» Rise of Sukuk Issuances in the Global Market

Sukuk Issuances jump to 66.2 Billion dollars as an increase of 8% in the first half of 2014

The report issued by KFH Research Ltd of Kuwait Finance House stated that the performance of the global market of primary sukuk has witnessed a remarkable rise in the first six months of 2014 as June issuances of 2014 reached 66.2 billion dollars as an increase of 8.2% in value compared to the issuances of 61.2 billion dollars during the same period of the previous year.
June has witnessed an increase of the momentum of the issuances in the global market of primary sukuk as 9 different countries have participated in issuing sukuk during the month compared to 6 countries in May of 2014. This was before the incoming of Holy Ramadan which officially began on 29 June in the countries of the Gulf Cooperation Council and Malaysia.
The month has witnessed a huge contribution particularly from the sector of companies’ sukuk which contributed more than 45% of the issuances (May 14: 21.9%) led by some huge issuances of the countries of the GCC. Total issuances of June has reached 11.6 billion dollars which represents a rise of 32.5% in the amount of issuances compared to the issuances amounted to 8.7 billion dollars issued in May.
This huge amount of issuances has made June the second largest month in respect of the issuances amount since the beginning of 2014 to date and the fourth largest month over the past 12 months (June 2013-June 2014). Based on the performance of the first half of 2014, some market experts expect abundance in the activity of sukuk issuances of this year. They expect that the issuances amount will exceed the record of issuances of 2012 amounted to 131.2 billion dollars.

Britain: the First Western State Entering the Shari’a Compliant Banking Market to Issue Islamic Sukuk
One of the significant events of June 2014 has been the entrance of a country outside the Organization of Islamic Cooperation to the market of sovereign sukuk as the United Kingdom has officially become the first country outside the Organization of Islamic Cooperation to issue sovereign sukuk. It preceded Luxemburg, South Africa, and Hong Kong. Those who are interested in sukuk market have been closely waiting for this sovereign issuance since Britain declared its intention to issue sovereign sukuk in October last year.

Five Deputized Banks
Britain deputized HSBC bank in last January to arrange the deal of sukuk issuance and now it has added four other banks which are Barwa Bank in Qatar, CIMB in Malaysia, the National Bank of Abu Dhabi, and Standard Chartered Bank. The banks arranging the issuance said that the promotional campaign will start on (June) 17 in Jeddah and Kuala Lumpur, and then it will move to Riyadh, Dubai, and Abu Dhabi
whereas closing its tour in London on ongoing (June) 20. Cameron, the Prime Minister of Britain, believes that the sovereign sukuk are considered a pivotal step to enhance the status of London as a leading centre of Islamic finance with the strong competition with financial centers in Asia and the Middle East.

Luxemburg: Second European State entering the field of Islamic Sukuk
Luxemburg has become the second European country entering the field of Islamic sukuk as its Parliament has approved a draft law regulating its issuance according to the requirements of Islamic Shari’a while Tunisia has referred to its intention to issue sukuk this year.
Luxemburg Lawyers Association’s Magazine stated that the Parliament has approved the draft law No.6631 which allows the sale of the repurchase of real estate assets necessary to issue Islamic sukuk. It also added that this parliamentary approval allows the Ministry of Finance to develop the Islamic financial services in Duchy, Luxemburg.
The Magazine said that the approval shows the country’s political will to diversify the finance markets and convert Luxemburg into an international center of financial services.
In this step, Luxemburg has become the second European country after Britain to use sukuk market as London issued sukuk in value of 200 million pounds Sterling last June. Luxemburg’s resolution coincides with the declaration of Hakim Ben Hamouda, the Tunisian Minister of Economy and Finance, stating that ‘Tunisia determined to enter the global market of issuing Islamic sukuk to mobilize finances ranging between 180 and 300 million dinars during 2014 (between 106 and 177 million dollars).
According to the Tunisian News Agency, Ben Hamouda said that the negotiations with the Islamic Development Bank to issue these sukuk are in advance stages despite its issuance
difficulties due to the requirements of in-kind guarantees. He clarified that several options are examined to match with the conditions in order to get the necessary funds.

International Finance Corporation (IFC) Said that Sukuk Issuance Is Still in its Early Stages
The IFC supervising the World Bank’s loans to the private sector is studying to return to the Islamic bond market according toMua’yed Makhloof, the IFC’s Director of the Middle East and South Africa.
On the sideline of a press conference in Dubai, Mua’yed Makhloof said that sukuk issuance is still in its early stages of discussion, but it may start in the fiscal year 2015 which begins next month.
The most recent sukuk issuance by the IFC which is working on stimulating the private investments in the developing countries was in value of 100 million dollars for a five-year sale in 2009 and it was listed on Dubai and Bahrain Stock Exchanges.
The IFC sold sukuk for the first time in Malaysia in 2004 in value of 500 million ringgit (155 million dollars in current price) for three years.

Dr. Rabee Saad