Sharjah Islamic Bank’s (SIB) $500 million sukuk was listed on Nasdaq Dubai today.
Ahmad Saad, Deputy CEO of SIB, rang the opening bell to celebrate the listing.
The listing adds further momentum to Dubai’s growth as the global capital of the Islamic economy and underlines Nasdaq Dubai’s stature as the largest exchange in the world for sukuk listings by value, currently standing at $43 billion.
The bell-ringing took place in the presence of Abdul Wahed Al Fahim, chairman of Nasdaq Dubai, and Hamed Ali, chief executive; and senior executives of SIB.
Saad said: “Our listing on the region’s international exchange supports our visibility among global and regional investors as well as providing first class regulatory standards. The sukuk was issued on September 8, 2016 and was oversubscribed by 3.2 times. It follows two earlier Sukuk listings by SIB on Nasdaq Dubai in April 2013 and April 2015, each of $500 million.”
Essa Kazim, Governor of Dubai International Financial Centre, secretary general of Dubai Islamic Economy Development Centre, and chairman of Dubai Financial Market, said: “SIB’s listing demonstrates the continuing growth of Dubai as the global capital of the Islamic economy, under the initiative launched in 2013 by His Highness Sheikh Mohammed Bin Rashid Al Maktoum, UAE Vice President and Prime Minster, and Ruler of Dubai. This expansion is supported by the UAE’s long tradition of pioneering the development of Islamic finance and the depth of its expertise in the Sharia’a-compliant capital markets sector. ”
Abdul Wahed Al Fahim, chairman of Nasdaq Dubai, said: “SIB’s listing underlines the close and mutually beneficial connections that the exchange enjoys with leading Islamic financial institutions. Nasdaq Dubai is committed to further enhancing its Sukuk listing procedures and framework, to ensure streamlined access to the exchange for issuers.”
SOURCE: TradeArabia News Service/3 Nov 2016
Thursday, 3 November 2016
Wednesday, 2 November 2016
Djibouti sees Islamic finance sector expanding, aims for sukuk
Nov 2 (Reuters) - Djibouti expects to see new entrants in its Islamic finance sector and the government plans to work on a framework to allow the use of sukuk, or Islamic bonds, to fund infrastructure projects, its central bank governor said.
Djibouti, a country of less than a million people located on the Horn of Africa, is a relative newcomer to Islamic finance, having introduced sector-specific legislation in 2011, but authorities hope it can increase banking penetration in rural areas while also attracting foreign investment.
The government has established a national sharia board to help oversee the sector, appointing five members to the independent body last week, central bank governor Ahmed Osman said in an interview.
The move could help Islamic finance by improving consumer perception of the industry and providing greater clarity on contracts which follow religious principles such as bans on interest and gambling.
The government is in discussions with the Saudi-based Islamic Development Bank to secure a technical mission to help establish a framework to issue sukuk for either the government or state-owned enterprises, said Osman.
"We will be looking a lot at sukuk in the next few years," said Osman, adding that there are around 10 projects which could be financed via sukuk - ranging from railways, pipelines to new roads.
One likely candidate is the state telecom operator due to the availability of assets to structure a sukuk, Osman said on the sidelines of the International Islamic Banking Summit Africa, which the central bank is hosting this week.
The central bank has avoided double-taxation of Islamic contracts through temporary exemptions, but it is in discussions with the Ministry of Finance to make those exemptions permanent, Osman added.
NEW ENTRANTS
The central bank is also in discussions with two lenders seeking to open Islamic windows of their own. Currently three of Djibouti's 10 banks are Islamic: Saba Islamic Bank, Salaam African Bank and East Africa Bank.
The sector is attractive due to its faster growth - estimated at around 16 percent versus 10 percent for conventional banks - but also for its low levels of bad debt.
"Islamic finance is more secure, as there is a direct link between financing and the underlying assets," Osman said.
Islamic banks held 16.2 percent of banking assets and 14.3 percent of deposits as of September, central bank data shows.
Their non-performing loans reached 3.1 percent of total lending as of June, compared to 19.5 percent for conventional banks.
SOURCE: Reuters/2 Nov 2016
Friday, 28 October 2016
Indonesia unveils ‘waqf’ based 'sukuk'
Bank Indonesia (BI) unveiled on Thursday a waqf (Islamic endowment)-based sukuk (Islamic bond), aimed at developing social property assets to be commercially self-sustaining.
BI Deputy Governor Hendar said the sukuk could further finance the development of commercial buildings such as office towers or shopping centers over waqf land. The coupon will be paid from the recurring income of the assets.
"There are many prospective waqf plots of land in Indonesia. If we build something productive there, it will generate more economic activity," he said during the Indonesia Sharia Economic Festival in Surabaya.
Hendar highlighted the Menara 165 office tower in Jakarta, a commercial building that was built over mortmain properties under waqf. Sukuk, he further said, could be issued by using the building as the underlying asset and the proceeds could be used to develop other assets.
According to Muhammad Anwar Basori, BI head of the sharia economic and finance department, waqf land was traditionally used for social and public purposes such as cemeteries, mosques, or pesantren (Islamic boarding schools).
Due to maintenance needs, the waqf asset manager usually collects money through spontaneous crowdfunding mechanisms such as asking for donations at the Mosque and even on the street. Waqf-based sukuk could be a solution for that, providing cash to cover maintenance costs.
"There are 400,000 hectares of waqf land in Indonesia, 90 percent of which are cost centers. In Kuwait and Singapore, they have built many productive assets on waqf land," he said. (ags)
SOURCE: The Jakarta Posts/28 October 2016
Saturday, 15 October 2016
Why African Sukuk Still Faces An Uphill Battle
Growth in African Sukuk Shows Positive Momentum, but Structural Challenges Remain
Many African countries are working to develop their legislative and regulatory frameworks to establish Islamic finance and sukuk as a sustainable funding alternative. With Africa’s demand for infrastructure financing solutions and its significant Muslim population, such an opportunity might be well received.
Islamic finance is already present in more than 20 African countries, with Sudan having a fully-fledged 100% Islamic financial system. However, the size of the Islamic finance industry in Africa is still small in relation to the industry as a whole. Fitch estimates around USD1bn of sukuk total issuance from the whole of Africa in 2016 compared to USD21.74bn in 1H16 across the Gulf Cooperation Council, Malaysia, Indonesia, Turkey, Singapore and Pakistan.
When considering the reasons Why? Africa is less developed in its Islamic financial system, two common themes emerge. The first theme is the complexities of sukuk. Second is the emerging capital market infrastructure of African countries. Both factors pose significant challenges for sukuk in general, particularly in establishing a legal structure and legislation that is acceptable to governments, investors and the Sharia boards. Also, structuring sukuk compared to issuing a traditional Eurobond remains a relatively complex and time consuming process.
Two main examples of these sukuk complexity challenges can be tax neutrality for sukuk and the ability to establish a special purpose vehicle (SPV) that acts as a single issuer for the sukuk. Although this is not Africa-specific, taxation is often challenging for sukuk due to their asset-backed/based nature. What this means is several asset transfers for a sukuk transaction, creating a dense tax load for issuers when there is not special sukuk legislation in place.
Regulations often need to be amended to provide some sort of exemption to taxable gains on the transfer of assets and tax on rental income earned by a sukuk issuing SPV. This is also true for withholding taxes linked to the transfer of underlying assets in sukuk transactions.
In most African countries, there are no specific comprehensive sukuk laws, though some initiatives have now materialized. One example is South Africa, which has introduced Islamic compliant financial structures with further amendments to the Taxation Act to widen the definition of sukuk. This comes following the issuance of its sovereign sukuk during 2014.
Regarding the second theme of the nature of Africa burgeoning capital markets, there are encouraging signs. That said, the development is still modest relative to their potential and compared to more developed countries. There are numerous limitations and challenges in developing bonds and sukuk alike. However, the regional/local currency sukuk market is an area where we have seen increased sukuk activity.
The choices in issuance are usually domestic versus international and the currency denomination of their sukuk (or bonds) are local versus foreign. These two features are often interlinked, as many issuances are denominated in the currency of the market in which they are issued.
Africa has seen success in issuing sukuk in sub-Saharan Africa, and West Africa in particular in the West African CFA franc (XOF), which minimises exposure to FX risk for domestic issuers and investors.
The continuation of sukuk activity this year is a positive development that allows the sukuk footprint to widen and foster greater acceptance of this instrument globally. Reuters reported that in 2016, Togo’s initial sukuk was XOF 150 billion (USD255 million).
This comes after Senegal launched its second XOF200 billion (USD341.5 million) sukuk towards the end of June and Côte d’Ivoire’s second phase of its XOF300 billion (USD510 million) sukuk program. Similarly, it has been reported by Reuters that Nigeria has convened multi-agency meetings to organize its maiden sovereign sukuk issuance, expected by in 2017.
With global financial reform, we have seen the transformation of banks’ willingness and ability to lend. This, combined with recent events and uncertainties globally like about interest rates increase and appetite of investors to emerging market, has highlighted the limitations of heavily relying on foreign investments alone and regional and local currency could make this complex process easier.
Conclusion Challenges lie ahead for the sukuk market despite continued momentum. The time needed to tackle these obstacles will in turn lead to a longer time frame of Islamic finance implementation and potentially higher costs in relation to more conventional forms of funding until a standardised framework is established.
However, several important trends could provide the necessary impetus for the development of Islamic finance in Africa. This includes growing government support for Islamic finance, increasing acceptance of Sukuk and Islamic finance more broadly and existing large investment and financing requirements in Africa.
Furthermore, Islamic finance could enable African sovereigns to broaden their investor base while providing some diversification away from traditional Eurobond investors and towards regional/local market participants.
As African governments tap the Islamic finance market, it is anticipated that other issuers such as state-owned companies and African banks could, in time, benefit from this additional source of funding.
SOURCE: ProshareNG/15 Oct 2016
Many African countries are working to develop their legislative and regulatory frameworks to establish Islamic finance and sukuk as a sustainable funding alternative. With Africa’s demand for infrastructure financing solutions and its significant Muslim population, such an opportunity might be well received.
Islamic finance is already present in more than 20 African countries, with Sudan having a fully-fledged 100% Islamic financial system. However, the size of the Islamic finance industry in Africa is still small in relation to the industry as a whole. Fitch estimates around USD1bn of sukuk total issuance from the whole of Africa in 2016 compared to USD21.74bn in 1H16 across the Gulf Cooperation Council, Malaysia, Indonesia, Turkey, Singapore and Pakistan.
When considering the reasons Why? Africa is less developed in its Islamic financial system, two common themes emerge. The first theme is the complexities of sukuk. Second is the emerging capital market infrastructure of African countries. Both factors pose significant challenges for sukuk in general, particularly in establishing a legal structure and legislation that is acceptable to governments, investors and the Sharia boards. Also, structuring sukuk compared to issuing a traditional Eurobond remains a relatively complex and time consuming process.
Two main examples of these sukuk complexity challenges can be tax neutrality for sukuk and the ability to establish a special purpose vehicle (SPV) that acts as a single issuer for the sukuk. Although this is not Africa-specific, taxation is often challenging for sukuk due to their asset-backed/based nature. What this means is several asset transfers for a sukuk transaction, creating a dense tax load for issuers when there is not special sukuk legislation in place.
Regulations often need to be amended to provide some sort of exemption to taxable gains on the transfer of assets and tax on rental income earned by a sukuk issuing SPV. This is also true for withholding taxes linked to the transfer of underlying assets in sukuk transactions.
In most African countries, there are no specific comprehensive sukuk laws, though some initiatives have now materialized. One example is South Africa, which has introduced Islamic compliant financial structures with further amendments to the Taxation Act to widen the definition of sukuk. This comes following the issuance of its sovereign sukuk during 2014.
Regarding the second theme of the nature of Africa burgeoning capital markets, there are encouraging signs. That said, the development is still modest relative to their potential and compared to more developed countries. There are numerous limitations and challenges in developing bonds and sukuk alike. However, the regional/local currency sukuk market is an area where we have seen increased sukuk activity.
The choices in issuance are usually domestic versus international and the currency denomination of their sukuk (or bonds) are local versus foreign. These two features are often interlinked, as many issuances are denominated in the currency of the market in which they are issued.
Africa has seen success in issuing sukuk in sub-Saharan Africa, and West Africa in particular in the West African CFA franc (XOF), which minimises exposure to FX risk for domestic issuers and investors.
The continuation of sukuk activity this year is a positive development that allows the sukuk footprint to widen and foster greater acceptance of this instrument globally. Reuters reported that in 2016, Togo’s initial sukuk was XOF 150 billion (USD255 million).
This comes after Senegal launched its second XOF200 billion (USD341.5 million) sukuk towards the end of June and Côte d’Ivoire’s second phase of its XOF300 billion (USD510 million) sukuk program. Similarly, it has been reported by Reuters that Nigeria has convened multi-agency meetings to organize its maiden sovereign sukuk issuance, expected by in 2017.
With global financial reform, we have seen the transformation of banks’ willingness and ability to lend. This, combined with recent events and uncertainties globally like about interest rates increase and appetite of investors to emerging market, has highlighted the limitations of heavily relying on foreign investments alone and regional and local currency could make this complex process easier.
Conclusion Challenges lie ahead for the sukuk market despite continued momentum. The time needed to tackle these obstacles will in turn lead to a longer time frame of Islamic finance implementation and potentially higher costs in relation to more conventional forms of funding until a standardised framework is established.
However, several important trends could provide the necessary impetus for the development of Islamic finance in Africa. This includes growing government support for Islamic finance, increasing acceptance of Sukuk and Islamic finance more broadly and existing large investment and financing requirements in Africa.
Furthermore, Islamic finance could enable African sovereigns to broaden their investor base while providing some diversification away from traditional Eurobond investors and towards regional/local market participants.
As African governments tap the Islamic finance market, it is anticipated that other issuers such as state-owned companies and African banks could, in time, benefit from this additional source of funding.
SOURCE: ProshareNG/15 Oct 2016
Friday, 22 April 2016
Malaysia: Overwhelming response to sukuk
KUALA LUMPUR: Malaysia has strengthened its position as a top investment destination with the overwhelming response to the government’s newly-priced global sukuk issuance, which reflects global investors’ continued confidence in the country.
Investors from a combined base of more than 195 accounts subscribed for the government’s 10-year and 30-year benchmark global trust certificates (wakala global sukuk), attracting an aggregate interest of more than US$6.3 billion (RM24.5 billion) and representing an oversubscription of 4.2 times.
Finance Ministry secretary-general Tan Sri Dr Mohd Irwan Serigar Abdullah said Malaysia remained among the faster-growing economies in the region and continued to successfully pursue fiscal consolidation while maintaining monetary and financial stability.
“This is a remarkable achievement as demonstrated by the tight pricing and excellent response to this landmark sukuk,” he said in a statement yesterday.
The government, via special purpose entity Malaysia Sukuk Global Bhd, has successfully priced the 10-year and 30-year benchmark sukuk papers at 3.18 and 4.08 per cent, respectively.
The new sukuk format uses non-physical assets to underpin an agency-based transaction known as wakala, instead of the traditional use of physical assets (commodity murabaha).
The sukuk used vouchers representing entitlement to travel units and syariah-compliant shares, the statement said.
This could serve as a model for other sovereigns which have previously faced some difficulty in identifying and transferring tangible assets, such as buildings, for use in sukuk issuance.
The wakala sukuk are expected to be assigned ratings of “A-” by Fitch Ratings and Standard and Poor’s Ratings Services, and “A3” by Moody’s Investors Services.
The issuance is Malaysia’s fifth global sukuk, after previous issuances in 2002, 2010, 2011 and 2015.
It was priced after a roadshow across global financial centres, including Hong Kong, Singapore, Abu Dhabi, Dubai, London and New York, besides Kuala Lumpur.
CIMB, HSBC, J.P. Morgan and Maybank acted as the bookrunners and lead managers for the offering.
SOURCE: New Straits Times Online / 22 April 2016
Malaysia: Overwhelming response to sukuk
KUALA LUMPUR: Malaysia has strengthened its position as a top investment destination with the overwhelming response to the government’s newly-priced global sukuk issuance, which reflects global investors’ continued confidence in the country.
Investors from a combined base of more than 195 accounts subscribed for the government’s 10-year and 30-year benchmark global trust certificates (wakala global sukuk), attracting an aggregate interest of more than US$6.3 billion (RM24.5 billion) and representing an oversubscription of 4.2 times.
Finance Ministry secretary-general Tan Sri Dr Mohd Irwan Serigar Abdullah said Malaysia remained among the faster-growing economies in the region and continued to successfully pursue fiscal consolidation while maintaining monetary and financial stability.
“This is a remarkable achievement as demonstrated by the tight pricing and excellent response to this landmark sukuk,” he said in a statement yesterday.
The government, via special purpose entity Malaysia Sukuk Global Bhd, has successfully priced the 10-year and 30-year benchmark sukuk papers at 3.18 and 4.08 per cent, respectively.
The new sukuk format uses non-physical assets to underpin an agency-based transaction known as wakala, instead of the traditional use of physical assets (commodity murabaha).
The sukuk used vouchers representing entitlement to travel units and syariah-compliant shares, the statement said.
This could serve as a model for other sovereigns which have previously faced some difficulty in identifying and transferring tangible assets, such as buildings, for use in sukuk issuance.
The wakala sukuk are expected to be assigned ratings of “A-” by Fitch Ratings and Standard and Poor’s Ratings Services, and “A3” by Moody’s Investors Services.
The issuance is Malaysia’s fifth global sukuk, after previous issuances in 2002, 2010, 2011 and 2015.
It was priced after a roadshow across global financial centres, including Hong Kong, Singapore, Abu Dhabi, Dubai, London and New York, besides Kuala Lumpur.
CIMB, HSBC, J.P. Morgan and Maybank acted as the bookrunners and lead managers for the offering.
SOURCE: News Straits Times Online / 22 April 2016
Wednesday, 13 April 2016
Oman: New regulation on sukuk to provide transparency
Muscat: Oman’s market watchdog Capital Market Authority (CMA) on Wednesday announced its new sukuk regulation, which includes stipulation on establishing a trustee structure and an LLC company as a special purpose vehicle for issuing sukuk.
The regulation, which is effective from Wednesday, also allows structure of the sukuk subject to the approval of respective Sharia Supervisory Board issuer and the choice of the board is left to the issuer.
The regulation made rating optional for the issuer and there is no restriction on the sukuk amount to be raised based on the company’s capital, said a CMA release.
The new sukuk regulation will provide clarity and transparency to the market players, while providing protection to investors in a sukuk transaction. In addition, it has been drafted to provide flexibilities and spur innovation for the market players.
“The issuance of this new sukuk regulation forms an integral part of the overall strategy of the CMA to enable the capital market to play its vital role as a fundraising platform for companies in the economic development of Oman, particularly in the fixed-income market, where sukuk forms an important element to further develop Oman’s Islamic capital market,” said Abdullah Salim Al Salmi, executive president of the CMA.
“In addition, the new sukuk regulation will form a key milestone in the evolution of the sukuk market in Oman and hopefully spur further Sukuk issuances particularly from the private sector players in order to meet their development and funding needs, while diversifying the financing base and risk away from the traditional banking sector,” he added.
“Further, sukuk issuances will also provide an essential liquidity management instrument and investment avenue for both Islamic and conventional financial institutions, investment funds and takaful/insurance operators in Oman. Hence, not only providing a wider investor base of both conventional and Sharia-compliant investors, but also attracting the required foreign investments into the country via the foreign investors. We are confident that this new regulation will have a positive impact on Oman’s capital market and the economy.”
The sukuk regulation is being issued subsequent to the amendments made to the Capital Market Law under Royal Decree No. 59/2014 on December 10, 2014, which provides the CMA the authority to regulate all sukuk issuances in Oman and any Special Purpose Vehicle or Company (SPV) being incorporated for the issuance of a sukuk, including the tax and fee exemption status provided for the SPV.
This sukuk regulation would complement the existing bond regulatory framework, which are currently in place in the Commercial Companies Law and Executive Regulation of the Capital Market Law.
All jurisdictions have specific and separate sukuk regulations, particularly in the Gulf Cooperation Council, with many just having a conventional bond regulatory framework with some additions made on the Sharia requirements.
In a short span of three years, besides the establishment of two Islamic banks and six Islamic windows, the Islamic financial market in Oman has seen the launch of the new Muscat Securities Market (MSM) Sharia Index with 30 Sharia-compliant listed companies on the MSM, three Sharia-compliant investment funds, the first Oman sovereign sukuk and also the first corporate sukuk, and the establishment of two takaful operators including the issuance of the new takaful law.
SOURCE: Times Of Oman / 13 April 2016
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