developments in the global sukuk market · 2019-12-03 · 1 developments in the global sukuk market...

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Developments in the Global Sukuk Market

IIFM Awareness Seminar on Islamic Finance

Monday, 2nd December 2019

Gulf Convention Centre, The Gulf Hotel, Manama, Kingdom of Bahrain

Ijlal Ahmed Alvi

Chief Executive Officer

IIFM

Total Sukuk Issuances

IIFM Awareness Seminar on Islamic Finance, 2nd December 2019, Bahrain

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Total GLOBAL Sukuk Issuances (Jan 2001 - Estimated August 2019) - All Tenors, All Currencies (in USD Millions)

Source: IIFM Sukuk Database➢ Total GLOBAL Sukuk Issuances Estimated As Of August 2019, USD 1192,902 Millions (Approximately)

1IIFM Awareness Seminar on Islamic Finance, 2nd December 2019, Bahrain

66,830

50,184

24,337

37,927

53,125

93,173

137,599 135,557

107,300

67,818

87,784

116,717123,150

91,401

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

2001-2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 EstimatedAug 2019

Total INTERNATIONAL Sukuk Issuances (Jan 2001 - Estimated August 2019) - All Tenors, All Currencies (in USD Millions)

➢ Total INTERNATIONAL Sukuk Issuances Estimated As Of August 2019,USD 277,740 Millions (Approximately)

21,556

14,002

2,210

7,023

4,248

8,684

20,269

22,992

26,730

21,880

31,210

37,648

32,988

26,301

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

2001-2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 EstimatedAug 2019

Source: IIFM Sukuk Database


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Total DOMESTIC Sukuk Issuances (Jan 2001 - Estimated August 2019)- All Tenors, All Currencies (in USD Millions)

➢ Total DOMESTIC Sukuk Issuances As of August 2019 USD 915,162 Millions (Approximately )

45,275

36,182

22,127

30,904

48,877

84,490

117,331112,565

80,570

45,938

56,574

79,069

90,162

65,100

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

2001-2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 EstimatedAug 2019



Total SHORT-TERM (GLOBAL) Sukuk Issuances (Jan 2001 - Dec 2018) - All Currencies, Tenor 12 Months or Less, in USD Millions

14,667

3,671

8,552

20,932

35,264

43,365

65,22762,725

56,601

15,990

23,340

17,074

34,459

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

2001-2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

➢ Total Global Short Term Sukuk Issuance 401,869 Millions Source: IIFM Sukuk Database


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Total SHORT-TERM (INTERNATIONAL ) Sukuk Issuances (Jan 2001 – Dec 2018) - All Currencies, Tenor 12 Months or Less, in USD Millions

1,910

48 0 0 19 0 0

1,018

5,800

7,576

9,3009,850

8,110

0

2,000

4,000

6,000

8,000

10,000

12,000

2001-2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

➢ Total International Short Term Sukuk Issuance 43,631Millions Source: IIFM Sukuk Database


Total SHORT-TERM (DOMESTIC) Sukuk Issuances (Jan 2001 – Dec 2018) - All Currencies, Tenor 12 Months or Less, in USD Millions

12,757

3,623

8,552

20,932

35,245

43,365

65,22761,708

50,801

8,414

14,040

7,224

26,323

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

2001-2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

➢ Total Domestic Short Term Sukuk Issuance 358,211Millions Source: IIFM Sukuk Database


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Total SHORT-TERM (GLOBAL) Sukuk Issuances (Jan 2001 – Dec 2018)– All Currencies, Tenor 12 Months or Less, in USD Millions

ASIA & FAR EAST Number of Issues Amount USD Millions % of Total Value

Brunei Darussalam 136 8,571 2.13%

Bangladesh 4 37 0.01%

Indonesia 77 7,759 1.93%

Malaysia 2,864 342,384 85.20%

Pakistan 8 141 0.04%

Singapore 3 221 0.05%

Total 3,092 359,113 89.4%

GCC & MIDDLE EAST Number of Issues Amount USD Millions % of Total Value

Bahrain 340 15,995 3.98%

Oman 1 130 0.03%

Saudi Arabia 6 1,301 0.32%

United Arab Emirates 1 100 0.02%

Yemen 1 234 0.06%

Total 349 17,760 4.4%

AFRICA Number of Issues Amount USD Millions % of Total Value

Gambia 252 365 0.09%

Sudan 21 16,520 4.11%

Total 273 16,885 4.2%

Europe & OTHERS Number of Issues Amount USD Millions % of Total Value

Turkey 265 8,112 2.02%

Total 265 8,112 2.02%

Grand Total 3,979 401,869 100%Source: IIFM Sukuk Database


Total SHORT-TERM (GLOBAL) Sukuk Issuances (Jan 2018- Dec 2018) – All Currencies, Tenor 12 Months or Less, Amount In USD Millions)Currency Breakdown

BHD, 1,897, 5.51%GMD, 228, 0.66%

IDR, 3,674, 10.66%

MYR, 15,853, 46.01%

SDG, 86, 0.25%

TRY, 4,611, 13.38%

USD, 8,110, 23.54%



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Corporate, 5,333, 15.48%

FI’s, 4,955, 14.38%

Quasi-Sovereign, 9,487, 27.53%

Sovereign, 14,684, 42.61%

Total SHORT-TERM (GLOBAL) Sukuk Issuances (Jan 2018- Dec 2018) – All Currencies, Tenor 12 Months or Less, Amount In USD Millions)Breakdown by Issuer Type



Hybrid Sukuk , 472, 1%

Hybrid Sukuk - Wakalah /Murabahah, 7, 0.02%

Sukuk Al Ijarah, 4,482, 13%

Sukuk Al Mudharabah, 3,264, 10%

Sukuk Al Murabahah, 11,026, 32%

Sukuk Al Musharakah, 469, 1.36%

Sukuk Al Salam, 1,368, 4%

Sukuk Al Wakalah, 13,371, 39%

Total SHORT-TERM (GLOBAL) Sukuk Issuances (Jan 2018- Dec 2018) – All Currencies, Tenor 12 Months or Less, Amount In USD Millions)Structure Breakdown



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Sukuk Issuances Breakupby Issuer Status

Total GLOBAL SOVEREIGN Sukuk Issuances (Jan2001-Dec2018) - All Tenors, All Currencies (in USD Millions)

➢ Total Sovereign Sukuk Issuance USD 606,391 Million

11,324

6,874 7,58510,637

24,881

34,071

67,765

87,09383,211

68,788

33,429

41,255

62,097

67,381

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

2001-2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018



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Total GLOBAL CORPORATE Sukuk Issuances (Jan2001-Dec2018) - All Tenors, All Currencies (in USD Millions)

➢ Total Corporate Sukuk Issuance USD 278,459 Million

19,185

23,420

39,702

12,549

8,856

14,77816,052

23,235

34,585

12,675

14,731

19,817

16,835

22,039

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

2001-2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018



Total GLOBAL QUASI-SOVEREIGN Sukuk Issuances (Jan2001-Dec2018) - All Tenors, All Currencies (in USD Millions)

➢ Total Global Quasi-Sovereign Sukuk Issuance USD 158,864 Million

1,979 1,448 1,497855

3,996

2,881

5,651

21,649

12,793

21,635

11,503

21,317

28,622

23,038

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2001-2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018



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Total GLOBAL FI’s Sukuk Issuances (Jan2001-Dec2018) – All Tenors, All Currencies (in USD Millions)

➢ Total FI’s Sukuk Issuance USD 57,789 Million

735

1,8641,400

296 193

1,395

3,706

5,6234,969

4,202

8,155

5,395

9,163

10,693

0

2,000

4,000

6,000

8,000

10,000

12,000

2001-2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018



Global Sukuk IssuancesBy Currency Breakdown

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GLOBAL Sukuk Issuances (Jan 2001-Dec2018) - All Tenors (in USD Millions)by Currency Breakdown

AED, 8,324, 0.76%

BDT, 37, 0.00%

BHD, 19,453, 1.77%

BND, 10,257, 0.93%

CFA, 1,434, 0.13%

CNY, 236, 0.02%

EURO, 2,151, 0.20%

GBP, 1,385, 0.13%

GMD, 383, 0.03%

IDR, 62,889, 5.71%

JOD, 483, 0.04%

KWD, 332, 0.03%

LKR, 5, 0.00%

MAD, 105, 0.01%

MVR , 10, 0.001%

MYR, 611,373, 55.50%

NGN , 714, 0.06%

OMR , 1,070, 0.10%

PKR, 12,523, 1.14%

QAR, 16,816, 1.53%

SAR, 70,492, 6.40%

SDG, 19,516, 1.77%

SGD, 2,735, 0.25%

TRY, 17,711, 1.61%

USD, 240,816, 21.86%

YER, 253, 0.02%



Global Sukuk Issuance Breakup by Sukuk Structure

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INTERNATIONAL Sukuk Issuances (Jan2018-Dec2018)- All Tenors (in USD Millions) by Structure Breakdown

Hybrid Sukuk , 1000, 3%

Hybrid Sukuk - Wakalah /Murabahah, 2,100, 7%

Hybrid Sukuk -Ijarah/Murabahah, 900, 3%

Hybrid Sukuk -Ijarah/Musharakah, 351, 1%

Hybrid Sukuk -Murabahah/ Mudharabah, 2,000, 6%


Sukuk Al Mudarabah/Wakalah, 1,690, 5%


Sukuk Al Murabahah, 700, 2%




Hybrid Sukuk , 1,512, 2% Hybrid Sukuk - Wakalah /Murabahah, 509, 1%

Hybrid Sukuk -Murabahah/ Mudharabah, 14,108, 16%



Sukuk Al Murabahah, 37,442, 41%

Sukuk Al Musharakah, 2,172, 2%

Sukuk Al salam, 1,386, 1%


DOMESTIC Sukuk Issuances (Jan2018-Dec2018) - All Tenors (in USD Millions) by Structure Breakdown



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Challenges In Sukuk Market

Challenges in Sukuk Market

1) Limited availability of tangible assets leads to over reliance on certain Sukuk structures

2) Asset title transfer law particularly for sovereign assets

3) Investor’s preference and risk appetite tilted towards balance-sheet risk rather than direct risk on a tangible asset

4) Utilization of Sukuk in liquidity management & product range

5) Absence of insolvency & close-out netting law in most of OIC Countries leads to structuring challenges (title transfer versus security interest)


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6) Legal Framework & Enhancement of Shari’ah monitoring (Dana Gas Sukuk legal case)

7) Corporate Sukuk issuances below par contribution

8) Equity linked Sukuk issuances to be encouraged i.e Exchangeable Sukuk

9) Tax Neutrality

10) Quasi Sovereign Sukuk Implicit and Explicit Government Guarantee

Challenges in Sukuk Market (Continued)


1) Use of Sukuk/Islamic Securities as Collateral

➢ IIFM Collateralized Murabahah Standard

2) Currency and Rate of Return Risk Mitigation

➢ IIFM Hedging Standards

3) Established conventional bond issuance process vs Sukuk issuance process (structuring, documentation, market guidelines)

➢ IIFM Sukuk Standards and Guidelines Under Development

Solutions to Challenges


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Update on IIFM Standardized Sukuk Documentation Initiative

Key Considerations

▪ Objective: create non-jurisdictional specific, English law benchmark suite of Islamic finance documents for Sukuk Al-Ijarah and Sukuk Al-

Mudarabah (both senior unsecured and also a subordinated, Tier 1 issuance)

▪ Market preference is asset based Sukuk not asset backed

▪ Defaults and recourse to underlying assets

▪ Asset backed Sukuk documentation may be considered at a later stage

▪ Structuring Tier 1 transactions (Mudarabah transactions)

▪ Governing law

▪ Shari’ah representation


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Market Update - Shari’ah Representation

Inclusion of standard Shari’ah representation in Sukuk documentation due to market developments:

Shari’ah Compliance

– Each of the [Company] and the [Trustee] agree that it has accepted the Shari’ah compliant nature of this Agreement; and:

a) it shall not claim that any of its obligations under this Agreement (or any provision thereof) is ultra vires or not compliant with the principles of Shari’ah;

b) it shall not take any steps or bring any proceedings in any forum to challenge the Shari’ah compliance of this Agreement; and

c) to the extent permitted by law, none of its obligations under this Agreement shall in any way be diminished, abrogated, impaired, invalidated or otherwise adversely affected by any finding, declaration, pronouncement, order or judgment of any court, tribunal or other body that this Agreement is not compliant with the principles of Shari’ah.


Sukuk Standards

Sukuk Al-Ijara h(senior unsecured):

▪ Sale and Purchase Agreement

▪ Ijarah Agreement

▪ Service Agency Agreement

▪ Purchase Undertaking

▪ Sale and Substitution Undertaking

▪ Skeleton Prospectus – summary of principal transaction documents and structure diagram and principal cashflows.

▪ Declaration of Trust

Note: capital market documents (subscription agreement, agency agreement) are not part of the current standardisation project; the key is to have a template suite of Islamic finance documentation.


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Sukuk Standards

Sukuk Al-Mudarabah (senior unsecured):

▪ Mudarabah Agreement

▪ Skeleton Prospectus – summary of principal transaction documents and structure diagram and principal cashflows


Note: No purchase undertaking. Take full risk on the performance of the Mudaraba.

Sukuk Al-Mudaraba h(Tier 1, subordinated issuance):

▪ Mudarabah Agreement

▪ Skeleton Prospectus – summary of principal transaction documents and structure diagram and principal cashflows


However, Tier 1 regime is entirely linked to the regulatory regime in the applicable jurisdiction and must tie into Shari’ah requirements of the relevant organisation / jurisdiction.


Process and Timeline

Clifford Chance appointed to prepare suite of standardised Sukuk documentation.

Working group consisting of financial, legal and Shari’ah institutions to review documents.

Sukuk Al-Ijarah

▪ Initial drafts circulated in February 2018 to working group.

▪ Responses from working group received from April to June 2019.

▪ Second drafts circulated in October 2018.

▪ Responses from working group received in January 2019.

▪ Third drafts circulated in February 2019.

▪ Working party call on 14 March 2019.

▪ Responses on third drafts received in March 2019.

▪ Revised drafts circulated in April 2019 for IIFM Shari’ah guidance process.

▪ First Shari’ah guidance meeting in July 2019.

▪ Revised drafts incorporating Shari’ah guidance recommendations circulated in September 2019.

▪ Shari’ah guidance process to continue in December 2019.


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Process and Timeline

Sukuk Al-Mudarabah

▪ Initial drafts were circulated in November 2019.

▪ Working group comments received March 2019.

▪ Second drafts circulated in April 2019.

▪ Working group comments received in July 2019.

▪ Revised drafts to be circulated in November 2019.

▪ Working party call and Shari’ah guidance process to follow thereafter with expected completion date of Q1 2020.

Sukuk market guidelines

▪ Currently under assessment


ShukranWassalamu ‘Alaikum

International Islamic Financial Market (IIFM)Office 72, 7th Floor, Zamil Tower , Government Avenue, P.O. Box: 11454, Manama, Kingdom of BahrainTel: +973 17500161 , Fax: +973 17500171, Email: [email protected], Website: www.iifm.net

Disclaimer: The information herein has been obtained from sources believed to be reliable but cannot be guaranteed. The views or opinions expressed are subjected to change at any time. Neither the information nor any opinion expressed can be construed as a solicitation for the purchase or sale of any securities. International Islamic Financial Market disclaims liability in this respect.

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developments in the global sukuk market · 2019-12-03 · 1 developments in the global sukuk market...

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