Financing Healthcare Infrastructure – Perspective of the Islamic Corporation for the Development of the Private Sector (ICD) Saeed Jaweed Ahmad October 10, 2011

ICD: Introduction  The Islamic Corporation for the Development of the Private Sector (ICD), is the private sector arm of the Islamic Development Bank (IDB), a multilateral development finance institution.  ICD established in 1999 with capital of USD 2 billion, and now has 50 member countries largely in the Middle East, Africa and Asia. 1 Member Countries Vision: Be a major player in the development of the private sector as a vehicle for economic and social growth and prosperity in member countries  Social Development  Integration into Global Economy  Building Knowledge Based Economies  Funding for Infrastructure Development Objectives Our Mission:  Providing Islamic financial services and products  Promoting competition and entrepreneurship in member countries  Advising governments and businesses  Encouraging cross border investments

ICD: Products and Services 2  ICD provides:  Direct financing (Sharia compliant) to projects and enterprises;  Direct investment in strategic enterprises and projects with either  Clear exit in 5-8 years or  For perpetual terms  SME finance through lines of finance to local financial institutions;  Advisory services  To raise debt / capital for growth stage companies;  To manage / co-manage investment funds;  To restructure / reorganize businesses;  To governments for economic planning, attracting investment, improving regulatory environments.

ICD: Healthcare Finance / Investments 3  ICD finances and invests in private sector enterprises in various sectors, including  Healthcare;  Health education and  Pharmaceutical / Biomedical plants and distributors;  ICD has invested in and financed over USD2 billion of projects over the past 10 years in various sectors;  About 6-7% of finance and investment has been in the healthcare and health related sectors including, in the MENA region, in:  Hospitals – KSA, Egypt, Yemen;  Pharmaceutical / Biomedical Plants – Jordan, KSA, UAE;  Health Education – Bahrain, KSA, Qatar, UAE;  Future Strategy also involves developing investment funds to encourage increased investment in the sector.

ICD: Healthcare Finance / Investment – A case study 4  Vaccine Project : Arabio  Equity – to support establishment of Greenfield and long term vaccine project and attract other investors;  Assistance with appointment of management;  Proactive support to management in financial management and capital structuring, and legal support related to technology acquisition and technical partner selection;  Short term finance – to bridge longer term funding from other agencies;  Medium term finance – acquisition of capital assets and bridge various delays;  Potential to arrange funding requirements on arms length basis.

ICD: Why Healthcare? 5  ICD strategy for healthcare investment is based on its direct impact on  Quality of life; and  Satisfaction of basic human need;  ICD initiatives for the sector are driven by:  Demographics;  Financial feasibility of sector;  Improvement of healthcare facilities, services, and efficiencies – thus reduce end user costs also;  Increased coverage of underserved / rural areas;  Increased provision of needed medicines / vaccines;  Strategic investment in sector to ensure local production wherever possible to:  Lower costs for consumers – entails availability to larger population segments & more income available for other necessities like education;  Ensure supply of strategic medicines;  Transfer technology to member countries.

ICD: Structuring Healthcare Infrastructure Finance 6  Direct Finance:  Medium – long term finance for acquisition of capital assets, construction of facilities or plants:  Lease to own structure;  Installment sale structure;  Istisna’a & forward lease structure;  Short term / corporate finance for working capital needs:  Sale – leaseback;  Murabaha;  Direct Investment:  Musharaka (equity investment) in manufacturing plants, healthcare service providers;  Diminishing Musharaka (mezzanine / quasi equity investments) for new (Greenfield) projects.

ICD: Issues in Healthcare Infrastructure Finance 7  Financial:  Shortage of long term finance from local financiers;  High cost of capital & debt;  Weak or insufficient collaterals for financiers;  High / Fluctuating cost of latest equipment & technology;  Under or over capitalizing of projects;  Financial management;  Long term nature of projects – long term gestation periods;  Reduced financing from equipment suppliers in certain regions and export credit agencies due to impact of global financial crisis;  Project Risks:  Timely facility completion;  Registration / Certification / Accreditation time and costs;  Personnel:  Small pool of expert technical staff.

ICD: Financing Environment & Opportunities 8  Defensive sector with low intrinsic risks given demographics and implementation of mandatory insurance in some countries and general growth of medical insurance industry;  Positive impact on capital available for health industry, due to  Growth of Islamic finance industry (asset backed); and  Growth of financing structures available:  Sukuk (Islamic bonds)  Corporate finance  Project finance  Leasing  Acquisition of capital assets;  Working capital  Private Equity  Mezzanine funding  Expansion

Contacts Name: Nabil Alami Phone: THANK YOU