IslamicFinance.de

Dubai-based developer Nakheel confirmed that it made a profit payment of Dhs 220m on its trade creditor sukuk. The company said that it has instructed Deutsche Bank, the registrar and paying agent, to make the profit payment to all sukuk holders on the due date of December 15, 2015 against the sukuk issued amount of Dhs 4.4bn to date. Nakheel’s last profit payment on its Dhs 4.4bn sukuk was issued in June this year. The company posted a net profit of Dhs 3.61bn in the first nine months of 2015, up 39 per cent compared to Dhs 2.6bn in the same period last year. The developer has paid off debts worth Dhs 7.9bn and is continuing to make payments on its Dhs 4.4bn sukuk, which is due to mature in August 2016.

The Thomson Reuters Global Sukuk Index is at 117.04371 points, down from 117.25342 at the end of last month but up from 115.79726 at the end of last year. The Thomson Reuters Investment Grade Sukuk Index is at 115.22131 points against 115.35741 at end-November and 113.69014 at end-2014. Some of the sukuk in the pipeline are: Qatar's Barwa Bank has listed a $2 billion Islamic bond programme on the Irish Stock Exchange. A unit of Malaysia's Ahmad Zaki Resources signed a guaranteed sukuk murabaha facility agreement with Bank Pembangunan Malaysia and Maybank Investment Bank for a guaranteed Islamic medium-term note facility of up to 1 billion ringgit ($238 million). Malaysia's Scientex said in early December that a unit had resistered with the Securities Commission a 15-year sukuk murabaha programme with a value of up to 500 million ringgit.

Nigerian financial operators have identified Sukuk Islamic bond as a major tool that can be used in closing the country’s gap on infrastructural deficit. Raising from the two days 2nd international conference on Islamic Finance which opened on the 30th Nov and closed 1st of Dec 2015 in Abuja, financial experts from the country’s public and private sector having exhaustively deliberated with their international global counter parts, resolved to urgently turn up the volume on enlightenment campaigns so as to create the required awareness to investors and operators on the potentials of Sukuk.

Qatar's Barwa Bank has listed a $2 billion Islamic bonds programme on the Irish Stock Exchange, taking the lender a step closer to tapping the sukuk market for the first time. Rating agencies Moody's and Fitch assigned ratings of A2 and A+ respectively to the sukuk programme. Barwa Bank hasn't specified a timeframe or size for its potential debut deal. Barwa is classified as a systemically important bank, with 53 percent of its share capital owned by the Qatari government through Qatari Holding LLC and other government funds. Barwa's sukuk programme uses an agency-based structure known as wakala. The transaction is being arranged by Citigroup.

Industrial packaging and property-based Scientex Bhd has proposed to set up a Sukuk Murabahah programme to issue up to RM500mil and it will have a tenure of up to 15 years. Its unit Scientex Quatari Sdn Bhd has lodged with the Securities Commission all the required information and relevant documents. The programme would enable Scientex Quatari the flexibility to raise funds via the issuance of Sukuk Murabahah from time to time which can be used to finance or to repay land and property investments. Other plans for the programme are to fund working capital requirements and to refinance existing bank borrowings. RHB Investment Bank Bhd is the principal adviser, lead arranger, lead manager and facility agent for the programme.

Thomson Reuters in partnership with Barwa bank released today the findings of its fourth consecutive Sukuk Perceptions and Forecast study. A buoyant 2014 had sukuk market players optimistic for another robust year but market uncertainty, especially with the drop in oil prices and the expected increase in global interest rates, have dampened activity in the market. The global sukuk market in 2015 welcomed significantly fewer new issuers compared to 2014. Total sukuk issued in the first 9 months of 2015 dropped a drastic 38.6% to $48.8 billion from $79.5 billion for the same period in 2014. The sukuk papers were a lso issued in 12 currencies in first nine months of 2015 compared to 16 over the same period in 2014.

The Directors General of the Infrastructure Concession Regulatory Commission (ICRC) Aminu Diko and Debt Management Office (DMO) Dr. Abraham Nwakwo have said that Nigeria would not be left behind in benefiting from the growing global Sukuk. They gave the assurance on Tuesday in Abuja at the two-day 2015 International Conference on Islamic Finance themed: "Islamic Capital Market: Infrastructure, Sukuk and Asset Management in Africa". Based on a 30-year National Integrated Infrastructure Master plan (NIIMP), Nigeria requires an expenditure of US$ 3.10 trillion in 30 years covering energy, transport, agriculture and water resources, social infrastructure and vital registration and security.

Al Baraka Islamic Bank-Bahrain is interested in purchasing Islamic bonds expected to be issued by the Kuwaiti government before the end of the year, CEO Mohamed Isa Al Mutaweh said. Kuwait's finance ministry said in September that it intends to issue bonds and sukuk before the end of 2015 to finance its public deficit, which is estimated to reach KWD 8 billion (USD 26.3 billion). The CEO said the bank, owned by Al Baraka Group, hopes to achieve growth in assets in line with the expected growth of the global Islamic banking at an annual average of 15-20%. Real estate financing accounts for around 40% of Al Baraka Islamic's portfolio in Bahrain and Al Mutaweh said the housing sector was expected to see strong activity due to rising demand.

Qatar’s Barwa Bank has established a $2bn sukuk issuance platform for the purchase of shariah compliant assets, according to Moody’s.
The rating agency has assigned a provisional rating of A2 to the programme, in line with its rating on the state controlled lender’s foreign currency deposits.
Trust certificates sold from the platform will be issued by a newly created Cayman Islands special purpose vehicle called BBG Sukuk Ltd and will

Product innovation has become imperative for the Islamic finance industry. This is going to be one of the key growth drivers for the industry in the coming years as demand for new products across segments such as Islamic banking, Takaful, sukuk and funds rises thanks to increased understanding and acceptance of Sharia-compliant products.
Islamic banking
Islamic banks are struggling with lower profitability compared to the conventional banks. The estimated 19 % lower profitability of Islamic banks compared to the conventional banks can be primarily attributed to higher expenses and lower average product holding (APH) per customer. Islamic banks have an APH of 2.1 compared to the APH of 4.9 for the conventional banks. Higher profitability can be aimed and achieved by Islamic banks by developing new products, which would provide cross-selling opportunities and higher APH. Islamic banks can also benefit from shedding their existing obsolete systems and embracing technological innovation to bring down costs.
Sukuk

Kazakhstan's parliament has approved legislative amendments to facilitate Islamic finance, paving the way for Central Asia's largest economy to issue its first sovereign sukuk next year, a government official said.
The amendments, which still require the president's signature, would also allow for the conversion of conventional banks into Islamic ones, said Yerlan Baidaulet, an adviser to the Investments and Development Ministry.

«We expect the sovereign sukuk in early spring of next year. Probably in March, it depends on the decision of the Ministry of Finance as it has its own budgetary process», Baidaulet said on the sidelines of an industry conference in Kuwait. The legal amendments to the banking services and securities laws are the latest steps by the majority Muslim state to help develop Islamic finance. A dedicated Islamic banking law is also currently in preparation, Baidaulet said. Lawmakers have also passed a law to establish an offshore centre in the capital Astana, which is partly aimed at attracting Islamic finance business, he added.

The Middle East and North Africa region recorded strong growth in the Sukuk market in the first 10 months of 2015, according to Michele Leung, Director, Fixed Income Indices, S&P Dow Jones Indices.
The market value, as tracked by the S&P MENA Sukuk Index, rose 14 % YTD to 37 billion, compared with the mere 1 % growth in the conventional bond market in the region. The Sukuk market has expanded 37 % since the S&P MENA Sukuk Index’s inception in July 2013. United Arab Emirates is the most active issuing country in the region, and it remains dominant in terms of country exposure at 52 %, followed by Saudi Arabia at 17 %.
Overall, governments have continued to diversify their funding platforms, and the global Sukuk market has witnessed solid support from the lack of primary supply. Looking at the indices’ total return performance, there has been a 1.1 - 1.3 % decline in both Sukuk and bond markets month-to-date. As of Nov 18, 2015, the S&P MENA Sukuk Index rose 1.05 % YTD, while the S&P MENA Bond Index outperformed and gained 1.90 % in the same period.

Five year 150 billion CFA issuance sukuk priced at a profit rate of 5.75%
The Ivory Coast is to become the latest state to issue a Sovereign Sukuk as it today launched its debut five year 150 billion CFA issuance sukuk priced at a profit rate of 5.75%. The addition of the Ivory Coast displays the continued growth of the Islamic finance market into Africa and represents a highlight in quiet year for sukuk issuance’s with total issuance volumes down considerably due to tightening of liquidity in traditional Islamic financial markets of the Gulf and South East Asia.
The sukuk is being arranged by the Islamic Corporation for Private Sector Development (ICD). The ICD signed an agreement in April 2015 for the implementation of a five-year Sukuk programme for 300 billion CFA to be issued in two equal phases of 150 billion CFA each. A road show was held in Saudi Arabia from 14 to 19 November and followed a recent upward revision of the Ivory Coast’s sovereign rating by Moody’s from B1 to Ba3.

Following are major Islamic bond issues in the global pipeline.
The Thomson Reuters Global Sukuk Index is at 117.30055 points, down from 118.24280 at the end of last month but up from 115.79726 at the end of last year. The Thomson Reuters Investment Grade Sukuk Index is at 115.33833 points against 116.64293 at end-October and 113.69014 at end-2014.

SINGAPORE's nascent Islamic finance industry is finding it tough going amid volatile financial markets and depressed oil revenues.
So far this year, there has been only one sukuk, or Islamic bond, deal in a fairly brisk fixed-income market which saw 136 bond deals worth S$17.7 billion sold in the first nine months of 2015 - Malaysia's mortgage lender Cagamas Bhd sold a S$163 million sukuk in September. The lack of a natural pool of Islamic funds in secular Singapore is a major barrier to sukuk launches, according to Clifford Lee, DBS Bank head of fixed income.
"And so you try to sell in other markets which need education (leading to) higher costs; if you're a strong issuer, the conventional bond market is more than ready to meet your needs," explained Mr Lee.
Islamic finance bans interest, products with excessive uncertainty, gambling, short sales and the financing of prohibited activities considered harmful to society. The strongest indicator that it's not smooth sailing for Islamic finance players here came in September when DBS Group Holdings said it will be winding down its Islamic banking unit, which it said has been unable to achieve the necessary economies of scale.

Turkish Islamic bank Albaraka Turk has received initial pricing feedback in the 10 % area for a potential U.S. dollar-denominated sukuk issue which would bolster its supplementary or Tier 2 capital, sources familiar with the matter told Reuters on Thursday.
The lender has received indications of interest totalling over $250 million, including those from joint lead managers, for the ten-year non-call five sukuk, the sources said. A potential deal is expected early next week subject to market conditions, they said.
Albaraka Turk, a unit of Bahrain-based Al Baraka Banking Group, has chosen Barwa Bank, Dubai Islamic Bank, Emirates NBD, Nomura, Noor Bank, Standard Chartered and QInvest to arrange the sukuk issue.

The Islamic Development Bank wants to use Islamic bonds to help finance the reconstruction of countries ravaged by conflict, with the World Bank as a potential joint issuer, the head of the multilateral lender said.
Refugee and reconstruction financing is a priority for the Jeddah-based IDB, which last month launched an initiative with the World Bank and United Nations to help more than 15 million people displaced across the region.
Work is now underway to identify specific projects for the initiative, with a priority on war torn Yemen, which could see the IDB and World Bank as issuers of the sukuk.
"We need to finalize this with the World Bank, but most likely it will be a joint issuance", IDB president Ahmad Mohamed Ali said on the sidelines of an industry conference in Kuwait.
The IDB, which operates to promote economic development in Muslim communities, has 56 member countries including Saudi Arabia, Libya and Iran as its largest shareholders.

It is anticipated that the South African taxation legislation governing the specific elements around Murabaha and Sukuk will be extended to cover listed companies, effective in January.
The government has followed through on their intention of ensuring Islamic financial arrangements accessibility to “other” entities (over and above just sovereign government itself and state-owned entities) to also allow for an alternate additional source to raise capital.
Over the last few years, the government has introduced Islamic compliant financial structures in stages. With the first of such introductions coming through in the Taxation Laws Amendment Act of 2010 – “the Act” that recognised for the first time arrangements like Diminishing Musharaka, Murabaha and Mudaraba as alternates to their conventional counterparts – these amendments were effected to enable banks to offer a Shari’ah compliant product.
In 2011 further amendments to the same act were effected, wherein Sukuk was introduced. However, issuance was limited to the sovereign government. Later on, effective from April 2015, Sukuk issuance was extended to state-owned entities.

It’s simple. No interest on investments but the lender and borrower share the returns.
This form of financing, known as Islamic finance, confronts the lifelong convention in finance of receiving interest on a loan.
The global financial system depends on the founding concept that money itself is a commodity that needs not be invested into an underlying commodity to have value. That said, money can be leveraged to create greater returns through the application of derivatives. Critics artfully label these leveraged and speculative winning, or more euphemistically, returns making money out of nothing. This can ultimately have catastrophic results.
Islamic finance theoretically eliminates the speculative nature of conventional finance. In prohibiting the “unjustified enrichment” and “speculation or excessive risk,” Islamic scholars pushed three principles:
Prohibition of interest.
Profit and loss sharing (riba).
No speculation (gharar).

Kazakhstan's parliament has approved legislative amendments to facilitate Islamic finance, paving the way for Central Asia's largest economy to issue its first sovereign sukuk next year, a government official said.
The amendments, which still require the president's signature, would also allow for the conversion of conventional banks into Islamic ones, said Yerlan Baidaulet, an adviser to the Investments and Development Ministry.
"We expect the sovereign sukuk in early spring of next year. Probably in March, it depends on the decision of the Ministry of Finance as it has its own budgetary process," Baidaulet said on the sidelines of an industry conference in Kuwait.
The legal amendments to the banking services and securities laws are the latest steps by the majority Muslim state to help develop Islamic finance. A dedicated Islamic banking law is also currently in preparation, Baidaulet said.