Thursday 07 October 2021
I wrote – Shaima Hefzy:
Egypt has begun to arrange the first joint green and Islamic financing, which is a financing facility worth two billion dollars, with a maturity of 3 years.
The Ministry of Finance said, in a statement today, Thursday, that the green projects that will be financed or refinanced will be determined according to the green finance framework that came into effect in September 2020, and the Islamic finance tranche will be used to finance the public budget deficit.
In the following lines, we review the most important information about green finance and its advantages for Egypt.
What is the value of the new financing that Egypt seeks?
The Egyptian government announced the start of securing the first financing facilities for a conventional term in accordance with the green and Islamic syndicated financing framework, amounting to $2 billion.
What is green finance?
It is a financing aimed at achieving economic growth compatible with green transformation and preserving the environment by reducing pollution and greenhouse gas emissions, minimizing waste, and improving the efficiency of the use of natural resources.
The global green finance market is growing rapidly, with the development of financial instruments such as green bonds and sukuk, green loans, green investment funds and green insurance.
What projects are implemented with green finance?
This type of financing is used in renewable energy, energy efficiency, clean transportation, agriculture, land use, forestry, environmental resources, water and sanitation, infrastructure, solid waste management, and other projects that support green transformation and the fight against climate change.
What are the advantages of green finance?
Funds allow its users to access new lenders and investors, diversify the tools for obtaining financing, and not rely on specific tools or markets.
Whether in the form of credits, bonds or development finance, these funds attract investors and financiers from the sector who focus on sustainable and responsible investments, and investors who make environmental, social and governance criteria part of their investment analysis.
Green finance also helps increase awareness of environmental programs, as the World Bank says, “Green bonds – one of the forms of green finance – have been shown to be an effective tool in raising awareness and opening an expanded dialogue with investors on projects that help address the challenge of climate change and other environmental challenges.” “.
When did Egypt start resorting to green finance?
Egypt has been pursuing green finance since last year, issuing the first government green bond in the Middle East and North Africa region, in September 2020.
In this offering, Egypt sold green bonds worth $750 million for 5 years at a yield of 5.250 percent.
What is Islamic Finance?
Islamic finance is the one that complies with the principles of Islamic Sharia, and its forms vary between credit facilities, sukuk, whether sovereign or companies, or other forms that are compatible with Sharia such as Murabaha, Musharaka, Ijarah and others.
Egypt is currently seeking to enter strongly into the Islamic finance market in order to diversify the financing means available to it, and has already issued this year the “Sovereign Sukuk” law and is seeking to complete the issuance of the executive regulations of the law as soon as possible in order to launch the first issuance of government sukuk for Egypt in international markets .
What is the benefit of Islamic finance?
It contributes to providing additional cash to the Egyptian economy and reducing the cost of financing needs and investments, especially since these funds are issued according to formulas that are compatible with Islamic Sharia principles, which attracts a different type of financiers and investors who only work in these financing tools.
Islamic finance contributes to achieving financial, economic, and development goals by diversifying the sources of financing the state’s general budget deficit, and by providing the necessary financial allocations for investment projects.
What is the government using the Islamic financing tranche in the new facility?
According to a statement by the Ministry of Finance today, the government will use the Islamic financing tranche in the financing facility that was announced today to finance the public budget deficit.
How will you get the new facility, whether green or Islamic?
The Government has selected Emirates NBD Capital Limited and First Abu Dhabi Bank as joint global coordinators, authorized lead arrangers and bookrunners for this joint financing facility.