Capital makes a venture
Middle East Venture Partners (MEVP), one of Lebanon’s few venture capital (VC) firms, made its first investments last month. As Executive reported in September MEVP has already closed its first fund, the Middle East Venture Fund, at $10 million, and has targeted a treasure chest of $20 million. The first of the young firm’s investments is in Pin-Pay, a platform that looks to transform mobile devices into payment tools. The second is iLevel, which claims to be Lebanon’s first “shopper marketing” agency. And the third is Multilane, a tech firm specializing in optical communication. Tarek Sadi, managing director at MEVP said: “We believe that the efforts of MEVP and other VCs in the region will give entrepreneurs more clarity into the benefits of institutional investors, galvanizing a deep ecosystem.” In other VC news, Berytech Fund, a competing VC firm, bought a 35 percent stake in technology start-up Dermandar last month. Dermandar works in digital image processing and is creating a tool to ease the production of panoramic photos. Dermandar is owned by Elie-Gregoire Khoury and Elias Khoury. Berytech is reported to have funds of more than $6 million and tends to prefer tech companies. Though the value of the 35 percent stake has not been released, the fund’s investments usually range from $100,000 to $1.2 million.
Lebanese banks hold up in regional roundup
Seventeen Lebanese banks have made the Union of Arab Banks’ top 150 Arab Banks list. The banks on the list, published last month in Al-Iktissad Wal A’amal magazine, have been ranked based on their consolidated assets. Bank Audi Saradar, the first ranked among Lebanese banks, came in 26th place in the entire region. Bahraini banks had the largest showing on the list with 25 banks, followed by the UAE with 20, Lebanon with 17, Egypt with 15 and Saudi Arabia with 11.
Ranking of Lebanese banks among the top 150 Arab banks
Soaking up Islamic liquidity
The United Arab Emirates will soon begin issuing Islamic certificates of deposit (CDs) in an effort to absorb excess liquidity, according to Afaq Khan, chief executive of Standard Chartered’s Islamic banking arm Saadiq. Khan told Maktoob Business that the CDs will be used as “a tool to absorb the excess liquidity in the Islamic money market.” The Islamic banking sector faces a lack of sharia-compliant tools to absorb excess liquidity, as CDs issued by the country’s central bank are not acceptable in Islamic law. Although 16 percent of the UAE’s banking assets are in Islamic finance accounts, the country currently has no liquidity management tools in place, while Pakistan — whose Islamic banking sector makes up 5 percent of assets — already has a local currency Islamic treasury, according to Khan. The move is the result of a liquidity management committee set up by the UAE central bank, which will also be considering an Islamic repurchase facility. The Islamic CDs will be offered up for auction daily and will work on a commodity-based murabaha plan, meaning that the profit will be based on the buying and selling of commodities and not interest. They will at first only be available to Islamic banks, but will eventually be available to conventional banks as well.
Insurance potential
Zurich Financial Services Group announced on October 11 that it would soon acquire a 99.98 percent stake in Compagnie Libanaise D’Assurances, a privately owned Lebanese insurance company with operations in the United Arab Emirates, Kuwait and Oman. Compagnie Libanaise D’Assurances posted gross written premiums of $49.1 million and a net income of $5.1 million at the end of 2009. Lebanon’s struggling insurance sector suffers from antiquated legislation and a lack of tax incentives to encourage the use of life insurance as a savings tool. Lebanese Minister of Economy and Trade Mohammad Safadi said that the insurance sector needs to take steps to ensure that informed human resources are available to Lebanon’s growing insurance market, at a conference in late September. He further said that regional cooperation and new legislation were on the way.
“Lebanese insurance companies are poised to grow if the economic free zone between Lebanon, Syria, Jordan and Turkey is formed. This will open a commercial and consumer market to 120 million inhabitants,” said Safadi. He continued: “We have complete confidence that the modernization of legislation and implementation of laws will provide protection for the holders of insurance policies and organize the work of all those who are involved in the insurance field.” Safadi also announced that his ministry would begin to publish insurance sector statistics to encourage transparency. Currently the only insurance statistics published in Lebanon are in Lebanon’s Al-Bayan magazine, which gets its information through an exclusivity agreement with the ministry.
Pumping the portfolio
The net investment portfolios of Lebanese financial institutions in foreign debt and private equity reached $5.3 billion as of March, according to Byblos Bank. This marks a 24.4 percent increase from the March 2009 figure, which was $4.2 billion. Of the $5.3 billion, 51.8 percent ($2.7 billion) is in equities; long-term debt securities constitute 45.3 percent ($2.4 billion) and short-term debt securities representing 2.9 percent, or $153.5 million.
Destination of equity investments
Destination of long-term debt investments
HSBC Islamic bond issue
HSBC is in the final stages of launching its first Islamic bonds exchange traded fund (ETF). The fund is largely aimed at international investors who have been rushing to booming emerging market funds, primarily in Brazil, Russia, India and China. The Middle East has been largely left out of this rush, which totaled $49.4 billion in investments according to financial data provider EPFR Global. Desirable international investors have largely ignored the region due to ongoing debt struggles and caps on foreign participation.
Raya’s debt roll over
The Lebanese Finance Ministry will be refinancing $800 million in maturing Eurobonds this month and will seek to swap $3.48 billion in additional Eurobonds due to mature in 2011 for longer maturities. Finance Minister Raya Hassan announced the plan at a conference late last month, where she also stated that the ministry is studying the market to achieve the optimum results from future swaps. She said that rolling over all debt maturing this year, and most if not all debt maturing in the first quarter of 2011, is advantageous because of the low interest rates expected to continue through the first half of 2011. Hassan stated that she expects 5 percent GDP growth in 2011 and 7 percent in 2010. The budget deficit will increase to $3.5 billion next year from $3.4 billion in 2010, said the minister. The weighted interest rate on Lebanese Eurobonds was 7.34 percent at the end of July, according to Byblos Bank.
