Islamic finance ideal for agricultural, micro and rural financing

LAHORE, Aug. 10 (MNA) – Islamic Finance provides an ideal mechanism to facilitate agricultural, irrigation, livestock, micro and rural financing products to boost the green economy.

Muhammad Zubair Mughal, the Chief Executive Officer, Al-Huda Center of Islamic Banking and Economics (CIBE) addressed the international conference Best Practices in Rural and Agricultural Finance jointly organized by African Rural and Agricultural Credit Association (AFRACA) in partnership with the Rwanda Development Bank (BRD), the Ministry of Agriculture, and IFAD in Kigali, the capital of Rwanda last week and was attended more than 300 delegates of 40 countries: “It not only provides a sustainable solution but creates the positive economic impact in lives of the farmers and rural communities,” said Mr. Mughal.

Mughal stated that the impact of Islamic financial products was much higher than any other financial products due to its uniqueness of asset-based financing and other features, features which is averse to diversion of cash fund for other purposes; “Islamic financial  products can be utilized in many fields for the development of agricultural, rural and micro financing in buying of seed, fertilizer, harvesting and planting equipment, agricultural  inputs, tractor, pesticides, farming goods, solar tube-wells, etc., while Salam is ideal product for agricultural financing, through which a farmer can fulfill all the financial needs for whole crop circle, e.g. liquidity, seed, pesticide, fertilizer, harvesting, irrigation, and market linkages,” said he.

“Istisna can be used for small manufacturing business, dairy or agricultural production, construction of warehouses and cold storages, rural entrepreneur development, while Ijara is good for leasing of tractors, agricultural equipment, threshers, tube wells, small production unit lease, sugarcane planter, rice planter, harvesting vehicles, etc. Meanwhile, farmer can utilize musharaka, mudarabaand diminishing musharaka for rural housing, forest development, agricultural inputs, farming, sprinkler/drip/solar pumps, tube wells, microenterprise and SME setup, Agricultural Joint venture projects, Dairy and livestock development, etc.,” he detailed.

“The Islamic finance has specialized financial solutions for each segment of rural poverty, e.g. for extreme poor; zakat, sadqa, and fitr are available as grant-based financial product, for poor or upper lower class.  

“Irrigation financing is a big challenge for the development of agriculture, and we can observe that only few banks and financial institutions have specialized products to cater the financial needs for  irrigation financing;  but we can understand that Islamic finance again as a step forward to address this issue,” he told the conference.

he concluded that Islamic Financial products were ideal for financial inclusion for those segments of society who are averse to interest-based financial products due to religious reasons; “we have to promote Islamic financial products as system, which can be benefited by Muslim and non-Muslim equally but for Muslim,  there is an extra benefit that it is according to their religious believes but for Non-Muslims, it is an ideal solution of Banking, Finance and Business for prosperity and development,” he added.

Al-Huda Center of Islamic Banking and Islamic Economics (CIBE) is a well-recognized name in Islamic banking and finance industry for research, advisory and capacity building over 11 years. The prime goal has always been to adhere to the commitments and provide state-of-the-art advisory consultancy and educational services through various well-recognized modes vis-à-vis Islamic financial product development, sharia advisory, trainings workshops, and Islamic microfinance and takaful consultancies, etc.

(Mehr News Agency / 10 August 2016)

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Ivory Coast returns to sovereign sukuk market, after Togo debut

Ivory Coast plans to complete a sale of 150 billion CFA francs ($263 million) worth of Islamic bonds later this month, the transaction's lead arranger said on Tuesday, following Togo's debut sale of sovereign sukuk launched last month.

The two West African nations join Senegal in tapping the market for sukuk, helping expand the use of Islamic financing options outside of the industry's core centres in the Middle East and Southeast Asia. 

The Ivory Coast will sell the 7-year sukuk using a lease-based contract known as ijara, with the subscription period closing on Aug. 31, according to the Saudi-based Islamic Corporation for the Development of the Private Sector (ICD). 

This would represent the second phase of a 300 billion CFA franc sukuk programme set up last year by the world's top cocoa producer and French-speaking West Africa's economic powerhouse. Togo plans to complete the sale of its sukuk later this week, aiming to raise 150 billion CFA franc with a 10-year maturity and a 6.5 percent yield. 

The ICD is the lead arranger for both the Togo and Ivory Coast sukuk. These back-to-back deals could boost the ICD's efforts to expand its activities across Africa, where the development of Islamic finance has lagged despite being home to a quarter of the world's Muslims. Nigeria and Kenya are also planning to issue sovereign sukuk of their own, in part to help fund large infrastructure needs, although the timing for such deals has yet to be determined.

(Standard Digital / 09 August 2016)

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Why Southeast Asia Is the Undisputed King of Islamic Finance

The annual World Islamic Economic Forum is always intended to be a global discussion. Nonetheless, this year's forum, which ended on Thursday in Jakarta, highlighted one region in particular as a heavyweight in the global Islamic economy: Southeast Asia. That 63 percent of the forum's 4,200 participants from 73 countries were Indonesian, and 24 percent Malaysian, was not just a function of geographic proximity and ease of travel. Even when it is hosted elsewhere, the forum reinforces the countries' dominance in the burgeoning world of Islamic finance.

The global Islamic economy is an amorphous concept comprising all manner of trade and financial services permitted by Islamic law, such as sukuk, Islamic bonds that avoid interest. In a sense, the Islamic economy consists of any transaction in which money is exchanged in accordance with Sharia principles, and the rules are never quite set in stone. According to simple directives laid out in Islamic verses and discussed over the centuries, Islamic economic law is constantly evolving. In addition, the varying interpretations of Islamic law have produced differing ideas of what constitutes Islamic fashion, food, travel, goods and finance from country to country. The Islamic economy is rife with competition to establish an accepted standard, for instance with a globally accepted halal certification label.

As interest in the sector grows among Muslim countries and their populations, the global Islamic economy is proving to be quite lucrative. In particular, Islamic finance is gaining traction worldwide, offering financial products and services comparable to those available in conventional markets but tailored to Islamic tenets. Rather than integrating with the global financial system, Islamic finance complements it, providing an extra tranche of financial services activity that appeals to Muslims. Estimated at $2 trillion — just 1 to 2 percent of the global financial system — Islamic finance is also much smaller than its conventional counterpart. But it is growing quickly.

Malaysia is the sector's undisputed leader. The country has crafted a dual banking system in which its conventional financial sector runs alongside an Islamic one, and it is responsible for 52 percent of the global Islamic bonds that are outstanding today. Malaysia is also the only country with a healthy domestic Islamic bond market denominated in a local currency. Beyond bonds, roughly 75 percent of the securities listed on Bursa Malaysia, Kuala Lumpur's stock exchange, are Sharia-compliant.

Several factors have contributed to the country's success in Islamic finance, but none more so than the support of its government. In the 1980s, then-Prime Minister Mahathir Mohamad oversaw the formalization of the sector, which he envisioned as a way to bring ethnic Malays into the formal economy then dominated by ethnic Chinese. In the years since, Kuala Lumpur has established a strong, centralized regulatory structure under its central bank, setting it apart from countries trying to catch up to Malaysia, including those in the Gulf Cooperation Council (GCC), which have less centralized banking systems. This has enabled Malaysia's Islamic finance sector to stay innovative and to defy other countries' attempts to surpass it, even as lower oil prices and an overall economic slowdown in Asia have hampered it in the past few years.

Then there is Indonesia, the world's most populous Muslim country, the Islamic world's largest economy, and the host of this year's World Islamic Economic Forum. Indonesia is a burgeoning force in the world of Islamic finance. At the forum, the country unveiled plans — including a banking agreement with Malaysia and a memorandum of understanding with Bursa Malaysia to jointly develop their Islamic capital markets — to further cultivate its Islamic financial sector. Though Jakarta hopes to develop its own Islamic finance industry, it is no surprise that it is taking cues from Malaysia. At the same time, Malaysia is eager to expand its presence in Indonesia, given Jakarta's potential.

Outside Southeast Asia, Islamic finance has taken off in the GCC, as well as in conventional finance capitals such as London, Singapore and Hong Kong, where more and more banks offer Islamic financial products. As part of its effort to increase its share of the global Islamic economy, the GCC began holding its own global summit several years ago. Still, the numbers don't lie. Southeast Asia is well ahead when it comes to Islamic finance, a truth that this year's World Islamic Economic Forum only reaffirmed.

(Stratfor / 05 August 2016)

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GCC bonds & Sukuk market gets a new life in Q2

The GCC bond and Sukuk market demonstrated improved activity in Q2 2016 especially on the sovereign front as the market witnessed prominent issuances from regional governments demonstrating appetite for debt in the region still exists. However, the lower oil prices, which has contributed to increased budget deficits and slower growth, has led to same credit deterioration such as the recent downgrade by rating agencies of Saudi Arabia, Oman and Bahrain.

Bond Issuances

Q2 2016 marked one of the largest bond issuances in the region by the Government of Qatar amounting to US$9 billion, followed by the Government of Abu Dhabi amounting to US$5 billion, its first in 7 years. The Government of Qatar’s US$9 billion bond was a US$3.5 billion issuance with an issue price of 98.924% of the principal amount, a US$3.5 billion issuance with an issue price of 98.963% of the amount, and US$2 billion issuance with an issue price of 97.606% of the principal amount. The Government of Abu Dhabi issued US$5 billion of bonds with a US$2.5 billion issuance with an issue price of 99.753% of the aggregate nominal amount and a US$2.5 billion with an issue price of 99.562% of the aggregate nominal amount.

In corporate bonds issuances, Gulf International Bank BSC-Riyadh issued its US$533 million 5 year bond with a coupon rate of 3.4%, while Abu Dhabi National Energy Co PJSC (TAQA) issued a US$1 billion bond, spread into two senior notes tranches of US$500 million each, due in 5 and 10 years respectively.

Sukuk Issuances

Bank Al-Jazirasuccessfully issued a US$533 million 10 year Sukuk, with an option for the lender to redeem the Sukuk after five years.

On the sovereign front, the Central Bank of Bahrain was an active contributor in the region issuing three Sukuk Al Salam each worth US$114 million (BD 43 million) and three short term leasing type Sukuk each worth US$69 million (BD 26 million).

Steven Drake, Head of PwC’s Capital Markets and Accounting Advisory Services team in the Middle East region said: “Bond and Sukuk activity improved compared to the previous quarter of this year, with notable issuances from regional governments such as of Qatar and Abu Dhabi and this is expected to pick up further in the next quarter as the Kingdom prepares its first ever proposed USD 10 billion bond issuance. However, challenging market conditions and uncertainty amongst investors and issuers may impact activity for the remainder of 2016 and a surge in borrowing cost could weigh on market appetite.

(Wealth Monitor / 03 August 2016)

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Mismanagement, lack of security unfold in Zakat distribution

Distribution of clothes for Zakat ahead of Eid-ul-Fitr is going on in the country amid mismanagement and lack of security.

Some 15 to 20 poor women and men wearing shabby clothes were seen trying to enter into a shop through its half-opened door at East Tejturi Bazar in Dhaka’s Farmgate area to collect Zakat clothes.

The distributors did not probably bother to maintain any system to ensure security of these poor people, including also some old people, who were trying to get their much expected Zakat by pushing one another.

Men were not giving any space to the women first fearing to be deprived of the ‘gift’ distributed by a private company probably.  

On being asked about the security of these people, an employee of the company told The Daily Star that they didn’t have any other option except keeping the door half-opened.Some people have been seen very pleased after getting the ‘gift’ of Zakat clothes while others were seen fighting to get theirs.

However, he failed to reply what would happen if any life is lost in any untoward incident.

It is definitely a good gesture that any individual or private institution wants to help the poor. But none can ignore the security concern for these underprivileged people.

(The Star Online Report / 04 July 2016)

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Malaysia: Sukuk issuance to remain muted 6 to 18 months, says S&P

KUALA LUMPUR:  S&P Global Ratings expects Sukuk issuance will remain muted over the next six to 18 months, with total issuance of US$50bil to US$55bil in 2016.

It said on Monday that Sukuk issuance in the second half of 2016 will continue to depend on monetary policy developments and volatility in developed markets and also policy actions of sovereigns in core markets – namely Gulf Cooperation Council countries and Malaysia – in response to lower oil prices.

The ratings agency said explained that plummeting oil prices have not boosted sukuk issuance despite some commentators' expectations low oil prices would spur governments in oil-exporting countries to tap the Sukuk market for funding, and maintain current and capital spending.

Instead, total issuance actually dropped in 2015 compared with the previous year, it explained in its report entitled, “Why low oil prices aren't sending Sukuk issuance skyward”.

 

S&P Global Ratings Global head of Islamic finance Mohamed Damak said: “The complexity of Sukuk issuance, uncertainty regarding US Federal Reserves' policy revisions, and the government's efforts to reduce financing needs in response to weak oil prices have and will continue to weigh on Sukuk market activity.”

He said while governments affected by the price drop are looking to spending cuts, taxation, and the privatisation of state companies to adjust to the new reality, their financing needs remain significant.

"Part of these needs will be met by conventional debt markets and, to a much lesser extent, the Sukuk market, with the complexity of Sukuk issuance remaining a key deterrent to tapping the market, in our view," Damak said. 

At the same time, he believes the European Central Bank's quantitative easing programme and the entrance of a few new issuers to the Sukuk market will continue to support issuance volumes.

(The Star Online / 04 July 2016)

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China Turns To Islamic Finance To Drive Economic Initiative

In 2013, Chinese President Xi Jinping unveiled the Silk Road Economic Belt and the 21st-century Maritime Silk Road initiative now known as One Belt One Road, (OBOR) in order to actively develop connectivity and economic cooperation with countries mainly between China and Eurasia. The initiative aims to build a community of shared interests, destiny and responsibility with mutual political trust, economic integration and cultural inclusiveness. Initiating investment and developing economic trade communications with Islamic countries is one of important components of the OBOR strategy and this is detailed in the "Vision and Actions on jointly building the Silk Road Economic Belt and 21st-century Maritime Silk Road" published by the government on 28th March, 2015 ("Vision and Actions").

Compared to traditional financial products, Islamic finance has developed significantly due to its high flexibility of business, low risk, low debt requirements and the need to use real estate as collateral. In 2014, Sharia compliant financial institutions represented approximately 1% of total world assets, at around US$2 trillion. The latest study shows that, by 2020, the value of the global Islamic financial market will rise to US$3.25 trillion.

Financial integration is one of the key areas of cooperation set out in the Vision and Actions. The Chinese government emphasises that financial integration is a crucial element in the construction of the OBOR and has decided to speed up the incorporation and operation of the Silk Road fund. Proposals to strengthen the practical cooperation of China-ASEAN Interbank Association and to carry out multilateral financial cooperation in the form of syndicated loans and bank credit has also been completed. Qualified Chinese financial institutions and companies are encouraged to issue bonds in both Renminbi and foreign currencies outside China, and use the funds raised to invest in countries along the OBOR.

As background to the strategic execution of the OBOR, State Owned and private enterprises in China are also trying to make use of Islamic finance, as against traditional finance, to serve their own overseas development. Chinese banks are strengthening their cooperation with Muslim countries, and are busy developing their overseas business and outbound investment. Islamic finance is rapidly becoming an established channel for China to enlarge its overseas economic influence.

Issuing Islamic securities is an important mechanism for Chinese enterprises to raise funds and expand in Muslim countries. Although Islamic finance does not offer interest, there are still opportunities to ensure financial benefits and remuneration primarily through issuing Islamic securities (Sukuk). Investors who purchase such securities would not obtain interest as an income; however, they could be given remuneration in terms of investment gains.

It has been reported that a High Speed Rail project in China is considering using Islamic securities to raise a fund for almost 30 billion Chinese yuan (US$4.7billion). If successful, this would be one of the largest Islamic securities fund ever raised. 

In addition, Hainan Airlines Group is planning to raise US$150 million for ship purchasing, and this could be the first such deal to be approved by the Islamic finance authorities. Hainan is also planning to raise offshore Islamic securities. Some large banks in China have been raising their influence in the Gulf countries indeed, three of these banks issued traditional securities on NASDAQ Dubai, while others are in the planning stages. 

Country Garden, the Chinese mainland real estate agents announced their intention in October 2015 to issue Islamic medium-term notes with a nominal value of MYR1.5 billion (US$340million) through their wholly-owned subsidiary in Malaysia. This is the first case of the Chinese real estate sector raising funds offshore through Islamic finance mechanisms.

Apart from issuing Islamic securities, local Chinese government authorities and enterprises who need to raise funds will do so in Islamic countries with substantial oil capital, fundamental infrastructure and energy projects such as coal, chemicals, wind power and solar generation. These are in compliance with the investment preference of the Islamic finance system on projects with long term, low risk, steady income and the "Go Abroad" strategy of Islamic countries as part of their financial globalization. This has highlighted efforts through the promotion of local development of China to absorb foreign investment and maintain local stability.

However, we must also note that due to the characteristic of Islamic finance, and how it differs from traditional finance, there are numerous difficulties and challenges Chinese enterprises would have to face when using this structure. Unfamiliarity with the Islamic finance process is the prime issue for Chinese enterprises compared with traditional finance. Islamic finance, as a special financing system, has to follow the teachings of Islam, and as such certain areas are forbidden including the payment of interest, speculation, investments in alcohol and gambling, and both risk and interest share. In order to fully use Islamic finance, Chinese enterprises must learn the fundamental system and regulation that govern this financing mechanism and understand it business practices

Constraints on current policies and systems also have an impact on China's development of Islamic finance. In 2009, the Bank of Ningxia was approved as a trial centre for Islamic banking business, and is the first bank in China to do so. There was a further suggestion that Ningxia could be developed as a pilot region of financial cooperation between China and the Gulf states, becoming the Islamic finance centre of China, like Dubai in the Gulf and Kuala Lumpur in Malaysia, however, this has not yet been finalised by the government. One likely reason for this is the unique nature of Islamic finance which makes it very difficult to merge into the current financing management system in China. Under the OBOR, China is considering using Islamic finance as a breakthrough to initiate extensive business communication and project cooperation in many areas with Middle East and South East Asian countries. It is considering opening outbound Islamic financing institutions, and participating in the investment in these regions or developing enterprises which operate through Islamic financing products. This is not only safer for funds and better for comprehensive income, but also improves the long term benefits.

Following the initiation of the OBOR it is now developing the practical stages, and there will be a significant increase in the use of Islamic financing tools and investment in major construction projects. If the Chinese government could enhance its cooperation with Muslim countries through Islamic finance, that it will significantly progress the development of the Silk Road project.

About Mr Du, Baozhong

Mr. Du is a senior legal counsel in the Beijing office of Yingke Law Firm. After graduating from China University of Political Science and Law with a master degree, he had been working for the Department of Treaty and Law in China's Ministry of Commerce for 13 years, and was engaged in legal consulting work in a large-scaled state-owned enterprise. Mr. Du, as the delegation member of Chinese Government, has participated in the working group meetings held by the Commission on International Trade of the United Nations several times, and addressed as the Chinese representative on meetings of OECD and APEC. He is specialized in foreign direct investment, outbound investment, international trade, private equity, venture capital, mergers and acquisitions, foreign-related arbitration, labor law, etc.

About Ms. Li, Xuan

Ms. Li is working as a trainee in the International Legal Affairs Department of the Beijing office of Yingke Law Firm, and also acts as the coordinator of Yingke Brussels Office. After graduating from Dalian Maritime University with a bachelor degree in Maritime Law, and a LLM Maritime Law degree at Bentham House, Faculty of Laws, University College London. She used to work in-house in an international shipping company, responsible for marine insurance and admiralty laws. While working in the UK, she served as the assistant analyst for hedge funds at Thomson Reuters London. Her specialisations are maritime law, international trade law and international arbitration.

(Zawya / 09 June 2016)

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Karama, Takaful, and social justice

Last week I had the pleasure of participating in the conference organised by the Ministry of Social Solidarity to mark one year on the beginning of the Karama and Takaful social programs.

Both programs provide direct cash assistance to the poor, Karama to elderly and disabled people who cannot work and Takaful to the poorest families.

During the meeting, the ministry announced that the two programs now cover three million people in the ten neediest governorates, most of them in Upper Egypt, and work was underway to extend the programs to other eligible beneficiaries in the remaining governorates.

I have been a zealous supporter of these programs since the idea was first proposed in 2008 under then Minister of Social Solidarity Ali El-Meseilhi, who also championed it, but political conditions were then unfavorable and inadequate attention was paid to social issues.

The idea rose and fell in the priorities of successive governments and parliaments, until the government of Ibrahim Mehleb finally made it a reality. Having actually implemented the programs over the last two years, the Ministry of Social Solidarity deserves fulsome praise, since implementation is ultimately the biggest challenge and the true measure of success.

The programs are significant because they diverge from conventional pension schemes and proceed from a fundamentally different understanding: that social justice can be realised by providing a comprehensive umbrella of social protection based on redrawing the poverty map in Egypt, examining wealth and income data, building a comprehensive database of all cash, in-kind, and service support received by citizens, and then using this to draft a plan to deliver subsidies to those who need them and limit waste and corruption in social spending.

This new approach distinguishes the Takaful and Karama programs from their predecessors, making for a more targeted, fairer provision of social protection and giving future decision makers an instrument for the application of other social policies.

There are two important dimensions of this type of targeted program. First, direct cash support is not necessarily an alternative to the in-kind subsidies provided for years in Egypt. It is instead a complementary mechanism allowing cash assistance to go where it is needed.

Second, the principle of targeted subsidies for the poor, whether cash or in-kind, means accepting the periodic review and assessment of recipients’ circumstances, and excluding them if their conditions improve or the grounds for their eligibility no longer apply.

Otherwise, the protection umbrella would continue to expand, ultimately again bringing in people who need no support.

The shift from comprehensive support that makes no distinction between rich and poor, needy and non-needy, lies at the core of a much-needed change. The sad truth is that over the last two decades, the exponential increase in social spending to cover all forms of comprehensive subsidies—which now account for 25 percent of public spending—has not been matched by reductions in the poverty rate. On the contrary, poverty has continued to grow.

This trend cannot be corrected without moving from the concept of comprehensive social protection to targeted spending for poverty and the poor.

But the Karama and Takaful programs are a significant beginning, not the end of the road. Several challenges have yet to be addressed.

First, the programs require ongoing follow-up, revision, and review to remedy implementation problems. In addition, these programs cannot be funded in perpetuity by loans and foreign grants.

The state must devote adequate resources from the public budget to ensure their sustainability without being at the mercy of shifts in political tides and international relations—the programs are a fundamental right, not a nonessential handout.

Moreover, in the longer term, we should not stop with these two programs. A social protection network must be based on sound, standardised data on all pension and support programs, up-to-date, accurate poverty maps, integrated social spending, and the provision of jobs.

I’m pleased that the Ministry of Social Solidarity declared its intention to incrementally build on this system, including by reviving the school meal project—a major pillar of the program that requires a more in-depth look.

However, the greatest challenge is for the state to recognise the importance of popular and community oversight of social protection programs. No matter how hard-working and sincere officials are and regardless of the many regulatory systems, records, and instruments they devise, these programs will inevitably stumble and be corrupted and diverted from their goal if they are not subject to the oversight of parliament, civil society, parties, and associations that represent stakeholders.

Community oversight does not interfere with or obstruct the work of official agencies; it is a necessary, positive contribution and a realisation of every citizen’s right to know how the state is spending its resources and whether it is meeting its declared objectives.

(Ahram Onine / 11 Jun 2016)

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DP World Raises $1.2 Billion From Sukuk to Fund Bond Buyback

DP World Ltd., the Dubai-owned company that operates ports from China to South America, raised $1.2 billion from the sale of Islamic bonds and said a tender offer to buy back securities received 48 percent more bids than the target.

The company sold a seven-year sukuk that will be priced to yield 237.5 basis points, or 2.375 percentage points, over the benchmark midswap rate, according to two people familiar with the deal, who asked not to be identified because the information is not public yet. The issue received more than $2.5 billion in bids, they said.

Money raised from the sale was meant to fund an offer to buy up to $750 million of DP World’s existing 2017 sukuk and for general corporate purposes, the company said earlier this month. The tender offer received $1.113 billion of valid certificates at its close on May 23 and DP World said it may buy all of them if it raises enough cash from the issue.

The offer for the 2017 securities was to pay $10,555 for every $10,000 of principal.

Bond sales from the six-nation Gulf Cooperation Council, which includes the two biggest Arab economies of Saudi Arabia and the United Arab Emirates, are accelerating as governments and companies seek funds following oil’s decline in the past two years. Offerings from the region have risen 28 percent to $16.7 billion, while Qatar’s government, Abu Dhabi’s Etihad Airways PJSC and its partners also plan to sell bonds this week. Dubai-based Noor Bank PJSC also raised $500 million from a perpetual sukuk today.

Citigroup Inc., Deutsche Bank AG, Dubai Islamic Bank PJSC, HSBC Holdings Plc, Barclays Plc, Emirates NBD Capital PJSC, First Gulf Bank PJSC, JPMorgan Chase & Co., National Bank of Abu Dhabi PJSC and Societe Generale SA are helping arrange DP World’s issue. Noor Bank, Samba Financial Group and Union National Bank PJSC have also been appointed co-arrangers.

(Bloomberg / 24 May 2016)

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Sukuk plays important infrastructure development role

Sukuk has played a significant role in promoting resilient infrastructure and sustainable economic development, and therefore should be boosted in the future, Finance Minister Bambang Brodjonegoro has said.

In his opening remarks at a seminar during the Islamic Development Bank ( IDB ) Group annual meeting at the Jakarta Convention Center ( JCC ) on Monday, Bambang said it was important for Islamic finance to contribute to the sustainable development goals ( SDGs ).

"Sukuk naturally controls the needs of financing, which are based on underlying assets. It also provides a protective mechanism and natural hedging, making the industry more sustainable," Bambang said.

He further said that sukuk had played a significant role in infrastructure financing. Aside from issuing sukuk for general financing, the government has issued sukuk to finance infrastructure projects, such as railways and toll roads.

"This kind of project financing assures the effectiveness of sukuk," he went on.

Bank Indonesia ( BI ) Governor Agus Martowardojo added that sukuk had been growing rapidly in the last few years. However, Islamic financing instruments must be developed.

Indonesia has been active in sukuk markets since it laid the groundwork for sukuk issuance in 2007. This year, Rp 110.9 trillion ( US$ 8.33 billion ) in sukuk was issued in the domestic and international markets, according to ministry data.

Sukuk made up 15 percent of total outstanding government securities as of April 29. It comprises six instruments across a wide range of tenors, sizes, coupons and investors. 

(The Jakarta Post / 16 May 2016)

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