Bahrain's NBB Group closes kingdom's first secured sustainable murabaha above $50 million

Summary

• NBB Group executed Bahrain's first secured sustainable murabaha, in a transaction valued above $50 million.
• The deal combined NBB's conventional capital markets desk with Bahrain Islamic Bank's Sharia-compliant treasury arm.
• Proceeds are earmarked for the group's environmental, social and governance asset portfolio.

The latest

Bahrain has recorded its first secured sustainable murabaha transaction, worth more than $50 million, executed by NBB Group. The group, which comprises the National Bank of Bahrain and Bahrain Islamic Bank, said the deal brought conventional and Sharia-compliant banking capabilities into a single financing structure. Proceeds will be directed to the group's ESG asset portfolio.

Details

• The transaction: NBB Group announced the execution of what it described as the first secured sustainable murabaha deal in the Kingdom of Bahrain, with a value exceeding $50 million, according to the Bahrain News Agency. The group did not disclose the counterparties or the tenor of the facility.
• The structure: The deal placed conventional and Islamic banking capabilities inside a single unified financing structure, according to the group. NBB Group presented that combination as the defining feature of the transaction rather than its size, framing it as a demonstration of what the two banks can deliver jointly.
• Division of roles: The National Bank of Bahrain handled the structuring and execution of the transaction, drawing on its capital markets knowledge and liquidity management, according to the group's statement. Bahrain Islamic Bank contributed its Islamic treasury expertise and its sustainable financing framework.
• The standards: The sustainable financing framework applied to the deal follows the principles of the International Capital Market Association and the Loan Market Association, according to the group. Both bodies set widely used voluntary standards governing how sustainable debt instruments are labelled and how proceeds are tracked.
• Use of proceeds: Funds raised through the transaction will be channelled into the group's portfolio of environmental, social and corporate governance assets, according to the announcement. The group did not break down which assets within that portfolio will receive the money, nor the timetable for deployment.
• The group: NBB Group consists of the National Bank of Bahrain and Bahrain Islamic Bank, operating conventional and Sharia-compliant arms under one roof. That structure is what allowed a single deal to be arranged across both sides of the business, according to the group's account of the transaction.
• The claim of a first: The characterisation of the deal as the first of its kind in Bahrain comes from NBB Group itself, carried by the official Bahrain News Agency. The group did not name a regulator or third party as having certified the designation.
• Sector positioning: The group described the transaction as a notable milestone in the development of the Islamic banking sector locally. It did not indicate whether further deals using the same structure are planned, or at what scale.

Background

Murabaha is a cost-plus sale structure widely used in Islamic finance as an alternative to interest-bearing lending. Sustainable versions tie the proceeds to environmental or social assets, while a secured structure adds collateral backing, a combination the group says had not previously been executed in Bahrain.

Between the lines

The headline number is modest by regional standards, which suggests the significance lies in the template rather than the ticket size. By building the structure around ICMA and LMA principles and splitting execution between a conventional capital markets desk and an Islamic treasury unit, the group has produced a model that other Gulf banks running dual conventional and Sharia-compliant arms could replicate for ESG asset financing.

What's next

Watch for disclosure of which ESG assets receive the proceeds, whether Bahrain's regulators formalise guidance for secured sustainable Islamic instruments, and whether other Gulf lenders replicate the structure in subsequent issuances.

Source: Bahrain News Agency (BNA)