Rob L. Wagner روب لستر واقنر

October 9, 2016

Bill Gates teams up with Gulf states to fight poverty

By Rob L. Wagner

Gulf News

9 October 2016

Jeddah: In the suburbs of Senegal’s capital city Dakar on Africa’s west coast, malaria thrives as a killer of young children and the infirm. Like many impoverished Muslim countries, Senegal is struggling to eradicate the disease, which is the third leading cause of death among its people behind strokes and respiratory infections.

Senegal, with a mortality rate that ranks the country 19th among 172 nations with 55 deaths per 100,000 people, is in desperate need of continuing preventative aid and treatment. But hope is coming in the form of an anti-poverty initiative funded by the Islamic Development Bank (IsDB), the Islamic Solidarity Fund for Development, and the governments of Qatar, Saudi Arabia and the UAE. The group is already financing a project in Senegal to eliminate the spread of the disease.

Announced two years ago in Jeddah by Microsoft founder Bill Gates, the initiative was formally launched last week with its first meeting under the group’s umbrella organisation, the Lives and Livelihoods Fund. LLF amassed $2.5 billion in contributions and is the largest philanthropic organisation of its kind in the Middle East.

Dr Waleed Ahmad Addas, chief of the Lives and Livelihoods Fund at the Islamic Development Bank in Jeddah, Saudi Arabia, told Gulf News on Wednesday that $363 million (Dh1.3 billion) in projects have already been approved for the first five years of operation. In all, about $2.5 billion will be allocated over the next five years in 30 of the most poverty-stricken Muslim countries.

Projects have already been launched in Africa.

“We are funding Morocco with the Support to Rural Community through Integrated Development programme, Senegal malaria pre-elimination and Uganda (for) neglected tropical diseases,” Addas said.

In addition to predominately Muslim African nations, financing is also scheduled for countries primarily in the Middle East and other Islamic countries. Combating HIV/Aids and developing infrastructure to develop better access to health care and drinkable water and increase agricultural production are top priorities.

Addas said the King Salman Relief and Humanitarian Aid Centre in Saudi Arabia contributed $100 million to LLF and chaired the first meeting of the organisation’s Impact Committee. He noted that contributions by donors do not guarantee their pet projects will be selected for funding. Instead, approval, in the form of grants and concessional loans, must go through the committee.

“Project selection is done in accordance with an eligibility criterion where members reach a decision [to financing a project] by consensus,” Addas said.

Maher Al Hadrawi, executive director of the King Salman Centre, said in a statement that, “aid from the King Salman Centre will help support incomes, provide the means for dignified living, and strengthen infrastructure in 30 Islamic countries, and is an extension of the significant efforts made by the Kingdom to help those in need.”

Addas said applicants for funds must go through a vetting process to determine whether they are entitled to funding.

“Eligibility is targeted for least developed member countries and projects must have at least three basic characteristics,” he said.

“[The projects must] have relevance to the development needs of the least developed member country and aligned with objectives of the Lives and Livelihoods Fund, to be ready for implementation, and finally to maximise the expected results on the community and beneficiaries.”

The money is financed through the Islamic Development Bank (IsDB) using $2 billion in IsDB financing combined with $500 million in donations. In addition to the King Salman Centre’s $100 million contribution, partners include the Bill & Melinda Gates Foundations, which is contributing 20 per cent of the total up to $100 million, $100 million from the Islamic Solidarity Fund for Development, $50 million from the Qatar Fund for Development and $50 million from the Abu Dhabi Fund for Development.

Hassan Al Damluji, senior programme officer for Middle East Relations at the Bill & Melinda Gates Foundation in London, told Gulf News that the Lives and Livelihoods Fund has checks and balances in place to prevent corruption, which has plagued many other anti-poverty initiatives at the local level.

“We have efficient processes in place to vet each project and ensure that each of the funds are invested in initiatives which make the most impact and which are economically, socially and environmentally feasible,” Al Damluji said. “The Lives and Livelihoods Fund will in most cases channel directly the project funds to the project contractor or service provider, to the benefit of the recipient country and its poorest people.”

“The LLF is a great example of the innovative financing mechanisms that we need in order to achieve the 2030 development agenda,” said Mohammad Al Suwaidi, director general of the Abu Dhabi Fund for Development. “We are proud to be a founding member of this joint regional effort and look forward to realising the funds’ full capabilities in reaching those most marginalised.”

Senegal’s citizens living in the poorest neighbourhoods of Dakar serve as a vivid reminder of the “marginalised” who are most susceptible to disease. The World Health Organisation reported that 214 million new cases of malaria were recorded in 2015 with Africa accounting for 88 per cent of all malaria cases. The LFF sees the region as a priority to aggressively pursue funding to eliminate the disease.


April 1, 2012

Saudi Consumer Debt Mounts

By Rob L. Wagner

The Media Line

1 April 2012

When Reem Muhammad sought a personal loan to pay off some lingering debts, a Saudi bank offered 100,000 riyals ($26,667). The price tag? Repayment of the loan, plus 33,000 riyals.

“I took the loan and repaid it, but I never knew what the 33,000 was for since it wasn’t interest,”  Muhammad, 38, told The Media Line. “But it sure felt like interest.”

Muhammad is one of thousands of Saudis taking advantage of Saudi Arabia’s healthy economy and banks’ increasing willingness to offer personal loans and credit cards. Her loan also illustrates the continuing debate in the Saudi banking industry whether some aspects of the loan system contravenes shariah, or Islamic law, that guides how Muslims conduct financial transactions.

Personal loans in Saudi Arabia jumped nearly 20-fold to a staggering 219 billion riyals in 2011, up from an estimated 11 billion riyals in 1998.  Loans included 27.7 billion riyals in property loans due in part to the passage of the 2011 mortgage law. Credit card debt in 2012 is estimated about  nine billion riyals.

Asher Noor, chief financial officer for the Riyadh-based AlTouq Group, a global investment firm, told The Media Line the increase in loans reflects Saudi Arabia’s strong economy.

“I find the increase in line with the growth of the Saudi economy, an emergence of an affluent middle class and creation of more high net worth individuals now than at any time in the past,” says Noor, who emphasizes he was offering a personal opinion. “The surge in personal loans is not just due to proliferation of credit cards in the Saudi economy, although plastic money has clearly made it easy to stack up debts. Real estate loans have also been a big reason for personal loan surge.”

Until about 2000, banks were reluctant to issue personal loans to individuals, preferring to limit their lending to large companies. Consumer credit card use was also relatively rare.

However, the demand for easier access to money has increased as the Saudi middle class has grown more affluent. Banks devised methods to offer credit cards compliant with shariah. Islamic law does not permit usury, charging or paying interest and conducting business contrary to Islamic values, such as operating a casino and selling pork or alcohol.

Saudis pay a fixed monthly fee on credit cards. Banks may require customers to have a savings account with a specific amount of money on deposit. Charges for late payments may be about 3% of the outstanding balance. Another way the card issuer earns a profit is to pre-purchase an item a customer plans to buy and then instantly resell it to him at a higher price.

Noor acknowledged there is “cause for concern” over the rapid increase in consumer loan and credit card debt, but the Saudi Arabian Monetary Agency (SAMA) has not allowed it to get out of control. “I think SAMA has not been asleep at the wheel and has kept the commercial banks in check with regulations like limiting loan to deposit ratios.”

SAMA in 2006 established regulations that total loans may not exceed 33% of the total salary of employees and 25% of the income of retirees. Nabil Al-Mubarak, executive-director of SIMAH, told the Arab News that, SIMAH’s policy labels card debtors as defaulters under two conditions: if they have not paid for six consecutive months and if the amount due is SR 500 and more.

Noor said the criteria to issue credit cards is heavily regulated in Saudi Arabia, noting that customers are rarely pre-approved and must prove their eligibility for credit cards. “There are SAMA regulations dictating the credit card and personal loan limits and the central database [Saudi Credit Bureau] SIMAH is monitoring defaults,” he said.

Noor said that given the large expatriate population, whose work and residence permits are linked, banks are very careful in credit card issuances and usually require having a bank account with them, salary transfer and employer letter before a card is issued.

“Since expatriates here are unable to leave the kingdom with credit card debts disproportionate to their earnings or end of service, the banks here have not struggled with staggering default rates as elsewhere,” Noor said.

Yet the explosion in obtaining credit cards and personal loans, and how banks charge fees, has led to consternation among some Islamic scholars whether the high fees are tantamount to paying interest.

Ahmed Alkady, a trainer at the Jeddah-based Islamic Development Bank, told The Media Line that he sees no difference between paying penalty fees and charging interest on credit cards.

“I don’t use or even recommend credit cards,” Alkady said, “It is a hidden type of interest as banks make you pay what they call a fine or a penalty for failing to pay them back on time. The same thing is applied in non-Islamic banks but they call it interest. I see no difference between the two unless you make sure you don’t use it for drawing cash. Or when you buy goods make sure you pay it back before the end of the time limit.”

Alkady also considers Muhammad’s 100,000-riyal loan as contrary to Islamic values with some Saudi banks skirting shariah-compliant regulations.

Islamic banks use an asset-based loan system, such as providing an automobile loan, in which the bank purchases the car, maintains ownership and then rents it to the customer. The customer makes monthly payments that add up to more than what the bank paid for the vehicle. Ownership is then transferred to the customer once all payments are made.

Alkady described Muhammad’s loan was tawreeq, or securitization, meaning the asset is made into financial tool like a share in a company. The transaction originates with an item, such as equipment or even property bought by the bank and then sold to the customer to be paid for on an installment basis. This allows the bank to raise the price of the item as a way of earning a profit while at the same time providing immediate liquidity for the borrower.

However, the Organization of Islamic Cooperation’s International Council of Fiqh Academy, a group of Islamic scholars, ruled in 2009 that tawreeq is “legal trickery” with roots in interest-based lending.

Alkady said the Islamic Development Bank followed with a similar ruling in April 2011. “The bank’s scholars have issued a decree in which they consider tawreeq un-Islamic simply because the bank is selling goods that it does not actually own,” he said.

Yet most Islamic banks worldwide embrace tawreeq, with many Islamic scholars in Muslim countries endorsing the practice.

Sami Al-Nwaisir, chairman of Al-Sami Holding Group, wrote in the Arab News recently that loans “favor the banks and their regulations” and “the unfair contracts by banks designed for their benefit alone, which victimize and suppress the individual through the systematic brutality of the one-sided agreement.”

Noor faults the banks for not educating borrowers. “Islamic banking is asset-based and borrowers need to understand that to better appreciate it,” he said. “Bankers, however, remain the culprit by complicating documentation and structures, and thus making it difficult for the layman to make a rational choice.”
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