WVB's News Content

» Expansion of Sukuk Issuance in the Global Market

The Tenth International Conference for Islamic Economics and Finance in Qatar
On 23 rd March, 2015, the tenth conference for Islamic Economics and Finance was held under the headline “Institutional aspects for the economic, cash and financial amendments”. The conference lasted for two days.
Sheikh Abdullah bin Saud Al-Thani, Governor of Qatar Central Bank (QCB), confirmed the essential role of The Islamic Liquidity Management Corporation in the opening speech. The corporation has achieved significant results in liquidity management despite being new, through the issuance of Sukuk and other Islamic financial tools under the direct supervision of the governors of a number of central banks in the Islamic world.
He explained that “It is obvious after all, that the Islamic financial institutions are characterized by transparency and governance by being based on the tolerant Islamic Shari'a principles. The institutions’ business is also governed by the Shari'a supervisory board in every Islamic financial institution which helps in enhancing discipline and supervision.” He added “We feel optimistic about the future of Islamic financial institutions due to realistic and logical reasons.”
He said “Decades ago, the launch of Islamic financial institutions’ business formed a prominent stage in the history of the global economic system and participated to a large extent in the system development.”
He expressed his pride of the development achieved by the Islamic financial institutions on all levels. He clarified that the available data in this respect shows that the number of the Islamic financial institutions multiplied during the few last years and its number has reached about 800 Islamic financial institutions with assets amounting to about 1.8 trillion dollars by the end of 2013 according to the estimates of the International Monetary Fund (IMF) and the World Bank.

The Islamic Economic Fiqh Forum in Dubai
On 23 rd March, His Highness Sheikh Ahmed bin Mohammed bin Rashid Al-Maktoum, Chairman of Mohammed bin Rashid Al-Maktoum establishment, inaugurated the activities of the Islamic Economic Fiqh Forum. This was held in cooperation with The Islamic Economics Centre Dubai and organized by the Department of Islamic Affairs and Charitable Activities in Dubai. The forum participants confirmed the essential role of the event and the expected decisions and outputs. The forum formed a prominent platform for communication and discussion among the experts of Islamic Fiqh and economics. It was held under the supervision of the daughter of HE Sheikh Hamdan bin Mohammed bin Rashid Al-Maktoum, the Dubai Crown Prince, and in the framework of the Vice President’s initiative, who is a friend of His Highness Sheikh Mohammed bin Rashid Al-Maktoum and also Governor of Dubai.

The German Government Grants License for the First Islamic Bank in Germany
Hamad Abdul Mohsen Al-Marzouk, Chairman of Kuwait Finance House (Baitak), declared in a press release that the Turkish branch of Kuwait Finance House (Baitak Turkey) has been granted a license to operate a subsidiary bank that provides integrated banking services in accordance with Islamic Shari'a in Germany as of next July.
Although about 4 million Muslims live in Germany, the bank aims to provide services to the general market in order to acquire the largest possible share of individual and corporate clients, added Hamad.
He declared that the new bank “KT Bank AG” is wholly owned by “Baitak Turkey”. The bank's headquarters will be located in Frankfurt and it will start proposing and presenting its services by the beginning of next July.
The new bank will be “the first wholly licensed bank to take deposits and offer financing and credit services in Germany in accordance with Islamic Shari'a.” confirmed Hamad Al-Marzouk. Misr 24 News Site

Jordanian-Japanese Cooperation of Sukuk Issuance
An official from Japan International Cooperation Agency (JICA) stated that the agency, together with the Jordanian government, are working on the launch of the first issuance of Islamic bonds in the kingdom in the coming weeks.
The agency provides assistance to Jordan due to the pressures of general expense decrease during the flow of enormous number of Syrian refugees on the Jordanian land and the growth of security costs.
the ling e ordan certified long awaited legislation in 2012 enab J government to raise finance by way of Sukuk which represent investment certifications, in compliance with Shari'a that prohibits Riba and Mudarabah.
No further action was taken. Nevertheless, the growing demand for Islamic finance tools in the Muslim majority countries in which Japan International Cooperation Agency is active was the reason behind the Jordanian Ministry of Finance's demand for the agency's help in Sukuk issuance.
In October, the agency signed an agreement with the Islamic Corporation for the Development of the Private Sector, a subsidiary of the Islamic Development Bank, in order to develop its financing capabilities.
“Jordan is our first target. The agency and the Corporation for the Development of the Private Sector are going to launch our technical cooperation in a month.” stated Tetsotaro Kon, the director of Middle East Operations in Japan International Cooperation Agency to Reuters.
The deliberation will continue over the next six months to process details such as the currency and Sukuk term. The Japanese Development Agency presents grants and cheap loans in markets such as Iraq and Palestine. Countries with relatively higher income desire to expand and diversify the range of finance sources to include Islamic Finance tools.
“As for the other countries, some current discussions are not yet settled.” said Kon. Japan International Cooperation Agency which is an active source for the bonds denominated in Yen in the Japanese market is granted a AA classification from Standard & Poor's. However, it does not intend to issue its own Sukuk at the present time.
Professor Ezz Al-Din Kanakria, the general secretary of Ministry of Finance, had previously confirmed that the government issuance of Islamic Sukuk shall not compete with the private sector for Islamic Finance.
Kanakria's reassurances are compatible with the opinions of financial experts and analysts. Islamic Sukuk is a tool to help the government to diversify its finance sources and an alternative to the bonds and treasury bills which were limited to the traditional banks.
He stated that the extra liquidity for Islamic Banks is close to 1.4 billion dinars and it is not invested. This contradicts Shari’a Law as the accrual of money for its own sake is forbidden.
The most essential points of the program of financial amendment are the diversification of finance sources to decrease the cost, enhance economic growth and issue Islamic Sukuk. He clearly explained the law of issuing Islamic Sukuk: “Their issuance is related to the aims of financing productive projects which work on increasing local production,
decreasing unemployment and enhancing growth.”
Kanakria revealed that the ministry has formed a technical committee for studying the productive projects to be financed through the first issuance of Sukuk during the first half of this year with value of 200 million dinars utilizing the ljara finance model.
“This is a new experience for the Jordanian economy. We will work on evaluating the first issuance and enabling individuals to participate in the purchase and sale of the issuance.” declared Kanakria. In the first stage, the issuance will be available to the Islamic and traditional banks in Jordan. Then, it is expected to be extended to other countries.
An accountable governmental source clarified that the issuance is going to be for two years. The Ijara price will match with the Central Bank amendments recently applied to the tools of cash policy. It is going to be much less than the interest applied to existing bonds. Reuters