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The Islamic Economics Global Department- for English and French Reading In this section we will put a news, research and studies are useful and diverse.

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قديم 01-06-2013, 12:04 PM
nafez alhersh nafez alhersh غير متصل
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تاريخ التسجيل: Mar 2009
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افتراضي Sukuk issues and advancement in global markets

This Article published in IFN Volume 9 Issue 50 dated the 19th December 2012 on page 22
Sukuk issues have witnessed much popularity over the past ten years specifically when Islamic banking activities have grown due to increasing demand for Islamic products. NAFITH AL-HERSH NAZZAL discusses the different factors which affect Sukuk issuance processes.

Experts estimate huge demand for Sukuk specifically in GCC countries & far east (Malaysia ). The GCC attracts strong inflows which have reached trillions of dollars in the shape of cash surplus or as funds and portfolios. Gulf countries such as Kuwait, Qatar, Saudi Arabia are raising funds for different reasons including expansion and infrastructure. With the expectations of a low interest rate policy, we expect fixed income assets (Sukuk) to continue in popularity.

We can say that there are a lot of Sukuk determinants in the GCC financial markets. The Shariah structure of Sukuk does not mean Sukuk are 100% capital guaranteed or safer compared to conventional bonds. Like bonds, Sukuk are affected by the same risk factors such as interest rate risk due to the fact that no global market index exists for Islamic products, although there are some efforts in this respect. That makes Sukuk returns linked with libor rates. The direction of regional bonds and Sukuk, for the most part, follow US bonds as Gulf countries' currencies are pegged to the US dollar.
The second factor is the credit quality of issuers. If the Sukuk are issued by a government or sovereign, their credit rating will be better than if issued by a corporate company.
In addition political risk can also affect the region. The after-effects of the Arab Spring have not only created the potential for political instability, but also put a damper on business in the region. On other hand, other experts have revealed the Arab Spring to be a motive for potential opportunities in future.

Another factor investors should look at is the real rate of return. The higher the risk, the higher the return. For example the recent Abu Dhabi Islamic bank Sukuk (ADIB Tier 1 Sukuk) raised US$1 billion at a high rate 6.375% as a Mudarabah structure (meaning high risk). In contrast the IDB Global Sukuk (2017) (Tranche 1) issue of US$800 million had a rate of return of just 1.357 % as it was a Wakalah structure (low risk ). Other factors that play an important role in risk management decisions include uncertainty over the level of protection for investors.In Sukuk development by country, Turkey sold its first sovereign Sukuk in the international markets, raising US$1.5 billion, marking a long-awaited entry into the Islamic finance capital markets and setting the benchmark for more corporate Sukuk out of the republic.

September witnessed issuance of around US$11.7 billion compared to US$6 billion last year with an increase to 95%. By October 2012 Malaysia had the largest market share of Sukuk by country (70%) , Qatar came second with 13.1%, then Turkey with 8.1%, Saudia Arabia with 4.5%, Indonesia with 1.4% and finally other countries such as Bahrain.
Malaysia continues to dominate the Sukuk market and stays upbeat in terms of regulatory initiatives to support the growth of the Islamic finance industry; the newest initiative being the introduction of the Agro Sukuk — which would help garner capital to finance companies in the agriculture industry.

Thomson Reuters announced the launch of the Thomson Reuters Global Sukuk Index, an independent and transparent benchmark for investors seeking exposure to Shariah compliant fixed-income investments, to be used to monitor the performance of the Sukuk market.
Libya, Tunisia, Algeria and Morocco have all expressed their willingness to sell Sukuk following similar announcements from Egypt. Oman's Islamic banking law could encourage Sukuk issuance in the sultanate as well as the other six GCC states.
Qatar's QIB, Turkey's Bank Asya, Saudi Arabia's Sadara and Saudi Hollandi and the Indonesian government, are but a few names expected to sell Sukuk in the fourth quarter of 2012. Countries from North Africa are also expected to join the club of issuers. This might have to wait till 2013 until the regulatory framework is in place, however.


Islamic finance has been receiving strong support from the Jordanian government, despite being a small part of the Jordanian financial system. The support from the government was demonstrated when a committee was formed in 2010 to study legislative issues relating to the issuance of Sukuk and other Islamic financial products and services and in 2011 a draft law was submitted. The proposed law was to enable the issuance of Sukuk under various Islamic principles such as Ijarah and Murabahah as well as other mortgage and equity type of transactions which will benefit the retail and wholesale market.
According to Sukuk law prepared in October 2012, Sukuk shall be tradable at the stock exchange. It is required by the state law that the owner of the Sukuk shall have all rights, obligations and actions as decided by the Shariah concept. The law has also provided a number of forms which can be used for Sukuk issuances such as leasing, Mudarabah, Murabahah, Musharakah, Istisnah and any other contract the commission approves. A successful practical case was the issuance of the seven-year AlRajhi Cement Sukuk Ijarah in the amount of JOD85 million (US$120 million).
In order to encourage the growth of Sukuk market in Jordan, exemptions are given to the special vehicle companies that are responsible in issuing Sukuk. Special efforts were made affect Sukuk rules and laws by all Jordanian professionals
Investors are encouraged to maintain a well-diversified portfolio and always look at the risk before taking any investment decision. The investment decision will be critical as the investor become the risk-taker during this highly changeable environment in both political and economical integration.

Nafith ALHersh Nazzal is an Islamic banking specialist, certified financial and investment advisor and statistical analyst (MBA , ACI Dealing & NLP) in Jordan. He can be contacted at nafez1974@yahoo.com.
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