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Industrial Finance

Industrial Finances

The Industrial Bank of Kuwait (IBK) has long experience in the industrial development of Kuwait. It encourages industrial projects in the country at subsidized rates and identifying the fields of industrial activity that have the best prospects for growth. The bank may also provide finance for industrial services, such as oil extraction, marine contracting, and other industrial services.   Medium or long-term financing is provided to new and existing projects, which plan for expansion. At the same time, the Bank provides the full range of commercial credit facilities for working capital finance to its corporate customers on competitive terms.

Licensing and Financing Criteria for Industrial Finance

  • Industrial License: 

In order to apply for  subsidized medium or long-term finance, the project should have an industrial license from the Public Authority for Industry, under the provisions of the Industrial Law No. (56) of year 1996.

  •  Availability of Land:

The project should have the availability of land not less than 1000 square meters in area.

  •  Criteria for Industrial Finance: 

The decision to grant industrial finance is based on the viability of the project and its ability to service its debts in the normal prevailing competitive conditions in Kuwait.

Types of Projects Financed

  • New projects (Green Field).
  • All types of expansion projects (addition of a product - increase in production capacity - transfer to new premise - replacement of depreciated assets, etc.).
  • Financial restructuring for existing plants.
  • Purchase of existing projects (acquisition) excluding the land value.

Conditions of Finance:

  • The amount of finance should be KD100, 000 and above.
  • For new projects, the amount of finance should not exceed 65% of the overall project cost.
  • For expansion projects: the finance may be equal 100% of the overall project cost.
  • For financial restructuring projects, the amount of finance shall be determined in accordance with the financial position of the client, the objectives of the restructuring in order to improve the business and financial performance of the client.
  • For purchase of existing projects or acquisition (excluding the land value), the amount of finance should not exceed 65% of the overall project cost of the new project, or 100% of the cost of an expansion project.

Industrial Islamic Finance

If you are interested in obtaining Industrial Islamic Finance for your project, we can provide finance in accordance with the Islamic Sharia, namely Murabaha, Ijara and Istesna’a.

  • “Murabaha” refers to any sale made in cash, installments, or has a purchase price with fixed profit margin, that does not increase over time, or decrease if paid in advance. 
  • “Ijara” refers to any rental of equipment, or fixed assets, for a specified period for a fixed fee, that can be owned by the end of period by the client.
  • “Istesna’a” refers to the contract under which finance if provided to manufacture specific items or parts, based on the technical requirements of the project

Charges and Repayment:

The interest rate on our conventional industrial loans is 3.5% per annum applied on a reducing balance basis.  Charges on Islamic finance based on Sharia principles provides industrial financing at a lower profit rate through Murabaha, Ijara and Istesna products.                                   
The finance amount is settled usually over a period of  five years through semi-annual installments. 
The repayment may be made in monthly or quarterly installments, based on the cash flow assessment of the project as agreed with the Bank.                                                       

The client may avail of a grace period, before settling any repayments. The grace period may be for a maximum period of 24 months from the expected date of commencement of commercial production and the cash flows of the project.

Collateral Requirement for long term Project Finance

The main collateral for industrial finance is a mortgage of the factory for which the finance is being taken. It is also possible to take a mortgage on another property of the client or of others, and on assets such as registered real estate, shares or listed securities, chattel mortgage (production line, trucks), or, deposit or bank guarantee. Additionally, in certain instances, a joint liability guarantee for the financing from a person or persons of affluence may also be accepted.

Application for Project Finance

The application for finance and the proposal should be submitted through a specific application form. Copies of the documents stated in the application form must be submitted including a copy of the by-laws and articles of association (and amendments if any). If the applicant is a company, copies of the industrial license and documents for allocation of land/industrial plot for the project/land lease contract are required.

Loan applications may be submitted from Sunday to Thursday, during  working hours, at The Industrial Bank of Kuwait, Middle Tower, Joint Banking Complex, Darwazah Al-Abdul Razak, Kuwait City.

Are you looking for long-term project finance or working capital finance for your factory?

Commercial facilities supporting project finance:

The following types of working capital finance are provided for companies operating in the industrial sector:

  • Overdraft, Advances Against Promissory Notes,/ Short-term Financing of Cash Flow, Local and International Letters of Credit / Refinancing Letters of Credit, Discounting of Payment Orders, Letters of Guarantee, Spot and Forward Foreign Exchange.

Commercial facilities supporting project finance

  • Project Financing Facilities
    • Cash and Non-Cash Commercial Facilities for Financing Projects, Defined Contracts
  • Bridge Finance Facilities
    • Bridge Financing Facilities (Cash and Non-Cash) to provide immediate financing until the industrial loans disbursed.
  • Term Loans
    • Medium-term loans,  Short-term Loans

If you are looking for working capital and shorter-term finance, the Bank provides financial services tailored to your needs.

Finance for Small Enterprises

We finance enterprises that may be of the nature of small industry, handicrafts or commercial services. The Al Senai portfolio for Small Enterprises was established at the Bank through Law No. 10/1998 for financing small enterprises according to Islamic Shariah in order to encourage individual Kuwaiti entrepreneurs.

What is the nature and type of a small enterprise?

A small enterprise project is one in which the total funds invested does not exceed K.D 500,000, and is categorized as follows: 

  • Small industrial enterprises: Projects where the main purpose is to transform raw materials to fully manufactured products or to intermediate products, or to transform intermediate products to fully manufactured products. 
  • Crafts related enterprises:                                                                                                                                                                                                    Projects that depend mainly on manual skills or artistic abilities using simple tools and machinery.
  • Commercial enterprises:                                                                                                                                                                                                                    All types of commercial projects assessed and approved by the Bank.

How will we finance your enterprise?

Finance is granted according to the Islamic Shariah where we directly purchase all your requirements as explained below within the terms and conditions of the finance.

Eligibility for a Small Enterprise Loan:

In order to obtain small enterprise financing, the following conditions apply.

  • You must be a Kuwaiti national, or a company established under Kuwaiti Companies Law.
  • You must hold a license for practicing the activity.
  • You should be an artisan fully dedicated to the project without being employed elsewhere.
  • Your assets must be insured by a local insurer according to Islamic Sharia
  • Your project investment should not exceed K.D 500,000. 
  • The maximum finance provided for a new project is 80% of the project cost and the owner bears the balance 20%.
  • The minimum amount for medium and long-term financing should not be less than K.D 5,000. 
  • The maximum amount of the short-term finance is K.D 25,000. 
  • We offer KD 25,000 as a profit-free loan to the applicant paid as a monthly salary for the first two years. 
  • For expansion projects, finance is available up to KD 400,000.
  • The value of your fixed and movable assets is considered as collateral.  Other aspects of collateral requirements may be discussed with the Bank.
     

Documents that you need to submit

  • Application form duly completed.
  • Certificate from the Public Institute of Social Security stating that you are not employed elsewhere.
  • A copy of all educational certifications and statement of relevant experience.
  • A declaration of complete dedication to the project.
  • Required licenses and certifications issued by the competent authorities. 
  • Copy of the lease or ownership contract of the project’s location.
  • In case of company applicant: Memorandum of Association, financial statement for the last 3 years and a certificate of the company's authorized signatory.
  • Quotations of fixed assets and raw materials required for the project. 

How can you use this finance?

  • Short-term financing:                                                                                                                                                                                                                    This may be used to purchase raw materials, packaging and spare parts for the business. You can settle this finance through repayment in quarterly installments within one year. If you are a new graduate entrepreneur, the settlement period is extended to two years from commencement of production.
  • Medium and long-term financing:                                                                                                                                                                                            This is granted to small projects that requires machines, equipment and tools and finance for repair, restoration, rebuilding and purchase of other fixed assets or to develop and expand existing enterprises. The installments are settled through monthly,  quarterly or semi-annual repayments.  A grace period between one and three years is allowed.

We finance enterprises that may be of the nature of small industry, handicrafts or commercial services

Finance for Agriculture

Agricultural finance function is provided from a portfolio established at the Bank by the Government by virtue of Law No. 48/1988. The purpose of the portfolio is to finance agricultural production projects, as well as support the development and expansion of existing agricultural projects.

All agricultural loans are subject to an annual management fee at 2.5% per year on the drawn amount of the loan. These loans are provided for farming and crop-growing projects, greenhouses, livestock breeding and fish farming and other agricultural activities.

Funding Areas

The Agriculture Finance Department of the Bank finances new projects expands existing projects in order to increase production or to add new products in the same location. Funding is provided for agricultural production in general, as well as the following specific areas:

  • Local production of all types of poultry including broilers and eggs production.
  • Local production and processing of dairy products.
  • Local construction of greenhouses.
  • Cultivation of cereals, crops, and fruit trees.
  • Breeding livestock and fish farming.
  • Production of feeds and fertilizers.
  • Preservation, storage, and transport services for agricultural projects.

types of funding

Types of funding provided for an agri-business:

  • Short-term loans to be settled within one year.
  • Long-term loans to be settled within a maximum of 10 years.
  • Funding is granted for agricultural production such as purchase of livestock and poultry, equipment and machinery, construction or restoration of greenhouses irrigation channels, buildings, wells and other related projects.
  • We finance agricultural projects covering over 15,000 square meters of land. We provide short-term loans that may amount up to 100% of capital requirements. These loans are settled from profits from the sale of crops and from government subsidies.

For short-term loans settled within one year, agriculture loans up to 100% of the cost of the project are provided between a minimum of KD 1,000 and a maximum of KD 20,000.

For long-term loans settled within 10 years, agriculture loans up to 70% of the project cost are provided between a minimum amount of KD 20,000 and a maximum amount determined by the Agriculture department.

Application for agricultural finance

To submit a request for loan, the applicant must submit a license from the Public Authority of Agriculture Affairs & Fish Resource, the original lease of agricultural land from the State Property Department at the Ministry of Finance, as well as other documents related to the project.

Loan Repayments & Collateral

Loan repayments may be made through monthly, quarterly, or biannual installments. A grace period of up to two years is offered for expansion projects, three years for new projects, and five years for fruit or palm tree cultivation projects.
The following types of collateral are accepted: first mortgage on the project’s fixed assets, mortgage of commercial space, operating license, goodwill, or any other acceptable collateral.

We are the leaders in providing finance for enterprises related to agriculture, livestock, poultry and fisheries.

Investment Services in Kuwait

  • Research and identification of potential investment opportunities in the industrial sector.
  • Promotion and establishment of industrial companies to help diversify the country's manufacturing base and invite private sector participation.
  • Investment in the local industrial sector to create added value and benefit the national economy.
  • Advisory services to local investors in respect of their local, regional and international investments in the industrial sector.
  • Establishment and promotion of local funds for industrial activities in cooperation with specialized entities and fund managers. Structure, advise and provide support services for such funds.

International Investment Services

Direct and indirect investment in industrial sectors with potential for expansion into local  or regional markets.

Direct Investment & Promotion

Our Investments team of the Bank is specialized and highly experienced in providing advisory services related to the Industrial sector. We perform professional Identification and promotion of opportunities in our field that lead us to solid based Investment in the industrial sector.

Treasury Services

The IBK Treasury caters to clients in the industrial sector and offers comprehensive financial and investment banking services with international standards in protection and safety, including deposit and bond services in local and international markets; foreign exchange services; other diversified treasury activities.

IBK also offers a specialized technical unit for consultations. The unit has the skill and expertise in all treasury activities to provide integrated financial and banking services, including

  • Deposits and bonds management in all local and international markets, such as personal deposits, governmental treasury bills and bonds, certificates of deposit, and all other types of bonds.
  • Foreign exchange services, including Immediate market operations; forward market operations.