Khazanah Nasional Berhad (“Khazanah”) via a Malaysian-incorporated independent special purpose vehicle, Ihsan Sukuk Bhd (“Ihsan”), will be issuing its first Ringgit-denominated sustainable and responsible investment sukuk (“SRI Sukuk”). The SRI Sukuk was launched by the Deputy Prime Minister and the Minister of Education, YAB Tan Sri Muhyiddin Mohd Yassin, today.

The SRI Sukuk, which was mandated by the Khazanah Board of Directors, will be issued from Ihsan’s RM1.0bn Sukuk Programme, the first programme approved under Securities Commission Malaysia’s Sustainable and Responsible Investment Sukuk framework. The Sukuk Programme has been assigned a preliminary rating of AAA(s) by RAM Rating Services Berhad, reflecting Khazanah’s role as the credit obligor under the structure of the SRI Sukuk.

The inaugural issuance proceeds of this sukuk will be channeled to Yayasan AMIR (“YA”), a non-profit organisation initiated by Khazanah in 2010, to manage its cashflow for the deployment of the Trust Schools Programme for schools identified in 2015.

YA’s objective is to focus on improving accessibility to quality education in Malaysia’s government schools through its Trust Schools Programme, a Public-Private Partnership with the Ministry of Education. As at the end of 2014, the Yayasan AMIR Trust Schools Programme has a total of 30 schools in Kuala Lumpur, Johor and Sarawak, and impacts the lives of more than 20,000 students nationwide.

“This sukuk presents a new method for funding for the purpose of education and a means for investors to fulfil their corporate responsibility,” said Tan Sri Haji Muhyiddin, lauding Khazanah’s effort in introducing this innovative funding programme.

He also calls on Malaysian corporates to support the sukuk which will enable the smooth roll-out of up to 20 new trust schools this year.

Meanwhile, according to Khazanah Managing Director, Tan Sri Azman Mokhtar, the SRI Sukuk provides an opportunity for the private sector to give back to society.

“We also hope that this sukuk will be a launch pad for more multidimensional debt offerings and innovative methods of social financing in the market in the future,” he said.

The social impact of this “Pay for Success” structure is measured using a set of pre-determined Key Performance Indicators (“KPIs”), which will be measured over a 5-year observation timeframe. If at maturity, the KPIs are met, the sukukholders will forego a pre-agreed percentage of the nominal amount due under the SRI Sukuk as part of their social obligation in recognising the positive social impact generated by the Trust Schools Programme. On the other hand, if the KPIs are not met, the sukukholders will be entitled to the nominal amount due under the SRI Sukuk in full.

The structure of the SRI Sukuk is in accordance with the Islamic principle of Wakalah Bi Al-Istithmar, which further attests to Khazanah’s continued effort to push the envelope on transaction innovation and the competitive positioning for Islamic structures.

CIMB Investment Bank Berhad (“CIMB”) is the sole Lead Arranger, and Amanie Advisors Sdn Bhd and CIMB Islamic Bank Berhad are the Joint Shariah Advisors for the RM1.0bn Sukuk Programme.