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The Islamic Development Bank (IDB) plans to issue a benchmark-sized Islamic bond in around May next year, the bank’s President Ahmad Mohamed Ali said. In February, AAA-rated IDB already priced a $1.5 billion, five-year sukuk. The new issue will reportedly be close to this year’s issue. Besides, IDB is considering whether to guarantee Tunisia’s proposed 700 million dinar ($431.79 million) debut sukuk. The Tunisian issue is aimed at helping the North African economy recover after being hit by the 2011 uprising. Moreover, IDB’s insurance arm, the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC), is also debating whether to extend a sukuk insurance product to boost the credit rating of Tunisia’s sukuk.

Contents
Revised Shariah Screening Methodology: 1
Expands ICM’s Global Reach
SHARIAH
New Shariah Advisory Council Resolutions 3
DEVELOPMENT
Region’s First Structured Covered Sukuk 7
Royal Award for Islamic Finance Calls for Global 9
Nominations
SC and Autoriti Monetari Brunei to Strengthen 9
Efforts in Greater Cross-border Activities
SC Leads Islamic Finance Taskforce to Publish a 10
Report on Enhancing Infrastructure for ICM
REGULATORY
IFSB-IOSCO-SC Collaborate on Disclosure 11
Requirements for ICM Products
SC Revises Equity Guidelines for SPACS 12
Technical Note on the Application of SC’s 13
Guidelines In Relation to Non-Tradable and
Non-Transferable PDS and Sukuk
FEATURES
2013: Another Resilient Year for the Global 14
Islamic Finance Industry
Global Islamic Funds Industry: Achieving 18
Growth Under Challenging Times
Harmonisation of Shariah Rulings 22
in Islamic Finance
News Round-up 29
STATISTICAL UPDATES
Malaysian ICM – Facts and Figures 32
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The International Islamic Financial Market is working on common templates for structuring sukuk to reduce delays caused by disagreements between Shariah scholars. The standards-setting body is drafting frameworks starting with leasing contracts known as Ijara. Bahrain- based IIFM is responding to feedback from members including the Islamic Development Bank and the Malaysian and Saudi Arabian monetary authorities. Having a unified set of standards would make the market more cost-effective and efficient. Moreover, the templates may also help address an international shortage of scholars. Enterprises with a global presence may be encouraged to explore sukuk issuance versus conventional if the standards are more widely accepted.

The Sukuk has been assigned an investment grade credit rating of BBB- by Fitch and is being issued in amortizing tranches, each with a term of five years, and an average life of approximately 2.5 years. Distributions will be made quarterly to investors on a fully amortising basis, with a profit rate of seven per cent per annum. The first tranche of the program, for $20 million closed in October 2013, and was oversubscribed. The transaction was structured to fund the operations of one of FWU’s five main subsidiaries, Atlanticlux Lebensversicherung S.A. (ATL), Luxembourg. The lead arranger and bookrunner for this issuance, EIIB-Rasmala, comprises the AIM-listed European Islamic Investment Bank Plc and Rasmala Group.

Pakistan's Minister for Finance Muhammad Ishaq Dar held a meeting with officials from Dubai Islamic Bank ( DIB ) in Dubai where they discussed prospects of another sukuk issuance and hiring an advisor for transparent sukuk transaction. Following the success of Euro Bond wherein Pakistan raised $2 billion from capital market recently, the minister said government intends to tap the sukuk market to increase its foreign exchange reserves. Pakistan plans to sell $1 billion dollar-denominated sukuk which will be marketed at the end of the third or in the fourth quarter of 2014. Dar said Pakistan government would soon release an advertisement in international and local press to hire financial advisor for sukuk transaction through a transparent and competitive process.

The global primary sukuk market has begun 2Q2014 on a solid footing as the month of April has produced a new issuances volume of more than USD13.4bln, making it the best performing month in 2014 year-to-date (YTD). The month saw a welcoming return of the Gulf Cooperation Council (GCC) sukuk issuers who expanded their volume with issuances totalling more than USD4bln. Issuances by GCC based obligors helped shore up the share of corporate sukuks which accounted for USD2.4bln of the total issuance volume in April, registering a 65% increase compared to March. However proportionately, the market continued to be heavily driven by the sovereign and quasi-sovereign issuers who collectively accounted for approximately 82% of the issuance volume in April

The backing of AAA rated Islamic Development Bank is a boon to the debut sukuk Tunisia plans by July. The North African nation is planning to sell more than $100 million of Shariah-compliant bonds, Finance Minister Hakim Ben Hammouda said. That will help keep borrowing costs lower than they would be otherwise, said Mourad El Hattab at STB Bank. The guarantor will help keep the interest within the current range, El Hattab added. The IDB has provided Tunisia $3.6 billion in support. The yield on Tunisia’s 400 million-euro ($557 million) bonds maturing in 2020 fell three basis points to 4.42 percent at 11.59: a.m. on May 8 in Dubai, compared with a high for the year of 5.7 percent on Jan. 6.

Albaraka Turk takes up sukuk baton after Turkiye Finans. Albaraka Turk has picked arrangers as it aims to follow participation bank peer Turkiye Finans's recent return to the dollar sukuk market. But one investor warned that Albaraka may find its deal more challenging. Albaraka Turk is looking to issue up to $500m of five year paper and has asked BNP Paribas, Emirates NBD, QInvest and Standard Chartered to manage the sale. Albaraka filed to the Istanbul Bourse, but leads could not confirm the mandate or say if a roadshow will follow.

Pakistan plans to sell more than $1bn of Islamic bonds after its first overseas debt sale in seven years boosted reserves. The dollar-denominated notes will be marketed at the end of the third or in the fourth quarter of 2014, Finance Minister Ishaq Dar said. Investor interest will determine the size of the offering which will be “much more” than $1bn and managers are yet to be appointed, he added. Dar said he expects investors from the Middle East, South Asia, Europe and the US. A successful conclusion to review talks with the IMF – which began in Dubai this week and will probably end on May 10 – will hopefully result in good pricing on the debt, he added. The sale is part of Prime Minister Nawaz Sharif’s plan to attract investment and overhaul the economy to meet conditions on a $6.6bn IMF loan.

Etiqa Takaful Bhd, a unit of Malayan Banking, plans to issue 300 million ringgit ($92.2 million) in sukuk as early as this month, its chief executive Ahmad Rizlan Azman said. Last month, Etiqa Takaful set up its maiden sukuk programme, rated AA1 by RAM ratings, designed to qualify as Tier 2 capital in the company's balance sheet. The sukuk would be a one-off transaction classified as Etiqa's liabilities, carrying a 10-year tenor and a non-call provision in the first five years, said Azman. Etiqa would use a musharaka structure and the proceeds of the sukuk would be used for general business operations, working capital and other purposes. Maybank Investment Bank is the advisor for the sukuk.

International law firm Simmons & Simmons and the Kyrgyz Republic have signed an agreement to provide consultancy services for the development of laws and regulations, supporting the introduction of Takaful and Sukuk in the Kyrgyz Republic. The consultancy services to be provided by Simmons & Simmons are to be funded under a technical assistance grant provided by the Islamic Development Bank (IDB). First Vice Prime Minister of the Kyrgyz Republic, HE Tayirbek Sarpashev, noted that upon the signing of this Agreement, the Government expects the economy to attract large investments that will favourably affect the development of the financial market and banking sector. The Simmons & Simmons team is led by Muneer Khan, assisted by managing associate Tariq Hameed.

Signs are everywhere in Asia that Islamic finance is expanding its frontiers. However, many Asian countries have yet to engage, while even those that have can still do much more to reap their benefits. Malaysia has been the biggest pioneer of the modern Islamic finance industry and dominates global sukuk issuance. Indonesia is another keen advocate of sukuk, both domestically and internationally, but has brought a much smaller $19bn worth of deals. Pakistan, Singapore, Brunei Darussalam and Hong Kong are also potential growth areas. Elsewhere, the market is at best in its nascent stages and very fractured. This, however, is seen as a cause for optimism by bankers.

Khazanah Nasional Bhd is reportedly considering selling as much as US$1bil (RM3.26bil) of dollar-denominated exchangeable sukuk. The state-owned entity is currently choosing banks for the potential offer. The notes will be exchangeable into shares of companies controlled by Khazanah. A decision hasn’t yet been made on which equities will be included in this offering. Khazanah also owns 39% of telecommunications company Axiata Group Bhd, the biggest shareholder. It has about RM103.5bil of assets, including a stake in CIMB Group Holdings Bhd. Khazanah’s sukuk is part of a gradual move to make the Malaysian stock market more liquid. Demand for this exchangeable sukuk is expected to be well-received.

King & Spalding advised Turkiye Finans Katilim Bankasi A.S. in relation to the issuance of US$500 million senior unsecured certificates due 2019, listed on the Irish Stock Exchange. The certificates are issued through TF Varlik Kiralama A.S., a Turkish incorporated asset leasing company. Rizwan H. Kanji led the team handling the Turkiye Finans issuance. He was assisted by senior associate Lidia Kamleh. The joint lead managers on the transaction were Citigroup Global Markets Limited, EmiratesNBD, HSBC and QInvest. Co-managers Dubai Islamic Bank and Commercial Bank International were advised by Clifford Chance LLP.

Dubai tapped capital markets for the first time in more than a year with the sale of $750 million of 15-year Islamic bonds as the emirate seeks to pay debt and finance its budget amid a property-market recovery. The Dubai government’s securities will reportedly price to yield 5 percent. The price Dubai paid for the sukuk indicates a significant improvement in the credit quality. The sale comes after Abu Dhabi agreed last month to roll over $20 billion of debt for five years, helping push Dubai’s credit risk to 165 basis points on April 4. Dubai Islamic Bank PJSC (DIB), Emirates NBD Capital Ltd., HSBC Holdings Plc (HSBA), National Bank of Abu Dhabi PJSC and Standard Chartered Plc managed the sale.

The Deloitte Islamic Finance Knowledge Center (IFKC) in the Middle East and the Islamic Research & Training Institute (IRTI) held on March 27, 2014 the "Restructuring Sukuk- the Islamic Way" workshop in Dubai, the first of a series of executive workshops targeting industry practitioners, investors and issuers. The event tackled the Sukuk market trends and the key Sharia' and regulatory considerations for restructuring activities. The participants discussed actual restructuring case studies with analysis of risks associated with transactions and lessons learned. The event also provided practitioners the opportunity to hear different perspectives in discussions facilitated by leaders from Deloitte, DFSA , IDB Group , Islamic International Rating Agency, FWU Global Takaful, and Clifford Chance .

The Bahrain-based International Islamic Financial Market (IIFM) will develop its first standard contract template for sukuk, and aims to double the number of its standards as early as next year. A standard for leasing-based sukuk will be developed first by the IIFM to help harmonise industry practices, said chief executive Ijlal Ahmad Alvi. The move comes after a consultation meeting in Dubai this week which identified a need for guidelines covering the ijara sukuk structure as a priority. A work group will also study other common sukuk structures such as mudaraba, wakala and musharaka, as well as convertible and exchangeable sukuk. The ijara sukuk standard could be ready by the end of this year at the earliest.

According to the newly released report “Global Sukuk Report 1Q2014” by Kuwait Finance House Research Limited (KFHR), the global sukuk market saw a modest volume of USD31.14bln in new sukuk issuances in 1Q2014, a drop of 15.2% as compared to 4Q13. The drop in issuance volume stems from a noteworthy slowdown in the GCC sukuk issuances in 1Q14. Consistent with the trend over past several quarters, the primary sukuk market was led by sovereign and quasi-sovereign issuers who collectively accounted for 81% of the global primary sukuk market issuances in 1Q14. As an outlook for 2014, the sovereign sukuk sector is of much stakeholder interest this year. As a result, despite the modest primary market momentum in 1Q14, the global primary sukuk market is expected to once again surpass the USD100bln mark in new sukuk issuances this year.

Pakistan looks set to end a year-long drought in sovereign sukuk issuance to support its goal of doubling Sharia-compliant banks' market share by 2020. The government may offer as much as Rs542 billion ($5.6 billion) of local-currency sukuk in 2014, including notes backed by a highway and an airport. That compares to one sale of Rs43 billion in 2013. Lenders including MCB Bank and National Bank of Pakistan, are converting branches to respond to rising demand for banking that complies with the religion's ban on interest, which now has a market share of 10 per cent. The Rs323 billion of sovereign sukuk outstanding is less than a third of the amount of Sharia-compliant bank assets.

Turkiye Finans navigated challenging markets on Tuesday to price its $500m five year sukuk inside guidance at 5.375%. After what one investor termed a “sluggish” start, the deal achieved a $1.4bn order book and rallied from par on the break to 100.125/100.375. Turkiye launched as tensions mounted again between Russia and Ukraine. The Russia 4.875% ’23 bond has fallen three points since the start of the week and equity markets are down. Despite this, the Turkish participation bank tightened its guidance from 5.5% and almost doubled its book.