Good prospects for global sukuk this year: Expert

January 10, 2011 - 9:16:22 pm


by Nasser Al Harthy

DOHA: There are good prospects for global Sukuk issuance this year, although it will not reach the 2007 pre-crisis levels, says Deloitte’s Global Islamic Finance Leader.

“The Sukuk was down on 2007 pre-crisis but has started coming back last year. I thing we will see an increase in Sukuk issuance this year. I don’t expect it to reach the 2007 pre crisis levels this year but possibly in 2012,” Daud Vicary Abdullah told reporters here yesterday.

He said interestingly, 50 percent of global Sukuk last year was issued through Malaysia with 25 percent coming from one bank both in terms of number and volume, the Malaysia Commerce International Merchant Bankers Berhad (CIMB), Malaysia’s second largest financial service provider.

According to Kuwait Finance House (KFH) Research’s latest report on Islamic Sukuk market, the global total Sukuk issuance increased to $ 27.9bn in the first nine months of 2010, 62.3 percent higher than the $ 17.2bn raised in the same period the previous year.  

The KFH report said the Sukuk market in 2011 would be driven by the recovery in the global economic activities, flexible monetary policies and sovereign fund-raising efforts to support economic growth as well as the revival of private sector projects.

More sovereign issuers are anticipated to tap the Sukuk market this year as governments will continue to raise funds to support economic growth, says the report.

Abdullah also noted that an increasing role in general for Islamic project financing is being seen. But the biggest challenge in driving that financing is tenor, he said. “You don’t see too many Islamic finance instruments going beyond 10 years and for some of these projects there are longer terms. We need to actually have more confidence in terms of our construct and also in terms of banks offering longer tenor,” he said.

He added that this would have a knock off effect for the growth of Islamic finance, since this will result in Takaful and re-Taful players coming in into the capital market, particularly family-Takaful organisations which are looking at long term exposure on their balance sheet and matching it off in terms of cash flow and assets.

The Peninsula