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