Kuwait Finance House (KFH) plans to finance mega multimillion-dollar government projects in Saudi Arabia, including the NEOM business zone. Kuwait Finance House is the biggest Islamic lender in Kuwait. KFH has plans to finance the infrastructure of Saudi Arabia and government projects in sectors including electricity and oil. KFH is planning new sukuk in 2022.
NEOM is an acronym for New Enterprise Operating Model. NEOM is an ambitious $500 billion landmark business zone aimed at diversifying the economy of Saudi Arabia. NEOM was launched in 2017 and is backed by the Kingdom of Saudi Arabia, the Saudi Arabian Public Investment Fund, local and international investors. The NEOM project currently employs more than 750 people, out of which 500 people were hired last year. Large-scale construction of the city has yet to begin. The city infrastructure might cost anywhere between the US $100 to 200 billion. Investments will be drawn from the US $500 billion allocated for NEOM.
Saudi Arabia, the largest oil exporter, and neighbour of Kuwait is working on several multi-million-dollar mega projects like NEOM and will require large financing. KFH, which sold $750 million during the Additional Tier 1 Sukuk back in June, does not intend to raise any more capital through Sukuk this year. However, KFH is planning to issue new Islamic bonds in the next year. The dates when the new Sukuk will be issued will depend on the financial needs of KFH and the need to support the capital through them. An Islamic financial certificate compliant with Sharia or Islamic religious law is known as Sukuk. It is similar to a bond in the Western world of finance.
The earnings of Kuwaiti banks slumped last year due to the economic crisis created by the Covid-19 pandemic. Another factor that hit the economy of Kuwait hard was the falling prices of oil. However, KFH said this week that their net profit for the second quarter more than tripled due to a decrease in impairments and provisions.