Insolvent investment companies in Kuwait will have to look for aid from their shareholders, not the state, central bank governor Salem Al Sabah has said. A draft bill containing clauses to help Kuwait¹s troubled sector of investment companies is due to be passed through Kuwait¹s notoriously uncooperative parliament. But Sabah says that although solvent investment companies will be provided with liquidity, insolvent ones will have to turn to their shareholders.
Sabah was speaking at a Euromoney Islamic Finance summit in London earlier this week.
Market sources expect ten to twenty investment companies to go bust. The biggest, Investment Dar and Global Investment House, expected to survive.
Global Investment House is in default, and Investment Dar will propose a re-structuring package to its banks and investors in mid March.
Kuwait has around 100 investment companies, and they hold an estimated 25% of financial assets in the country. They borrowed heavily from abroad for their investments, and local banks also have dangerously high exposures to the companies.
Up to now a bill to help the investment companies has been stalled by disagreements between parliament and the government of Kuwait. Some members of parliament are eager to see state support of investment companies matched by relief on consumer loans.
