AFB to set up Islamic regional funds worth RM850m

By Isabelle Francis
Asian Finance Bank (AFB), which recently set up an asset management unit, expects to ink deals to establish a regional Islamic equity fund and a bio-technology fund totaling up to RM850 million soon. AFB CEO Datuk Mohamed Azahari Kamil said AFB will tie-up with a government agency to set up the country's first biotechnology fund by year-end with a total size of about RM350 million.
“This fund will be used for mezzanine bio-tech companies. The agency is not necessarily a venture capitalist,” he told The Malaysian Reserve recently.
Mezzanine companies are young companies that seek funding from more sophisticated investors, including private equity and venture capital firms.
Mohamed Azahari said the equity fund is slated for launch by the first quarter of next year, with an initial size of RM500 million. He said AFB's role is as a fund manager for the two funds and it will not take on any proprietary position.
AFB is scheduled to sign a distribution agreement for an Asean Shariah Corporate Governance Fund today. However, it is unsure as to whether the deal is part of the RM850 million plan.
Mohamed Azahari, who took over the helm at AFB just two months ago, said the setting up of the asset management unit adds value to the bank, which wants to provide funding to Malaysian government-linked and public listed companies' operations in the Middle East.
"AFB's target is to assist government-owned and public-listed companies and firms with operations in GCC (Gulf Cooperation Council) countries, not only in an advisory capacity but to establish partnerships and networks to take advantage of the robust growth in the Middle East.
"We are talking with many other government-linked companies and public-listed companies for possible funding and to establish joint venture projects with our network in Abu Dhabi and GCC in the areas of power, infrastructure and development," he said. Early this month, AFB provided Tenaga Nasional Bhd with a AED87.5 million (RM84.47 million) financing for a cooling project in Abu Dhabi.
Mohamed Azahari said AFB is also present in Indonesia, where it is already talking to companies on funding for coal-powered terminal and steel manufacturing plants. He said given the meltdown of the global financial market, it is timely for Islamic banks to play a more active role in developing and reconstructing the financial architecture. "Islamic banks do not design products that involve over-speculation and overleveraging. We are not dented by the financial meltdown," he added.
He said given AFB's small capital base, its lending capability is limited and hence, the collaboration with its shareholders and other counterparts is a vital strategy for the growth of the bank.
"These partners not only have the expertise and infrastructure, but also the strength in providing us funding towards a syndication process," Mohamed Azahari added.
AFB's shareholders include Qatar Islamic Bank with a 70% stake, RUSD Investment Bank Inc of Saudi Arabia with 20% and Global Investment House of Kuwait with 10%. AFB is the third foreign Islamic bank to be established here after Kuwait Finance House and Al Rajhi Bank.
Mohamed Azahari said AFB aims to make profits and double its assets from some RM1.5 billion now to RM3 billion by the fiscal year 2009.