Sabah K. Almoayyed General Manager of Eskan Bank INTERVIEW

skan Bank launched the Kingdom's first Residential Mortgage-Backed Securitization transaction to broaden the range of the country's debt capital markets

Eskan Bank was founded in 1979 by the Bahraini government to help build up the country's housing finance market.

The company chose two paths to achieve that goal: real estate development and mortgage lending, and has been very successful in both areas. Eskan has already lent nearly 500 million Bahraini dinars to more than 28,000 families for home purchases, and now the lender is working on expanding the Kingdom's mortgage industry by starting a market for mortgage-backed securities, and has hopes to turn it into a regional market that will continue to offer financing to home buyers.

In August of last year, Eskan was the first bank in Bahrain and in the Gulf Cooperation Council countries to secure residential mortgages when it sold 30 million dinar worth of bonds with maturities of three, five, seven and 10 years.

A wholly owned unit of the bank, Eskan RMBS Company, was incorporated especially to handle the sale of the securities. One of the unit's first transactions was to buy 100 million dinar of mortgages from Eskan Bank, using funds it raised with the sale of bonds. The money raised from RMBS sales can be used by the bank to finance more lending, or for real estate development, another area where the bank excels.

Eskan Bank has made progress in developing the Mortgage Guarantee System (MGS), an initiative to create a complete system encompassing the mortgage loan market along with developments in other international markets. “The objective of the mortgage guarantee system is to create both the primary and secondary markets,” said Sabah K. Almoayyed, General Manager of Eskan Bank. “Our interest lies in making the program sustainable so that, in the future, people will not have problems getting mortgages with a subvention (provided that they fall under the specified income group) from any bank in Bahrain.”

The banks can then sell their home loans to the National Mortgage Corporation, the company being set up by the government initially to bundle all the debt into mortgage-backed securities, or MBS, to then be sold into the secondary market. The Central Bank of Bahrain is ready to work closely with Eskan to create and expand a securitization market in Bahrain and also for the whole region.

The government has already sold one of the bank's development companies in an initial public offer that was oversubscribed. “On the property side, our aim is to provide mixed use properties, retail, commercial and residential properties, to cater for different income groups,” Almoayyed said. Eskan is currently promoting various projects, including a group of villas in Busayteen and Hamad, the Segaya Plaza commercial and residential development, and the Sitra mall.

Another current project is a development that will house about 25,000 people. The bank used a Shariah compliant structure that welcomed private investment for the project, and also issued Sukuk bonds, another feature of Islamic finance. Eskan is also ready to expand its financial operations. The Central Bank recently approved changes to Eskan's license, permitting it to enter the markets for commercial, conventional and Shariah-compliant financial services. “The bank is moving towards introducing more financial products and services to support the economic development of the Kingdom of Bahrain,” said Almoayyed.