British Red Cross looks to raise as much as $150m through sukuk in 2019

Islamic finance to play a key role in the future of development and aid work

Water flows from a broken pipe. The British Red Cross aims to improve water sanitation.

The British Red Cross is planning a to raise up to $150 million (Dh550.5m) in funding through Islamic bonds, or sukuk, to finance its water sanitation projects in 28 countries, a senior official of the UK-based aid organisation said.

The British charity has already signed memorandums of understanding in “a couple of areas of corporation” with the Islamic Development Bank (IDB) and plans to raise the funds by the end of this year or early next, said Simon Meldrum, investment specialist with the global innovative finance team at the British Red Cross (BRC).

“We see Islamic finance as really, really relevant to the communities we serve both in terms of donors and beneficiaries because we operate across the world,” he told the 2019 London Sukuk and FinTech Summit.

The BRC, he said, has found financing from Sharia-compliant funding sources to be effective in tackling issues such as cholera outbreaks, with 29 of the 40 cholera hot spots identified by aid organisations being in Islamic countries.

The UK charity and the IDB are working to raise philanthropic capital for its projects and is engaged with potential stakeholders such as the Bill & Melinda Gates foundation and other organisations interested in water and sanitation about contributing.

The BRC will then speak to commercial investors and conduct a roadshow at the end of the year.

The size of sukuk was “a function of the fundraising we do on philanthropic capital raising stage, but we have a $100m to $150m proof of concept”, Mr Meldrum said, referring to the amount of investor interest in the bond from pilot projects.

The BRC, he added, planned to regularly issue deals of this nature and the organisation is “spending a good amount of time” working on the financing structure.

Aamir Rehman, senior advisor and the United Nations Development Programme, stressed the importance of Sustainable Development Goals, saying they provide “a common language about how we talk about development”. Islamic finance, he added, could also play a key role in funding future development.