Sukuk Market Overview & Structural Trends

Transcription

1 Sukuk Market Overview & Structural Trends IIFM Industry Seminar on Islamic Capital Market, Liquidity Management & Risk Mitigation Instruments Morning Pre-Conference Day Session, 19 th Annual World Islamic Banking Conference Sunday, 9 th December 2012, Awal Ballroom, Gulf Hotel, Kingdom of Bahrain Ijlal Ahmed Alvi Chief Executive Officer IIFM What is International Islamic Financial Market (IIFM)? IIFM is the international Islamic financial market s organization focused on the Islamic Capital & Money Market segment of the Islamic Financial Services Industry. Its primary focus lies in the standardization of Islamic financial products, documentation and related processes at the global level. IIFM was founded with the collective efforts of the Islamic Development Bank, Autoriti Monetari Brunei Darussalam, Bank Indonesia, Central Bank of Bahrain, Central Bank of Sudan and the Labuan Financial Services Authority (Malaysia) as a neutral and nonprofit organization. Besides the founding members, IIFM is supported by its permanent member State Bank of Pakistan as well as by a number of regional and international financial institutions and other market participants as its members. The main strength of IIFM is pooling of expertise from banks, legal, accounting and other market participants who work together under the guidance of Shari ah scholars 1 1

2 What IIFM provides to the Industry? Addressing the standardization needs of the industry & creating awareness Providing universal platform to market participants through Global Working Groups for the development of Islamic Capital & Money Market Shari ah harmonization in documentation, products and processes 2 Recent Sukuk Trends Islamic Institutions Sukuk issuance to support capital base Abu Dhabi Islamic Bank, UAE Saudi Hollandi Bank, KSA Sovereign Benchmark Sukuk Turkey Government Sukuk Indonesian Government Sukuk UAE, Qatar, Saudi Arabia (Corporates) Fixed Profit Rate & Lower Pricing Longer Tenors including Perpetual 3 2

3 Why The Market Need Sukuk Allows banks to manage its Liquidity and Balance Sheet more Effectively Offers Alternative Investment with Floating or Fixed Returns Offers Investors with a Choice of Varied Risk & Maturity Gives rise to Tradable Asset and provides Liquidity to the Market 4 Why The Market Need Sukuk Assist Growth in the Takaful Market Allow for a Balanced Portfolio Ensure Prudent Borrowing Facilitate Islamic M & A Activities Provides an Asset that can be used for Reserve requirement and for Central Bank Money Market intervention 5 3

4 Salam (1,958) 3% Wakalah (8,090) 12% Hybrid (2,087) 3% Exchangeable (6,190) 9% Musharakah (10,832) 15% Murabahah (817) 1% Ijarah (32,734) 47% Mudarabah (6,675) 1 6 Bai' At-Tawarruq (49) Salam (2,563) 1% Musharakah (61,749) 19% Wakalah (3,621) 1% Bai' Bithaman Ajil (BBA) (27,912) 8% Bai' Inah (1,958) 1% Hybrid (2,550) 1% Exchangeable (408) Murabahah (138,644) 42% Ijarah (66,693) 2 Istisna'a (3,651) 1% Investment / Al Istithmar (9,284) 3% Mudarabah (10,847) 3% 7 4

5 Law Amendment to Issue Sukuk Tax neutrality measures for Sukuk Income Tax Law, Corporate Tax Law, VAT Law, Stamp Duty Law Ability to Sell State Asset Setting up of SPV Trust Law 8 What is Required for the Development & Success of the Sukuk Market Sovereign and Quasi-Sovereign Implicit versus explicit guarantee Sizeable Issuance 2012 record year Quality Corporate issuer Market Makers 9 5

6 International Sukuk Domestic Sukuk Sovereign (22,811) 33% Corporate (39,044) 56% Sovereign (176,615) 54% Corporate (138,591) 42% Quasi- Sovereign (7,527) 11% Quasi- Sovereign (14,725) 4% 10 Future Prospects We have only begun to tap the potential that exists in the global Sukuk market Islamic banks are becoming prominent Sukuk issuers to support their balance sheet Project finance Sukuk Asset-backed Sukuk Mortgage-backed Sukuk Convertible/Exchangeable Sukuk Use of Islamic Hedging products 11 6

7 Future Prospects: Final Remarks It is clear that the Sukuk supply side is becoming quite robust. The challenge for Islamic financial institutions is to develop the following four strategic areas: Develop Trading Capabilities Sell down to private and retail investors Development of Sukuk & Balanced Fund Liquidity Financing capabilities , , ,000 92,403 80,000 60,000 48,929 47,081 40,000 29,992 25,571 18,752 20,000 12,180 6,410 8,140 1,172 1, Q

8 Breakdown of Global Sukuk Issuances By Region Jan 2001 Q (All Amounts in USD Millions) Central Asia and Eastern Europe (77) USA (767) Africa (13,408) 3% GCC (97,437) 25% Europe (394) Asia, , 72% 14 UK(271) UAE (40,808) 1 Turkey (2855) 1% Sudan (13,344) 3% Singapore (380) Saudi Arabia (26,922) 7% Qatar(15,783) 4% Pakistan (6,645) 2% Bahrain, (11,959) 3% Brunei Darussalam, Yemen (253) (3,688) 1% USA (767) Gambia (66) Malaysia (259,056) 65% Germany(123) Japan (131) Indonesia, (13,607) 3% Jordan, 119, Kazakhstan, 77, Kuwait (2,458) 1% 15 8

9 Singapore Dollars (SGD) Sudanese Pounds (SDG) 3.66% Saudi Riyals (SAR) 4% Qatari Riyals (QAR) 2% Pakistani Rupees (PKR) 2% Yemeni Riyals (YER) Bahraini Dinars (BHD) 1% Bruneian Dollars (BND) 1% Emirati Dirhams (AED) 2% Turkey Lira (TRY) United States Dollars (USD) 17% Chinese Yuan Renminbi (CNY) Euros (EUR) Malaysian Ringgit (MYR) 63% Gambian Dalasi (GMD) British Pounds (GBP) Indonesian Rupiah (IDR) 3% Jordanian Dinars (JOD) Kuwaiti Dinars (KWD) 16 Breakdown of Global Sukuk Issuances By Maturities Jan 2001 Q (All Amounts in USD Millions) 11 to 15 years (23,253) 6% 26 to 30 years (7,135) 31 to 40 years 21 to 25 years (5,503)1% 2% (5,822) 1% 16 to 20 years (18,200) 5% 6 to 10 years (82,875) 21% 41 to 50 years (586) Less than 1 year (141,238) 35% 2 to 5 years (114,699) 29% 17 9

10 Use of Sukuk as Collateral International Sukuk Domestic Sukuk 18 Shukaran Wassalamu Alaikum