mohamed Ali, president of the IDB, told reporters.

"We are hopeful we could do more than that if we mobilise our resources because we are now working on [a] sukuk," he added on the sidelines of an Islamic economic conference in Jakarta.

The Jeddah-based bank aimed to issue the sukuk in "a few months", he told Reuters separately, but declined to elaborate on the possible size or give other details.

Islamic bonds do not pay interest, which is banned as usury under Islamic law, and are structured as profit-sharing or rental agreements underpinned by physical assets.

Ali said that agriculture was one area where the bank was looking at investments, including to produce rice to be exported back to Saudi Arabia.

"Saudi Arabia is ready to invest in infrastructure for projects to encourage (the) private sector in order to invest in agricultural or other potential sectors," he said.

Ali denied that such investments in land could provoke a backlash in recipient countries.

"They're developing the land," he said.

Separately, State Enterprises Minister Sofyan Djalil confirmed that Saudi Arabia was interested in investing in rice fields in Indonesia.

The IDB, set up to foster economic and social development among its 56 member states, has sought to boost trade between Muslim-majority states during the financial crisis.

President Susilo Bambang Yudhoyono of Indonesia, the world's most populous Muslim nation, floated the idea of establishing a Muslim fund to channel funds to less developed countries.

"I believe it is worth considering whether an Islamic world expenditure support fund can also be established, so that the least developed Muslim countries could directly benefit from the availabity of sizeble, reserves in the hands of oil exporting Muslim countries," Yudhoyono said at the launch of the 5th World Islamic Economic Forum in Jakarta. (Reuters)