Can Sukuk FDI Fill the $200 Billion Infrastructure Funding Gap for Bangladesh?

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1. R AT I NGS | MAR K ETS | SUK UK | FI NTECH October 29 2019 | NOTES RI SK Islamic Finance: QUICK NOTES ❖ Bangladesh is the 9th largest Islamic Can Sukuk FDI Fill the $200 Billion Infrastructure Funding Gap for Bangladesh? country by GDP ($314bn) with strong GDP growth (>4% since 1995 and 7%+ since 2015) & the 4th largest Islamic population (153mm). Acreditus notes that despite Islamic banking’s sizable ❖ At ~$30bn its Islamic banking sector system, sukuk (and bond) issuance remain negligible. and fast growing ~20% share of the domestic banking ranks 8th globally and is around 20% of domestic banking assets and is growing at ~15% annually. Islamic Banking has a large footprint in Bangladesh ❖ Domestic sukuk (and bond) markets (15%/year) despite some broad systemic challenges. remain insignificant ~$1Bn or 0.03% of global sukuk market outstanding. ❖ By 2040 over US$600bn of infrastructure investment is needed. A shortfall of ~US$200bn is likely, spread primarily across power (US$100bn), telecoms (US$40bn) and water (US$40bn). ❖ Sukuk are perfectly suited for both and has continued to grow faster than global trend Key export-oriented sectors as well as infrastructure and microfinance could tap undersupplied sukuk capital markets to drive improved Foreign Direct Investment, financial inclusion, innovation and productivity gains. Sukuk are naturally suited to tangible asset financing the low risk, fixed-price projects as well as the higher risk Public-PrivatePartnerships needed for more FDI. and especially public-private-partnerships. Greater ❖ Limited domestic and international transparent long-term funding programmes for investor base, lack of sovereign yield curve and issuance costs are key issues for market growth. strategic policy support coupled with coordinated government related entities and structural reforms are needed to improve institutional investor access and boost growth of the capital market. Islamic Finance: Can Sukuk FDI Fill the $200 Billion Infrastructure Funding Gap for Bangladesh? 1
2. C1 : BANGLADESH – COUNTRY SNAPSHOT CURRENT STATUS Capital Market Classification (MSCI, FTSE, S&P) Credit Rating (Moody's, Fitch, S&P) GDP / 3yr historical average / 3yr forecast average S. Asia vs B’desh FDI Inflows / YoY change ‘18 vs ’17 / No. 1 Investor Global Competitiveness Ranking (out of 140) Ease of doing business rank (out of 190) Population Density Rank (out of 232) Frontier Market Ba3, BB-, BB$314bn / 7.5% / 7.1% $54bn vs $3.6Bn / +68% / China ($1.0Bn) 103 176 12 Source: World Bank, Word Economic Forum, Moody’s, Fitch, S&P, UNCTAD, Trading Economics 1. A strong and remarkably stable economic growth story… Bangladesh ranks as the 41st largest economy, with a nominal GDP of US$314Bn 1 . Manufacturing was the major contributor to the country’s GDP and ready-made garments were the key exports. The country has emerged as one of the fastest continuously growing economies in the world. Annual GDP growth has remarkably exceeded a healthy 4% since 1995 with an average of more than 7% across the past five years. Remittance inflows grew 9.8% to hit $16.4Bn in 2019 and account for 5.4% of the country’s GDP. Bangladesh recorded an FDI inflow of US$3.6Bn dollars in 2018. Despite a 68% increase on 2017, share of GDP remains low at 1.1% vs India at 1.5% but higher than the 0.80% in which has much weaker and more volatile GDP growth. These robust growth trends (Chart C2) have been supported by private consumption, infrastructure development, remittance inflows and exports. However, the current account has run an importdriven deficit since 2017 and is expected to remain at the ~2% level into 2020. C2: BANGLADESH – Other Macro Indicators 1 Asia Bangladesh GCC MENA (ex-GCC) Africa (ex-North) Others Total 1 : IMF, April 2019 Banking Assets 266.1 ~30 708.4 540.2 13.2 47.1 1575 The economic output from agriculture, manufacturing and construction sectors have grown by 11%, 18% and 16% respectively in the last year (YE2018). Headline unemployment level is currently 4.3%. A key challenge is the asset quality pressure and weak credit growth in the banking sector, especially at the State banks. Business environment has been suboptimal in Bangladesh when compared to peers, as evidenced by the low ranking in the Ease of Doing Business Index as well as the Global Competitiveness Index. … but country remains underweight in global Islamic asset share given GDP and banking trends As the fourth most populous Muslim country and ninth terms if GDP (see appendix), the Bangladesh banking sector ranks a commensurate eighth with assets of around US$30Bn. However, overall ranking is 17th driven primarily by negligible government or corporate sukuk issuance (unusual) and tiny Takaful industry (common). 2015 2016 2017 2018e 2019e 2020f 2021f 6.8 6.2 33.7 -4.0 1.9 7.2 5.7 33.3 -3.4 0.6 7.6 5.6 32.5 -3.3 -2.1 7.7 5.6 34.8 -4.1 -2.8 7.3 5.4 34.8 -4.2 -1.9 7.0 5.4 34.5 -3.7 -1.7 7.0 5.5 34.1 -3.5 -1.7 Real GDP growth (in %) Inflation, CPI (% change) Gross Government Debt (% of GDP) Fiscal Balance (% of GDP) Current Account Balance (% of GDP) C3: ISLAMIC ASSETS BY REGION 2 Future export growth is expected to be driven by the readymade goods and agriculture-based products. Sustained growth in exports has further been supported by US-China trade tensions. Sukuk Outstanding Islamic Funds 323.2 ~1.0 187.9 0.3 2.5 16.5 530 24.2 ~0.0 22.7 0.1 1.5 13.1 61.6 2 Takaful Contributions Total 4.1 ~0.03 11.7 10.3 0.0 26.1 617.6 927.1 550.9 17.2 76.7 2189.5 Share % 28.2% ~1.4% 42.3% 25.1% 0.8% 3.5% IFSB Financial Stability Report 2019 Islamic Finance: Can Sukuk FDI Fill the $200 Billion Infrastructure Funding Gap for Bangladesh? 2
3. 2 . Bangladeshi Banking sector is facing systemic liquidity and asset quality challenges… Bangladesh’s financial sector is heavily dominated by banks. With limited debt/sukuk capital markets, corporates have few funding alternatives. Private sector credit growth has fallen from a peak of 25% in 2011 to 11% in 2019 and was primarily due to a regulatory drop in the Advance/Deposit ratios and declining deposit growth. The latter was due partially to rate caps, declining central bank reserves and rising impairments. The Non-Performing Loan (‘NPL’) ratios for the overall banking sector increased to 10.3% in 2018, increasing from 9.3% in 2017. If restructured and rescheduled loans are included, the level exceeds 20% of the total loans. However, the real drag on system confidence and growth is the heavy impairment ratio for State-Owned Commercial Banks (‘SOCBs’) which are estimated to be much higher at 30.3% (all are conventional FIs). Private commercial banks are much more on a stable footing with NPLs of 4.6% to 4.9% between 2012 and 2017 has spiked up to 5.5% in 2018. Structural reforms are needed, including better credit risk management and proactive regulatory enforcement. Tighter criteria for loan restructuring and improved corporate governance are also key. Lastly, Bangladesh’s Central Bank (Bangladesh Bank / ‘BB’) has raised the minimum paid-in capital requirement for banks to BDT5Bn (~US$60mm) from BDT4Bn to strengthen the capital base of banks and promote the consolidation of smaller banks through mergers and acquisitions. … and Islamic sector is sizable and growing, but lacks long-term funding The local roots for Islamic finance date back to 1983, when the first Islamic bank, Islamic Bank Bangladesh Limited (IBBL) was established. Since then, Islamic banking has expanded its presence both in terms of assets and in terms of market share. The Islamic banking industry has grown in recent years owing to strong public demand for Islamic products and regulatory support from BB. Islamic banks account for 23.7% of total deposits in the banking sector and 12.1% of the total branches with 747 branches in urban regions and 505 branches in the rural regions. At around $30bn in size the Islamic sector is still only around 1.9% of the global Islamic bank assets. However, Bangladesh is showing asset, financing and deposit growth rates of a healthy ~15%, double the global IFI average of around 7-8% 2. C4: Global Islamic Banking Assets Share (Q2 2018) Source: IFSB Stability Report 2019 The NPL levels of Islamic Financial Institutions (‘IFI’) have been much lower than SOCBs but at ~5.6%, are still in line with the system average although provisions have dropped sizably from ~84.7% to 14.4% coverage. Capital Adequacy and Tier 1 levels remain adequate at 11.7% and 7.5% respectively. Liquidity-wise, LCRs and NSFRs stood at a sound 125% and 112% respectively. Overall profitability is good with a 23.7% RoE and 1.2% RoA for YE2018. C5: ISLAMIC BANK DOMESTIC SHARES % Share Deposits 23.7% Investments 24.2% Remittances 22.7% Bank Branches 12.1% Agricultural Credit 9.1% Source: Bangladesh Bank Despite this strong foundation however the local sukuk market remains oddly non-existent. In other jurisdictions IFIs often lead the issuance by necessity. A deeper sukuk market should provide: (i) longer-term liabilities necessary for (a) funding stability and (b) infrastructure projects (ii) sovereign sukuk liquidity management tools and instruments necessary to support credit growth and improve IFI profitability. (iii) improved risk resilience of the sector Islamic Finance: Can Sukuk FDI Fill the $200 Billion Infrastructure Funding Gap for Bangladesh? 3
4. To address liquidity challenges common for IFIs , Bangladesh Bank has taken steps in this regard by launching the Islamic Interbank Fund Market as Sharia-compliant money market. made up of National Saving Certificates (NSCs) while 31% is Treasury bonds. C7: Bangladesh Domestic Debt Outstanding They have also reduced the statutory liquidity requirements (SLR) for Islamic Banks as half of what they would require conventional banks to maintain, in a bid to allow Islamic banks utilize their deposits more, compensating for the lack of a developed Islamic capital market. However, this will create regulatory distortions and could add further risks if deeper Islamic moneymarket opportunities are not developed. 3. Global sukuk issuance has slowed due to less GCC volumes Despite the headwinds in the global economy, global Sukuk issuances witnessed modest growth of 1.7%, rising from US$91.9Bn in 2017 to US$93.4Bn in 2018. The growth was much lower than 2017, which saw issuances climb by 22.8% owing to large issuances by low-oil, deficit driven GCC sovereigns. C6: Global Sukuk Issuances by year (US$Bn.) Sovereign 100 80 60 0 15.8 24.4 76.1 69.0 15.4 40 20 Corporate 59.4 NSCs suppress the growth of the domestic bond market given yields of ~11%, far higher than the 5-6% yield of government bonds with same maturities. Why is the local Sukuk/Bond market non-existent? The Sukuk (and Bond) markets are grossly underdeveloped in Bangladesh versus other Islamic (and Asian) counties, especially considering the size of the country’s Islamic banking industry. Only the Bangladesh Government’s Islamic Investment Bond (BGIIB)’s two Islamic bonds with a tenure of three and six months respectively are currently in operation with the outstanding amount at BDT104Bn (US$1.23Bn)3 as on May 2019. We propose four key drivers are blocking the growth of the sukuk (and bond) market: (i) 2016 2017 2018 Source: IFSB Financial Stability Report 2019 The rise in oil prices during the first nine months of 2018 reduced deficit funding needs for GCC sovereigns. This resulted in the reduction of sovereign issuances during the year. On the upside, there was a 55% increase in corporate issuances during 2018, led by large issuances from the UAE, Malaysia, Saudi Arabia and Turkey all looking to tap the global demand for yield and the unprecedented low interest rates and risk premiums driven by the Quantitative Easing (‘QE’) policies of Central Banks worldwide. Bangladesh Sovereign Debt Structure Bangladesh’s public debt is denominated in the local currency. 54% of the total outstanding debt is 3 Source: IMF 2018 Lack of regular, rated sovereign issuances. This means both (i) the absence of an international investor base and (ii) the local yield curve needed for the corporate and infrastructure sector to issue. (ii) Limited domestic institutional investor base. The largest demand driver in mature markets are pension, mutual and insurance funds most of which are small or absent in Bangladesh. (iii) Limited Islamic bank issuance. In other jurisdictions, sophisticated IFIs have been leaders in issuing longer term sukuk to reduce the asset/liability mismatch of risk profile (iv) Issuance costs and credit pricing. These are likely key issues for private-sector sukuk growth, especially with the name and relatedparty lending from banks and associated subsidised pricing common in new markets. Exchange rate on 1 October 2019 used for conversion Islamic Finance: Can Sukuk FDI Fill the $200 Billion Infrastructure Funding Gap for Bangladesh? 4
5. 4 . A US$200Bn Infrastructure Funding Gap The lack of an infrastructure sukuk/bond market is a key gap in the funding strategy for any sovereign. Bangladesh lags behind many other peer countries According to a study by the World Bank, Bangladesh, in order to realize its goal of becoming an upper middle-income economy by 2031, an estimated investment of US$300Bn is required for infrastructure development. Another detailed study by the Global Infrastructure Hub estimates US$600bn is needed to 2040. C8: Infrastructure Funding Gap by Sector Source: Global Infrastructure Hub 2019 Bangladesh is fortunate that the global search for yield has driven a much higher risk appetite for Emerging Market assets and pension funds worldwide are struggling to source the longer-term assets necessary to fulfil their liabilities. Sukuk, which are perfectly suited to tangible asset development and profit-sharing type structures would be a key path to increasing FDI from the growing pools of Islamic investment liquidity around the globe while simultaneous providing high quality assets for the Islamic banking sector. The projects can be grouped into three broad risk categories that drive the investor appetite for such investments. (i) Low Risk Sukuk. Regulated sectors with government related and monopolistic off-takers and hence limited/zero price risk (eg power, water, railways etc). Underlying is investment grade suited debt-type instruments although sovereign rating ceilings may require some credit guarantees/wraps. (ii) Medium Risk Sukuk. Open sectors where prices are subject to competition and supply/demand dynamics. Also suited to sub-investment grade investments although credit wraps/could possibly be applied in the conventional bond space (eg health, education, manufacturing etc). (iii) PPP Sukuk. These projects involve publicprivate-partnerships and inherently have a risk/reward share that make them perfect from an Islamic Finance perspective. The policy environment is still evolving and airports, roads and ports can fall into either risk category dependent on the regulatory and pricing framework agreed. Direct lending to such projects will remain difficult for the Islamic banking sector until the large asset/liability mismatch of their funding profile is addressed which will not happen in the near term. As such the government needs to take the lead in building a yield curve and setting up a coordinated international funding programme around the sukuk and bond capital markets to take advantage of the global investor interest in Emerging Market and infrastructure assets. Efficiencies of scale, governance and the relevant investor protections will be key. 5. Islamic finance supports increased financial inclusion Financial inclusion is one of the primary objectives of Bangladesh, as it has nearly ~50mm people still below the poverty line The government has been playing a proactive role by introducing policies and regulations that promote financial inclusion. Islamic finance, which is inherently inclusive, and community focussed in nature, is well suited to contribute towards this goal. C9: Banking Penetration Indicators Indicator Having a Bank Account (% of population above 15 years) Have used a loan or a credit card (% of pop’n above 15yrs) Branches per 100,000 adults ATMs per 100,000 adults Debit cards per 1,000 adults 2017 % 50.0 9.2 8.6 8.1 75.8 Source: World Bank Islamic Finance: Can Sukuk FDI Fill the $200 Billion Infrastructure Funding Gap for Bangladesh? 5
6. However , despite the ongoing initiatives, 50% of the total population still does not have a bank account. Rural populations tend to be more Shariah sensitive and as such, Bangladesh can leverage the existing strength in conventional microfinance into Islamic microfinance for a greater financial inclusion. One area where Islamic finance could be more effectively used is as an alternative to interestbased lending - supporting the development of entrepreneurial talents among low and middleincome group of the economy. According to Thomson Reuters, the Islamic Fintech industry is expected to reach US$3.9Tn by 2023, propelled by a young Muslim demographic that is on an average younger than the world’s non-Muslim population. With digital, low-cost, commercially viable microfinance sukuk like those issued by Blossom Finance 5 could become an attractive option for socially responsible investors across the globe to support MFIs in Bangladesh. Case Study 1 – Blossom Finance More innovation is needed to support micro-entrepreneurs and SMEs Blossom Finance is pioneering blockchainbased social impact investment platform that effectively crowdfunds social investment into a liquid and tradeable sukuk instrument. Financing of start-ups and small businesses could be done through Islamic finance with more profitsharing and/or equitable financing as they would not require collateral reducing the financial pressure on would-be entrepreneurs. A regulatory framework that adopts both the principles of Sharia and concepts of microfinance needs to be constructed. Islamic microfinance could be driven by Islamic banks, which already have a sizeable presence in the country although perhaps new players are needed to break the debtbased business models currently widespread. Application of new technologies such as blockchain to crowdfunding sukuk and machine learning will be key to reduce transaction costs and improve the access of low-income customers to various microfinance services via mobile devices. They closed the world’s first sukuk issuance on the Ethereum blockchain in October 2018, this pilot project raised international investor funds for a microfinance institution in Indonesia. The sukuk pays a variable profit share from the microfinance portfolio to investors and is the first of series of ground-breaking and projects According to a report published by DinarStandard in 2018, there are 93 Fintech start-ups globally that are active. Of these 65 are focused on P2P financing. Fintech start-ups in Bangladesh are more oriented towards financial inclusion and are conventional in nature despite having a well-developed Islamic banking infrastructure. One prominent Islamic Fintech start-up that has emerged is a blockchain based trade finance platform named TEEK TAKA. Micro-sukuk, which are certificates of small denominations have been launched that could serve as an attractive savings and investment product for the clients of Islamic banks and NBFIs. Islamic MFIs would benefit by issuing Sukuk, which could help in reducing the dependence on volatile customer deposits for funding. Case Study 2 – TEEK TAKA TEEK TAKA is a platform that uses blockchain technology and trade financing to perform endto-end supply chain activities. The platform allows suppliers to access cheaper and faster financing in return for participating in a system of ethical supply chain. Islamic Fintech: A new dawn for inclusive capitalism The distributed ledger links the supply chain right from factory certifications to shipment tracking to order delivery. The platform aims to address the inefficiencies associated with banks in terms of trade finance and tries to eliminate the paper trail left by them. The system makes use of smart contracts that release payments to the supplier once certain criteria are met. New technology will be key to realising the Islamic finance promise of less debt/interest-based investment and finance. The financial services industry has seen transformative brought about by concepts such as automation, disintermediation and decentralization that are closely associated with the ‘fourth industrial revolution’4. 4 World Economic Forum - The Fourth Industrial Revolution 5 Disclosure; Acreditus is investor and advisor to Blossom Islamic Finance: Can Sukuk FDI Fill the $200 Billion Infrastructure Funding Gap for Bangladesh? 6
7. 6 . Infrastructure and microfinance could be catalysts for sukuk market growth in Bangladesh Bangladesh finds itself in an unusual situation where the Islamic banking sector is reasonably developed when compared to the other key components of the Islamic Finance ecosystem. The local sukuk markets and the Islamic insurance industry are still at a nascent stage in the country but there is extraordinary potential given the scope of sukuk (and bonds) to both address some of the longstanding financial inclusion issues and development objectives to help the country and its people move up the economic value chain. Development of local capital markets for both domestic and international investors will create a transparent and risk-adjusted new channel for foreign capital and reduce reliance on the banking sector that is facing its own challenges and unable to support the infrastructure needs of the country. Like most emerging market countries, the development of such markets needs a top-down government led approach especially given the lack of deep sovereign yield curve and vast public sector investment needs of the country. The Islamic banks especially are poorly placed to fund the sector and currently would have to rely only on short-term deposits to fund their long-term investments. Thus, like many other Islamic countries it is the financial sector – both Islamic and conventional - that needs to support the government in this crucial next stage in sukuk and bond market growth More broadly bringing in more investor transparency and credibility in addition to effecting structural reforms would help in the overall development of the Islamic finance sector in the country and in turn supporting the growth objectives of the government. Lastly, in addition to the macro economy, sukuk finance has enormous potential at the micro end of the scale to help drive more inclusive growth. Success will require a proactive and supportive regulatory environment to thrive with an emphasis on new technologies. The costs around capital markets are high and suited for large institutions, only fintech, blockchain and tokenisation will allow the origination, transaction and securitisation costs to fall sufficiently for a more equity and asset-backed form of finance to become reality and help avoid the easy addiction to debt-fuelled consumption that has proven to be a volatile, exclusive and stagnating source of growth. Islamic Finance: Can Sukuk FDI Fill the $200 Billion Infrastructure Funding Gap for Bangladesh? 7
8. 7 . Appendices (IMF Article IV & Bangladesh Bank) A1: Islamic Banks, Branches & Windows in Bangladesh No. Bank Name Total Branches Full-fledged Islamic Banks 1 2 3 4 5 6 7 8 Islamic Bank Bangladesh Limited* ICB Islamic Bank Limited Social Islami Bank Limited* Al-Arafah Islami Bank Limited EXIM Bank Limited Shajhjalal Islami Bank Limited First Security Islami Bank Limited Union Bank Limited 342 33 155 168 123 123 177 77 Islamic Banking Branches of Conventional Banks 1 2 3 4 5 6 7 8 9 The City Bank Limited AB Bank Limited Dhaka Bank Limited Premier Bank Limited Prime Bank Limited Southeast Bank Limited Jamuna Bank Limited Bank Alfalah Limited HSBC Limited 1 1 2 2 5 5 2 1 0 Islamic Banking Windows of Conventional Banks 1 2 3 4 5 6 7 8 Sonali Bank Limited Janata Bank Limited** Agrani Bank Limited Pubali Bank Limited Trust Bank Standard Bank Limited Bank Asia Limited Standard Chartered Bank 11 5 2 9 2 5 1 A2: Islamic Banks, Selected Financial Ratios Capital Adequacy Ratio 2013 Capital Adequacy 12.1% 2014 2015 2016 2017 2018 11.3% 11.4% 10.8% 11.0% 11.7% 9.6% 9.1% 8.9% 8.3% 7.6% 7.5% - - 8.0% 7.5% 6.6% 7.3% Gross nonperforming financing (gross NPF) ratio Asset Quality 4.2% 4.6% 4.3% 4.1% 4.1% 5.6% Net nonperforming financing (net NPF) to capital 20.9% 25.7% 28.1% 24.6% 19.4% 28.4% Provisions for gross nonperforming financing (gross NPF) 69.3% 66.3% 79.8% 83.7% 84.7% 14.4% Tier 1 capital to Risk Weighted Assets Common Equity Tier 1 (CET1) Capital to Risk Weighted Assets Return on assets (ROA) Earnings 1.7% 1.6% 1.5% 1.5% 1.5% 1.2% Return on equity (ROE) 22.8% 23.4% 22.7% 25.6% 28.6% 23.7% Net profit margin 33.3% 32.5% 30.9% 32.7% 36.7% 34.5% Cost to income Capital to assets (balance sheet definition) Leverage (regulatory definition) Liquid assets ratio Liquid assets to short-term liabilities Liquidity coverage ratio (LCR) Net stable funding ratio (NSFR) Net foreign exchange open position to capital Large exposures to capital Growth of financing to private sector 34.8% 34.7% 36.5% 39.1% 41.6% 48.7% Leverage 6.3% 5.9% 5.7% 5.4% 4.8% 4.7% - - 5.4% 5.1% 4.8% 5.2% Liquidity 24.6% 27.2% 31.8% 28.8% 30.1% 25.9% 68.4% 71.9% 85.9% 84.5% 104.1% 95.6% - - 176.1% 137.7% 113.5% 125.2% - - 115.9% 109.6% 108.1% 112.1% Sensitivity to Risks 5.2% 10.0% 7.7% 10.0% 4.2% 8.1% 210.6% 320.7% 325.8% 327.0% 334.3% 321.2% 11.2% 19.8% 15.5% 20.9% 3.2% 32.8% Islamic Finance: Can Sukuk FDI Fill the $200 Billion Infrastructure Funding Gap for Bangladesh? 8
9. A3 : Distribution of Banking Assets and Deposits in Bangladesh by year (in %) 2009 2010 2011 2012 2013 2014 2015 2016 2017 27.8 26.1 26.4 27.5 27.5 27.6 25.8 Assets State Owned Commercial Banks (SOCBs) 28.6 28.5 State owned development FIs (SDFI) 6.6 6.1 5.6 5.5 5.7 3.7 2.8 2.6 2.4 Private Commercial Banks (PCBs) 57.4 58.8 60.0 62.2 61.9 63.3 64.5 65.0 67.1 Foreign Commercial Banks (FCBs) 7.4 6.6 6.6 6.3 6.1 5.5 5.2 4.8 4.6 Deposits State Owned Commercial Banks (SOCBs) 28.6 28.1 27.4 25.5 26.0 28.0 28.4 28.4 27.4 5.3 4.9 4.8 4.8 5.5 3.4 2.9 2.8 2.8 Private Commercial Banks (PCBs) 59.0 60.9 61.8 63.6 62.8 63.9 64.5 64.8 65.9 Foreign Commercial Banks (FCBs) 7.0 6.1 6.0 6.1 5.7 4.7 4.3 4.0 4.0 2014 2015 2016 2017 2018 State owned development FIs (SDFI) A4: Key Ratios – Banking Segments 2013 Capital Adequacy Regulatory capital to risk-weighted assets 11.5 11.3 10.8 10.8 10.8 10.5 State-owned commercial banks 10.8 8.3 6.4 5.9 5 1.9 Private commercial banks 12.6 12.5 12.4 12.4 12.5 12.8 Foreign commercial banks 20.2 22.6 25.6 25.4 24.9 26 Asset Quality Nonperforming loans to total loans 8.9 10 8.8 9.2 9.3 10.3 State-owned commercial banks 19.8 22.2 21.5 25.1 26.5 30 Private commercial banks 4.5 4.9 4.9 4.6 4.9 5.5 Foreign commercial banks 5.5 7.3 7.8 9.6 7 6.5 61.6 56.1 92.9 74.3 50.5 50.3 5.5 5.6 8.2 6.8 4.7 5.2 Loan provisions to total nonperforming loans Loan provisions to total loans A5: Outstanding Bank Advances to Private Sector by Sector (in %) Sector FY12 FY13 FY14 FY15 FY16 FY17 FY18 Q3 FY19 a. Agriculture 5.4% 5.4% 5.3% 4.9% 5.4% 5.0% 4.8% 4.5% b. Industry 35.7% 36.2% 35.6% 36.7% 38.1% 38.6% 40.8% 41.2% c. Construction 8.6% 9.4% 8.8% 8.4% 8.8% 9.1% 9.3% 9.4% d. Transport 1.3% 1.4% 1.1% 0.8% 0.7% 0.7% 0.8% 0.8% e. Trade & Commerce 36.7% 36.1% 38.9% 36.1% 35.6% 35.7% 33.9% 33.7% f. Other Institutional loan 0.9% 0.8% 1.5% 1.7% 1.9% 2.3% 2.5% 2.8% g. Consumer finance 5.6% 6.8% 6.2% 9.9% 8.8% 7.8% 7.3% 7.0% h. Miscellaneous 5.8% 3.9% 2.4% 1.3% 0.7% 0.7% 0.5% 0.5% Islamic Finance: Can Sukuk FDI Fill the $200 Billion Infrastructure Funding Gap for Bangladesh? 9
10. A6 : GDP of Countries with Muslim-Majority Populations GDP (nominal) GDP (PPP) GDP / capita GDP / capita (PPP) Exports Imports 1,152,889,600,000 3,764,176,000,000 4,290 14,009 168,800,000,000 185,900,000,000 Turkey 961,655,000,000 2,465,090,000,000 11,602 29,741 157,300,000,000 242,900,000,000 Saudi Arabia 759,219,500,000 1,921,484,000,000 22,538 57,041 231,300,000,000 136,800,000,000 Iran 413,114,300,000 1,858,584,000,000 4,961 22,320 91,990,000,000 59,000,000,000 Egypt 263,868,117,949 1,393,484,100,000 14,045 23,530,000,000 59,220,000,000 Nigeria 475,566,900,000 1,216,671,600,000 2,501 (2017 2,387 est) 6,107 40,810,000,000 40,260,000,000 Pakistan 306,731,108,890 1,220,761,000,000 5,958 21,940,000,000 40,580,000,000 Malaysia 402,605,500,000 1,074,677,400,000 1,641 (2018 12,240 est) 32,673 188,200,000,000 192,900,000,000 Bangladesh 314,65,600,000 831,755,200,000 1,902 4,992 35,910,000,000 40,690,000,000 United Arab Emirates Algeria 427,830,200,000 753,966,900,000 39,802 70,143 314,700,000,000 273,500,000,000 208,773,400,000 700,012,100,000 4,845 16,246 33,150,000,000 22,530,000,000 Iraq 233,402,400,000 744,723,400,000 5,709 18,216 56,740,000,000 56,890,000,000 Kazakhstan 190,469,800,000 529,405,700,000 10,165 28,254 49,290,000,000 42,820,000,000 Kuwait 140,146,300,000 320,338,000,000 30,109 68,822 54,090,000,000 36,540,000,000 Qatar 193,906,000,000 374,891,000,000 68,977 133,357 56,260,000,000 6,706,000,000 Morocco 129,033,000,000 334,532,700,000 3,625 9,400 24,570,000,000 45,830,000,000 Oman 85,636,500,000 207,342,000,000 19,487 47,183 31,900,000,000 8,709,000,000 Libya 46,923,000,000 79,417,000,000 7,133 12,073 19,720,000,000 10,820,000,000 Uzbekistan 47,892,000,000 256,390,000,000 1,455 7,791 11,380,000,000 3,800,000,000 Azerbaijan 47,926,500,000 190,237,000,000 4,764 18,911 15,690,000,000 10,060,000,000 Tunisia 41,956,700,000 149,094,000,000 3,568 12,682 14,220,000,000 12,860,000,000 Yemen 17,452,500,000 47,304,000,000 551 1,494 501,200,000 4,190,000,000 Sudan 43,160,800,000 209,751,000,000 992 4,724 3,808,000,000 6,823,000,000 Lebanon 56,379,400,000 94,661,000,000 11,775 19,987 4,051,000,000 8,855,000,000 Jordan 44,794,500,000 98,001,000,000 6,011 13,151 7,734,000,000 8,681,000,000 Syria 121,600,000,000 (2009 est) 121,303,000,000 1,364 (2015 7,963 est) 2,900 (2009 20,817 est) 1,786,000,000 5,973,000,000 Turkmenistan 77,460,000,000 (2015 est) 46,401,900,000 7,394,000,000 4,175,000,000 Ivory Coast 52,979,300,000 116,397,000,000 2,016 4,430 11,080,000,000 4,759,000,000 Bahrain 39,703,100,000 77,590,000,000 26,277 51,354 14,330,000,000 7,830,000,000 Senegal 21,722,700,000 51,758,000,000 1,293 3,082 2,546,000,000 2,405,000,000 Brunei 14,791,100,000 38,216,000,000 33,623 86,873 5,776,000,000 1,641,000,000 Tajikistan 8,176,100,000 32,077,000,000 887 3,482 794,700,000 1,250,000,000 Kyrgyzstan 8,029,300,000 26,030,000,000 1,231 3,994 1,768,000,000 937,400,000 Somalia 8,210,000,000 20,560,000,000 744 1,863 819,000,000 576,000,000 Maldives 5,169,800,000 7,935,500,000 13,902 21,344 256,200,000 567,000,000 Palestine 9,828,000,000 21,220,000,000 3,576 7,722 1,955,000,000 6,476,000,000 OIC 7,580,179,168,739 22,148,546,500,000 7,360 17,741 1,746,527,600,000 1,620,011,100,000 Russia 1,754,285,200,000 4,322,616,000,000 12,191 30,039 336,800,000,000 121,900,000,000 % of World 12.40% 22.06% 87.26% 115.92% 11.61% 2.16% World 79,865,481,000,000 126,687,917,000,000 10,728 16,779 17,779,000,000,000[ 74,899,000,000,000 Indonesia Source: Wikipedia Islamic Finance: Can Sukuk FDI Fill the $200 Billion Infrastructure Funding Gap for Bangladesh? 10
11. A7 : Selected Countries with Muslim Populations Country/Region Total Population Muslim Population Muslim percentage (%) of total population Percentage (%) of World Muslim pop’n Indonesia 263,000,000 229,000,000 87.2 12.7 Pakistan 207,774,520 200,400,000 96.5 11.1 1,370,000,000 195,000,000 14.2 10.9 Bangladesh 170,000,000 153,700,000 90.4 9.2 Nigeria 200,000,000 95,000,000 103,000,000 85,000,000 90,000,000 82,500,000 47.6-51.6 5.3 90-94.7 4.9 99.4 4.6 98.6 – 99.8 4.6 99 2.7 India Egypt 95,000,000 Iran 83,000,000 Turkey 80,810,525 Algeria 41,657,488 79,000,000 80,700,000 41,240,913 Sudan 40,825,770 39,585,777 97 1.9 Iraq 40,194,216 38,465,864 95.7 1.9 Morocco 38,314,130 37,930,989 99 2 105,000,000 35,600,000 33.9 1.8 Saudi Arabia 33,413,660 31,878,000 97.1 1.6 Yemen 28,036,829 27,784,498 99.1 1.5 Uzbekistan 32,653,900 26,550,000 96.5 1.7 21,466,863 21,101,926 98.3 1 Tanzania 54,199,163 19,426,814 35.2 0.8 Mali 18,429,893 17,508,398 95 0.8 Syria 18,000,000 16,700,000 93 1 Malaysia 31,809,660 16,318,355 61.3 1.1 Senegal 15,726,037 15,112,721 96.1 0.8 146,877,088 10 - 17 1 70.2 0.5 Ethiopia Niger Kazakhstan 18,744,548 15,000,000 25,000,000 13,158,672 Ivory Coast 26,260,582 11,265,789 42.9 0.5 Tunisia 11,446,300 11,190,000 99.8 0.6 Guinea 11,855,411 10,563,171 89.1 0.5 Jordan 10,458,413 10,165,577 97.2 0.4 Azerbaijan 10,046,516 9,735,074 96.9 0.5 Tajikistan 8,931,000 7,621,700 96.7 0.4 Libya 6,754,507 6,551,871 97 0.4 China 1,390,000,000 0.45 – 3 0.4 – 2.8 8.8 0.3 Russia France 67,000,000 6,255,000 50,000,000 5,720,000 Kenya 48,397,527 5,500,000 11.2 0.2 9,541,615 4,615,081 76 0.2 83,000,000 5.4 - 6 0.2 4,780,978 4,500,000 5,000,000 4,298,000 97.5 0.3 66,040,229 4,130,000 6.3 0.2 6,100,075 3,519,743 57.7 0.2 327,827,000 3,450,000 1.1 0.2 United Arab Emirates Germany Palestine United Kingdom Lebanon United States Source: Wikipedia Islamic Finance: Can Sukuk FDI Fill the $200 Billion Infrastructure Funding Gap for Bangladesh? 11
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