HM Treasury and IFSB Secretary General Prof Rifaat Abdel Karim Honouredat 2010 London Sukuk Summkit Islamic Finance Awards

Her Majesty’s Treasury received a timely recognition for ‘Outstanding Contribution to the Development of Islamic Finance in the UK’ at the 2010 London Sukuk Summit Islamic Finance Awards which were presented at a Gala Dinner at the Hyatt Churchill.

The Awards, organised by London-based ICG-Events, honoured institutions and individuals involved in the Islamic finance industry for their contributions and achievements during the past year. The Guest of Honour at the Awards was Dr. Catherine Cowley, Senior Lecturer in Ethics and Finance at Heythrop College, London University.
In its Award commendation, ICG-Events stressed that HM Treasury has been at the forefront of the UK Government’s policy over the last few years to introduce enabling legislation including tax neutrality measures to facilitate the introduction of Islamic financial products in the UK as part of the government’s stated policy of developing London into an international hub for Islamic finance, trade and investment, and ensuring that UK citizens who wish to have access to such products can now do so under Whitehall’s financial inclusion policy.
At the same time, Prof. Rifaat Abdel Karim, the outgoing Secretary General of the Islamic Financial Services Board (IFSB) was also honoured for his ‘Outstanding Leadership in Islamic Finance’.
This is the third award which Prof. Rifaat has received in a month. In May 2010, he was awarded the ‘2010 IDB Prize in Islamic Banking and Finance’ which will formally be presented to him at the 35th Annual Meeting of the Board of Governors of the Islamic Development Bank (IDB), which is due to be held in Baku, Azerbaijan, on 23-24 June 2010.
Prof Rifaat was also conferred the Panglima Jasa Negara (P.J.N.) Award which carries the title of ‘Datuk in conjunction with the birthday of Yang di-Pertuan Agong Tuanku Mizan Zainal Abidin, the Malaysian monarch, on 6th June 2010.
ICG-Events commended Prof. Rifaat for his “substantial contribution to the area of Islamic banking and finance”, especially his valuable services in the standard-setting organizations such as the Accounting and Auditing Organization for Islamic Financial Institutions (AAOFI) and the IFSB. The Committee also

lauded Prof. Rifaat’s significant academic and research contribution to the industry, and his leadership of the IFSB to international recognition since its inception in 2002.
In the context of the summit theme of Sukuk, Liquidity Management House of Kuwait won two Awards – the first one for ‘Best Sukuk Arranger’ and the second one for ‘Most Innovative Sukuk Stucture/Deal’ for its role in arranging the US$500 million GE Capital Sukuk Al-Ijarah.
Emad Yousuf Al Monayea, Chairman and Managing Director of Liquidity Management House (LMH), which is a subsidiary of Kuwait Finance House, one of the largest Islamic banks in the world, accepted the Awards on behalf of LMH. With the necessary enabling legislation and tax neutrality measures in place in the UK under the Finance Bill 2010, it is only a matter of time before the first corporate Sukuk origination in the UK takes place. In fact, LMH is working with one or two potential British corporate Sukuk issuers who are keen to raise funds from the market with debut issuances.
At the same time, the Jeddah-based Islamic Development Bank was honoured for the ‘Best Sukuk Structure by a Sovereign/Quasi Sovereign’ for its US$850 million Fixed Rate Sukuk. The Award was accepted on behalf of the IDB by Abdul Aziz Al Hinai, Vice-President of the IDB.
Another popular Award of the evening went to Khazanah Nasional Berhad, the investment arm of the Malaysian Ministry of Finance, for the ‘Outstanding Contribution by a Sovereign Wealth Fund to the Development of the Islamic Finance Industry’. Khazanah’s strategy sees Islamic finance as its main investment activity and conventional investment as the alternative.
The world’s largest Islamic bank in terms of capital and assets, Al Rajhi Bank of Saudi Arabia was honoured for ‘Outstanding Contribution to the Development of Global Islamic Finance’ Award. The growing and successful operations of its two Malaysian Islamic banking entities was particularly singled out for commendation, especially in taking Islamic finance to non-Muslim areas where even local Malaysian banks dared not venture into.
The role of a major global player such as Standard Chartered Bank was also recognised, with Afaq Khan, CEO of Standard Chartered Saadiq receiving the ‘2010 Islamic Banker of the Year Award’. Mr Khan has led the Saadiq team in Sukuk originations for sovereign Pakistan, Indonesia, Brunei and Singapore, and in expanding the dedicated Islamic finance entity’s activities especially in the Middle East, South Asia and East Asia.
To underline the changing times in Islamic finance, the Banque centrale du Luxembourg, was commended for its proactive work in facilitating Islamic finance in the Duchy with the ‘Outstanding Contribution by a Regulator to the Development of Islamic Financial Services’ Award, which was accepted on behalf of the central bank by Marc Theisen, Partner Theisen Law and who is a member of the central bank’s Task Force on Islamic Finance.

Several prominent Malaysian, GCC, South African and UK institutions and individuals involved in the Islamic finance industry were honoured for their contributions and achievements during the past year.
South Africa’s Oasis Group Holdings won two Awards – ‘Islamic Fund Manager of the Year’ and ‘Outstanding Achievements in Islamic Fund Management’. Oasis through its Crescent family of equity funds, led by seasoned CEO Adam Ebrahim, has consistently been one of the best global performers in the Islamic asset management space. To date, it has some 63 Shariah-compliant investment funds and retirement products.
The Securities Commission of Malaysia (SC) was recognised for its ‘Outstanding Contribution to the Development of Islamic Capital Markets’; The Malaysia International Islamic Financial Centre (MIFC) won the ‘Best International Islamic Financial Centre’ honour for the third successive year; Lembaga Tabung Haji (the Malaysian Pilgrims Management Fund) won the Award for ‘Outstanding Contribution in CSR by an Institution Offering Islamic Financial Services’; and RHB Islamic Bank won the Award for ‘Most Innovative Islamic Finance Transaction’ for its Tawarruq based on mobile phone airtime.
This year’s Zaki Badawi Award for Excellence in Shariah Advisory and Research’ was given to Associate Prof. Dr Mohamed Akram Laldin, Executive Director of the International Shariah Research Academy for Islamic Finance (ISRA), the Shariah research entity of Bank Negara Malaysia.
UK winners this year included Trowers & Hamlins LLP for ‘Outstanding Contribution by a Law firm to Islamic Financial Services’; DDCAP Limited for ‘Best Islamic Finance Market Intermediary’; and Volaw Trust & Corporate Services Limited of Jersey for ‘Best Islamic Administrator/Trustee.
Altogether some 23 institutions and individuals were honoured. For a full list of winners and the categories see below.
2010 London Sukuk Summit Award Winners
1. Most Innovative Sukuk Structure/Deal
Liquidity ManagemenHt ouseo f Kuwait for the USD500m million GE Capital Sukuk Al-Ij arah
2. Best Sukuk Arranser(s)
Liquidity Management House of Kuwait
3. Most Innovative Islamic Finance Transaction
RHB Islamic Bank of Malaysia for its Tawarruq Based on Mobile Phone Airtime
4. Best Islamic Administrator/Trustee
Volaw Trust & Corporate Services Limited, Jersey
5. Best Islamic Wealth Management Service Provider
Emirates NBD. United Arab Emirates

6. Best Islamic Finance Market Intermediary
DDCAP Limited, United Kingdom
7. Best International Islamic Financial Centre
Malaysia International Islamic Financial Centre (MIFC)
8. Best New Entrant in the Global Sukuk Market
International Finance Corporation (IFC) for the USD100 Hilal Sukuk
9. Best Sukuk Structure by a Sovereign/Ouas Sovereign Issuer
The Islamic Development Bank (IDB) for the USD850 million Fixed-Rate Sukuk
10. Zaki Badawi Award for Excellence In Shariah Advisory & Research
Associate Prof. Dr Mohamad Akram Laldin
11. Zaki Badawi Award for Excellencein Young Shariah Advisorv & Research
Faizal Manjoo
12. Islamic Banker of the Year
Afaq Khan CEO Standard Chartered SAADIQ
13. Islamic Fund Manger of the Year
Adam Ebrahim, CEO Oasis Group Holdings (PTY) Ltd
14. Outstanding Contribution by a Law Firm to Islamic Finance Services
Trowers & Hamlins LLP United Kingdom
15. Outstanding Contribution bv an Accounting Firm to Islamic Financial Services
Deloitte Touche Tohmatsu
16. Outstanding Contribution in CSR by Institution Offering Islamic Financial Services
Lembaga Tabung Haji of Malaysia
17. Outstanding Achievements in Islamic Fund Management
Oasis Group Holdings (PTY) Ltd
18. Outstanding Contribution by a Sovereign Wealth Fund to the Development of the Islamic Financial Industry
Khazanah Nasional Berhad of Malaysia
19. Outstanding Contribution by a Regulator o the Development of Islamic Financial Services
Banque centrale du Luxemboug
20. Outstanding Contribution to the Development of Global Islamic Finance
Al Rajhi Bank of Saudi Arabia
21. Outstanding Contribution to the Development of Islamic Capital Markets
Securities Commission Malaysia

22. Outstanding Leadership in Islamic Finance
Professor Rifaat Ahmed Abdel Karim Secretary General, Islamic Financial Services Board (IFSB)
23. Outstanding Contribution to the Development of Islamic Finance in the UK
Her Majesty’s Treasury, United Kingdom

s0urce: i-newswire

Kenya: CBK Targets Gulf Cash with Sharia Compliant Bonds

The Central Bank is working on a framework that will eventually lead to the flotation of sharia – compliant bonds and treasury bills in the local money market.

The move to entrench Sukuk bonds and bills in the law is seen as a push by CBK to tap the increasing amount of cash flowing into Africa from the Gulf region.

Sukuk — bonds that are structured to be in compliance with Shariah law which bars payment of interest — have seen rapid uptake in recent years as more and more businesses and governments have used them to raise financing.

They has a maturity that is determined in advance and is backed by an asset which makes it possible for the investor to earn a return from the profits derived from the assets.

Much of this activity has taken place in the Gulf and South East Asia so far, and analysts believe a government issue could be the key that Kenya needs to place it as the premier Islamic finance hub in the region.

“We’re are still waiting for the structured Sukuk to cover bonds and the Treasury bills market,” says Alex Nandi – deputy director banking supervision at the CBK.

Plans for a framework to oversee the flotation of Sukuks come two years after the licensing of the first Islamic banks in Kenya.

Gulf African Bank and First Community Bank are still finding their footing in the Kenyan banking sector and are on course to turning profitable two years into operations.

But unlike conventional banks which are able to trade in bonds and treasury bills, Sharia law has constrained income avenues for Islamic banks.

With the flotation of Sukuk bonds, Islamic banks will have an investment avenue to generate income from the new form of government securities.

Infrastructure bond

Gulf African Bank for instance invested Sh500 million in the sukuk portion of a government infrastructure bond issue last year and received a 13.5 per cent rate of return.

In 2009 the bank earned Sh56.6 million from its investment in government securities compared to no income from government securities in 2008.

The banks are also benefiting from cash flowing from the Middle East into investment projects in the country.

Sovereign funds in Gulf States, flush with cash are eyeing African countries as lucrative investment zones and most of this cash is handled by these institutions.

“There is a huge appetite by business people from the Gulf region to invest in Africa,” says Suleiman Shahbal, the chairman of Gulf African Bank.

Since the break-out of the global economic crisis which took it’s toll on conventional banking, Islamic banking and financing has enjoyed a growing popularity.

Touted as the answer to conventional banking whose risky practices have come under the spotlight since the start of global financial crisis back in 2008, it presented an attractive alternative.

Last year, global issuance of Sharia – compliant bonds and loans grew 40 per cent in the first 10 months of 2009 compared to the same period a year ago, as reported by the New York Times.

The total amount of Sharia – compliant debt outstanding is estimated at about $1 trillion, up from $700 billion just two years ago.

Still, Sukuk issues were not spared the snowball effect of the global financial crisis that hit conventional banks.

Sukuk issues fell from $25 billion in 2007 to $15 billion last year.

Jawal Ali a managing partner at law firm King and Spalding’s Middle East office says that by 2008, up to 85 per cent of Sukuks issued were not considered Shariah compliant.

But the Dubai Debt crisis early this year did nothing to firm-up the credibility of Islamic financing as a bright spotlight was cast on Sukuks.

About 10 per cent of the Dubai’s $80 billion debt load is estimated to comply with Shariah, casting the spotlight on the credibility pedestal Islamic financing has ridden on over the years.

Underlying assets

A key problem was a collapse in value of underlying assets – primarily real estate investments – which back Sukuk issues.

Islamic bonds are structured as profit-sharing or rental agreements, and their returns are derived from underlying physical assets such as real estate or commodities.

Unlike conventional banking which has a vast array of investment options, Islamic banks are heavily concentrated in real estate placing them at high risk should property values fall as they did during the financial crisis.

But as the global economy limps out of the recession and the choke-hold on credit eases, Islamic financing is expected to gain traction this year.

“There is a lot of market activity and there might be a pick up this year,” says Mr Ali.

source : allafrica

Indonesia eyes Islamic T-bills, retail sukuk in 2010

Indonesia may issue Islamic treasury bills and retail sukuk this year to diversify funding sources, develop the Islamic debt market and finance the state budget deficit, finance ministry officials said on Monday.

The ministry also said it expected to issue conventional bonds for retail investors in July or August, with maturities of up to five years.
Indonesia, the world’s most populous Muslim country, has been relatively slow to develop its Islamic markets, lagging Malaysia and Singapore. It stepped up its efforts last year by eliminating double taxation of such sharia products, as this had hampered growth of the industry.
The finance ministry currently issues conventional treasury bills, with maturities of up to 12 months — usually at least once a month via debt auctions — while Bank Indonesia (BI), the central bank, issues treasury bills called central bank certificates (SBIs) with a maximum maturity of six months.
“We are still in talks with BI including on the maturity” of the Islamic T-bills, Dahlan Siamat, the finance ministry director in charge of Islamic debt, told reporters.
“If it can be issued this year, that will be good,” said Rahmat Waluyanto, the ministry’s head of debt management unit, referring to Islamic T-bills.
The finance ministry’s decision to consider issuing Islamic treasury bills follows moves by the central bank to reduce the frequency of its SBI auctions as it tries to contain hot money flows, shift money into longer-dated paper and spur bank lending.
The central bank is in the process of changing its auction schedule. It will hold its SBI auctions once a fortnight, instead of once a week, until late May, and then once a month starting in June.
Central bank officials have said they expect to rely less on SBIs for monetary operations and instead use more finance ministry debt securities.
Ministry officials also said they expected to issue Islamic debt, or sukuk, for retail investors around November.
The ministry last sold sukuk to retail investors in February, raising 8 trillion rupiah ($888.3 million) in a three-year issue that yielded 8.7 percent — well above the one-year bank deposit rate of about 6.5 percent.
The finance ministry has said it plans to raise 176.2 trillion rupiah from bond issues this year, including both conventional and Islamic debt.
The proceeds would be used to finance the budget deficit, which under the approved budget is forecast at 1.6 percent of GDP this year, although under the revised budget it is forecast at 2.1 percent of GDP. ($1=9005 Rupiah)
source : guardian

‘Sukuk alternate solution to tawarruq’

ISLAMIC financial institutions looking into tawarruq, a controversial Islamic financing structure, should instead consider sukuk ijarah, or Islamic bonds, when looking at options to raise cash, a study said.

In its basic form, tawarruq allows the sale of an asset on a deferred payment basis. The purchaser then sells the asset to a third party to get cash. But so-called organised tawarruq has divided scholars who debate whether allowing such transactions via banks still meet syariah laws.

In a paper, Shochrul Romatul Ajija, an Indonesian student taking her Master of Economics at the International Islamic University Malaysia, said tawarruq is gaining popularity in Malaysia and has been established as syariah-compliant. “It helps people who need cash on short notice … it is not a loan,” she said.

She said should Brunei wish to start providing tawarruq financing, it can be done to help people who are in need of cash in the short term.

But in her paper, Shochrul said that if Islamic financial institutions need an alternate solution to prevailing liquidity management challenges, they can turn to sukuk ijarah, or Islamic bonds.

Sri Anne Masri, a local Islamic business consultant, said, “The Islamic banking industry must seriously differentiate itself from the conventional banks, not just by replicating conventional products.” She added that tawarruq is being used today as either a liquidity facility (inter bank placement) or a credit facility (credit financing) as it is a highly profitable business.

The First Global Investments, an Islamic investments firm, defines tawarruq as, reverse murabahah. “As used in personal financing, a customer with a genuine need buys something on credit from the bank on a deferred payment basis and then immediately resells it for cash to a third party. In this way, the customer can obtain cash without taking an interest-based loan,” it said.

Shochrul said that the use of tawarruq came under scrutiny because people were finding it difficult to find other brokers to sell their tawarruq to, and that was when the banks started to arrange buyers and sellers in order to make the sale, which is prohibited in the syariah context. “This is what is called organised tawarruq and it is not syariah-compliant,” she said.

In her paper, she said that should Islamic financial institutions decide to use tawarruq, they should note that it should “only be used in extreme cases where no option is available, to avoid interest”.

She said that widespread use of tawarruq is harmful to the industry in the long run, stressing syariah boards have to “strictly monitor all tawarruq-based transactions”.

The Organisation of Islamic Conference Fiqh Academy, an Islamic studies academy in Jeddah, Saudi Arabia, in April 2009, ruled that organised tawarruq was “impermissible” due to the arranged nature between the Islamic financial institutions and the people.

source : The Brunei Times

The Islamic Bank of Thailand plans to float 55 billion baht worth of Islamic bonds

The Islamic Bank of Thailand plans to float 55 billion baht worth of Islamic bonds in the local and overseas markets in 2010, says bank president Dheerasak Suwannayos.

He said the bank hoped to raise 5 billion baht from a local Islamic bond issue in the second quarter, the first issued in the Thai market.

Another 50 billion baht in funds would be raised as a sovereign bond issue in the international market by the third quarter.

“We hope to raise funds from the petrodollar market, using interest in basic infrastructure investments and funding from Islamic infrastructure funds,” Mr Dheerasak said.

The Islamic bonds would be issued in strict compliance with Islamic law, with investor returns projected at 3% to 4% per year. Bonds would be offered to individual and institutional investors.

The Finance Ministry and the Revenue Department are in the process of drafting regulations to remove tax obstacles related to the issue of Islamic bonds, including tax liability from the transfer of assets to a special purpose vehicle typically used in Islamic finance structures.

The Islamic Bank posted a net profit of 334 million baht in 2009, a sharp increase from profits of 2.08 million the year before.

Outstanding deposits stood at 41 billion baht at the end of last year, more than double the year before. Outstanding credit showed similar growth at 38 billion baht at the end of December, up from 16.7 billion the year before.

Net assets for the bank at the end of 2009 were 45.2 billion baht, compared with 23.8 billion the year before.

Mr Dheerasak said the bank, also known as I Bank, expected to reach net assets of 100 billion baht by the end of the year, with outstanding deposits of 78.7 billion and credit of 88.7 billion. Profits are projected at 668 million baht, double last year’s figures.

He said the bank would require additional capital to reach the growth target. The Finance Ministry has already approved a plan to raise paid-up capital for the bank to 9.87 billion baht from 3.48 billion now.

“But at the end of the day, I Bank is not solely oriented on generating profits, but also helping society as well,” Mr Dheerasak added.

For instance, the bank diverts a portion of its late-payment fees to a special fund to assist the poor. I Bank is also helping credit card borrowers refinance loans as part of a broader government programme to address the problems of low-income debt.

Source : Bangkok post

A positive future for sukuk is the real asset

At its inception in 2001 the market was worth less than $500 million (Dh1.83 billion) yet by 2007 the value of sukuk issued around the world was greater than $60bn.

Despite this, in 2008, the number of sukuk issued globally declined for the first time. Market commentators attribute this to a number of factors, including the global financial turbulence and resulting market conditions.

Additionally, the default by the Kuwaiti firm Investment Dar on a $100m sukuk and the headlines relating to Nakheel has possibly led to investor uncertainty regarding the treatment of sukuk in a default scenario.

In particular, recent events may have left investors nervous as to whether they have a claim over the assets underlying the issuance or not, and whether or not sukuk are more secure than conventional bonds because they are backed by tangible assets.

If there is a claim over the assets, investors could expect priority in realising their investment in a default scenario.

However, if this is not the case, investors would be unsecured creditors in the bankruptcy of a debtor.

This uncertainty may have arisen because a number of structural features are typically present in sukuk such that they are constructed on the foundations of tangible assets, for example, land, real estate or machinery and equipment.

However, have some investors been wrong in their belief that sukuk offer a more secure investment than conventional bonds?

To-date, the issuers of sukuk and the financial experts who assist in selling such securities have tried to meet the requirements of Sharia-compliant investors who have sought a similar fixed-income risk profile to a conventional bond. Those are usually based on the financial performance of a corporate entity with which they are familiar and in which they wish to invest.

In the majority of unsecured sukuk transactions the investors ultimately have no direct recourse to the assets themselves. The repayment of their investment is dependent on the exercise of a purchase undertaking by the seller of the assets at maturity or upon default. Thus, as with a conventional bond, the investors take credit risk on the seller who has granted the purchase undertaking.

Although typically there is a physical asset in the structure, it is present primarily to generate periodic profit payments, not to enhance the credit quality of the deal or provide investors with recourse to the assets upon a default.

As a result, offering documents prepared for most sukuk transactions have very little disclosure (if any) in respect of the physical asset; instead, disclosure focuses principally on the balance sheet and business and risks of the seller.

While Sharia principles do require a transfer of control and risk (as well as reward) in relation to an asset from the seller to the investors, the actual analysis of whether a transfer of the asset is perfected and immune from the bankruptcy of the seller (a typical feature of conventional, asset-backed securitisation) has not been a necessary feature of sukuk.

So what alternative Sharia-compliant structures exist for an investor who wishes exposure to asset-risk and to have direct recourse to those assets?

One conventional product that has attracted a great deal of attention over the past few years has been asset-backed securitisation. One of the cornerstones of the majority of conventional asset-backed securitisation transactions is a true-sale of assets. In order for the instruments ultimately evidencing an investment in an asset-backed transaction to achieve the appropriate credit rating, the transfer or sale of assets needs to be a sale which would survive the insolvency of the original owner (ie the assets are isolated from the bankrupt estate of the seller).

This is only achievable to the extent that the transfer represents a true transfer of ownership which is legally perfected.

While Sharia principles seem harmonious with the nature of asset-backed securitisation, for securitisation to become more mainstream in the GCC, three prerequisites will be required: firstly, investors will need to demonstrate a commercial desire to take the risk (and reward) associated with the true sale of assets in an asset-backed structure, including the management of those assets in a default scenario; secondly, those companies seeking finance will need to demonstrate a desire to sell their assets (which will have accounting and shareholder equity implications); and thirdly, a robust legal framework will need to evolve as bankruptcy and asset-selling laws in many jurisdictions in the GCC remain opaque and militate against securitisation structures.

In conclusion, the outlook for the sukuk market remains positive, with Standard & Poor’s indicating that the total amount of sukuk issued or being talked about in the market is estimated to be $50bn.

The global financial turbulence has resulted in a number of high-profile defaults, and this has generated a timely debate by market participants as to the nature of investors’ recourse to the underlying assets (if any).

In turn, this will inevitably result in a better understanding by investors, bankers, originators and lawyers alike of what the consequences of a default are, leading to further innovation and development of existing sukuk structures and the further evolution of Islamic debt structures.

source : the national

UK gov”t to support Islamic finance

The UK Treasury has introduced measures in Parliament to support Islamic finance and the issuance of corporate sukuk within the UK, Kuwait News Agency (KUNA) reported on Thursday.

“The Financial Services and Markets Act 2000 Order 2010,” will help to provide “a level playing field” for corporate sukuk within the UK, a statement by the Treasury said.

The Order provides clarity on the regulatory treatment of corporate sukuk, reducing the legal costs for these types of investments and removing unnecessary obstacles to their issuance.

Sukuk are a broad class of financial instruments designed to replicate the economic function of bonds, but with a structure which complies with Islamic principles. Although there is an obvious appeal to the Muslim community, sukuk can be issued and bought by everyone.

Treasury minister Sarah McCarthy-Fry said: “the objectives on Islamic finance are to enhance the UK competitiveness in financial services by maintaining its position as a Western leader for international Islamic finance; and to ensure that everybody, irrespective of their religious beliefs, has access to competitively priced financial products.

“This measure is another important step in the development of the Islamic finance sector in the UK and will help to provide a level playing field for Islamic financial products in this country. It is good news for the UK economy and for our Islamic finance industry”, she added.

source : Saba

Brunei’s total sukuk issue tops $2 billion

THE Ministry of Finance issued $68 million worth of sukuk in two separate floats between last year November and December, bringing the total sold to more than $2 billion, a ministry statement released yesterday said.

The statement said the Ministry of Finance had completed the successful pricing of its 40th and 41st issuances of short-term Sukuk Al-Ijarah securities.

Series 40 carries maturity of 91 days, with a rental rate of 0.39 per cent, and began on Nov 19 and will mature on Feb 18, 2010.

Series 41 carries maturity of 91 days with a rental rate of 0.39 per cent. It began on Dec 3 and will mature on March 4, 2010.

The total of sukuk issuances for series 40 is $25 million and $43 million for Series 41.

According to the the statement, the latest issuances means the Brunei government had successfully issued over $2 billion worth of short-term Sukuk Al-Ijarah securities since it began offering the Islamic bonds on April 6, 2006.

In their simplest form, sukuk are certificates proving ownership of an asset. Unlike bondholders, sukuk investors do not receive interest but rather returns generated by the underlying assets pooled under special purpose vehicles. The Sukuk Holding Properties Inc and Sukuk (Brunei) Inc was set up by the Ministry of Finance and registered under the International Business Companies Order 2000 to act as conduits to issue sukuk.

Most governments that issue sovereign Islamic bonds do so to fill a gap in their funding for critical infrastructure projects. For Brunei, where the bulk of export receipts come from the oil and gas sector, the issuances are expected to set benchmarks on rental rates that prospective issuers in the private sector can use should they decide to raise money by selling bonds.

Demand for investments and financial services that comply with Islamic law has been growing as Muslims seek what they see as more ethical ways to investing their money.

Islamic bonds do not pay interest, which is banned as usury under syariah, and are structured as profit-sharing or rental agreements underpinned by physical assets. Islam also prohibits investing in companies dealing in alcohol or gambling.

Previously, experts have said that conventional investors can also turn to Islamic investment products, like sukuk, to diversify their investment portfolios and reduce risk of losses.

Financial planners have always advised investors to diversify their investments as a strategy to reduce risk by spreading their money in different kinds of investments such as stocks, bonds, among others. In terms of returns, Islamic investments are not inferior to conventional investments, because in some cases they do better than conventional investments.

source : the  bruei times

RAM Places Lekas’ Bonds On Rating Watch, With Negative Outlook

RM785 million (rated at AA3), Junior Sukuk Istina’ of up to RM633 million (rated at A1), RM240 million Redeemable Convertible Unsecured Loan Stocks Programme (rated at B3) and RM50 million Redeemable Unsecured Loan Stocks (rated at B3) on rating watch with a negative outlook.

 The rating watch is premised on the cessation of construction works on the Kajang-Seremban Highway in the Taman Bukit Margosa area, and potentially lower traffic plying the highway as a result of the delay in completion of the Taman Bukit Margosa area, RAM said in a statement on 30th of Dec, 2009.

 On 12th of Nov, 2009, LEKAS was directed to stop construction works of the highway in the Taman Bukit Margosa area, where the Seremban High Court allowed the application of an injunction order to stop work by residents of Taman Bukit Margosa against LEKAS and 11 others.

 On Dec 10, 2009, the hearing for the defendants’ application to strike out the civil suit which includes compensation claims of RM112 million by the plaintiffs was deferred to March 1, 2010.

 LEKAS has thus been unable to resume construction of the highway in the Taman Bukit Margosa area.

 In the meantime, LEKAS is in the midst of applying for a stay on the injunction order while the next hearing date remains to be fixed.

 “We highlight that there will be downward rating pressure if LEKAS is unable to complete and open the highway to the public by mid-June 2010, which will result in loss of tolling revenue, or if the company is found to be liable for compensation to the plaintiffs,” RAM said.

The rating agency said it will continue to monitor the traffic volume of the highway.

 “We have highlighted that it is imperative for the traffic volume to reach 65,000 average daily traffic during the first full year of operations, with long-haul commuters who travel from Seremban to Kuala Lumpur city or vice versa making up at least 50 per cent of the total traffic volume,” it said.

 “There will be downward rating pressure if the traffic volume build-up is slower than expected,” it added.

source : bernama


The Saudi Basic Industries Corporation (SABIC) is pleased to announce that it has obtained the Saudi Capital Market Authority approvals and has begun to issue its second Shariah Compliant Sukuk on July 11, 2007. The Sukuk issuance will be available to the investors in the GCC. The Sukuk will be issued in denominations of SAR 10,000 and will be subject to a minimum holding of SAR 50,000.

SABIC has mandated HSBC Saudi Arabia Limited and Riyad Bank as Lead Managers and Book runners for the Sukuk issuance, which features a Sukuk structure approved by SABB Amanah’s Shariah Supervisory Committee. The investor presentation period will continue until July 25, 2007.