sukuk market overview & structural trends - iifm market... · sukuk al istisna'a (3,456)...

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Sukuk Market Overview & Structural Trends

IIFM Industry Seminar on Islamic Capital and Money Market

Hosted by Bank Indonesia

Tuesday, 6th May 2014, Jakarta

Ijlal Ahmed Alvi

Chief Executive Officer

IIFM

Recent Sukuk Trends

Perpetual Sukuk issuances

Abu Dhabi Islamic Bank Perpetual Sukuk • Mudarabah Structure

Almarai Perpetual Sukuk • Hybrid – Mudarabah and Murabah

GEMs School Perpetual Sukuk • Mudarabah

Malaysian Airline System Perpetual Sukuk • Al Mushrakah

Covered Sukuk

Malaysia Building Society (under planning)

– Consumer Finance as security with no title change

1 IIFM Industry Seminar on Islamic Capital and Money Market, 6th May 2014, Jakarta

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Recent Sukuk Trends (continued)

Sovereign Benchmark Sukuk

Turkey Government Sukuk

Indonesian Government Sukuk

UAE, Qatar, Saudi Arabia (Corporates)

Fixed Profit Rate & Lower Pricing

Longer Tenors including Perpetual


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Sukuk Al Ijarah (45,946) 44%

Sukuk Al Musharakah (11,611) 11%

Sukuk Al Salam (1,958) 2%

Sukuk Al Murabahah (7,489) 7%

Hybrid Sukuk (6,709) 7%

Sukuk Al Wakalah (18,075) 17%

Sukuk Al Mudharabah

(6,325) 6%

Islamic Exchangeable

Sukuk (6190) 6%

IIFM Industry Seminar on Islamic Capital and Money Market, 6th May 2014, Jakarta

Source: IIFM Sukuk Database

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4

Sukuk Al Musharakah (84,187) 16%

Sukuk Al Salam (3,334) 1%

Sukuk Al Murabahah (273,494) 53%

Bai' Bithaman Ajil (34,634) 7%

Hybrid Sukuk (22,882) 4%

Sukuk Al Wakalah (7,271) 1%

Sukuk Al Mudharabah (10,772) 2%

Islamic Exchangeable Sukuk

(408) 0%

Sukuk Al Istisna'a (3,456) 1%

Sukuk Al Ijarah (80,675) 15%



What is Required for the Development & Success of the Sukuk Market

Sovereign and Quasi-Sovereign

Implicit versus explicit guarantee

Sizeable Issuance

2012 as well as 2013 were record years & continuation in 2014

Quality Corporate issuer

Market Makers


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6

Corporate (55,881)

54%

Quasi Sovereign (16,944)

16%

Sovereign (31,476)

30%

International

Corporate (185,332)

34%

Quasi Sovereign

(28,214) 5%

Sovereign (326,889)

61%

Domestic



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

Covered Sukuk & Mortgage-backed Sukuk

Convertible/Exchangeable Sukuk

Use of Islamic Hedging products


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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



1,172 1,371 7,057 9,465 13,698 33,837

50,041 24,264

37,904 52,978

92,403

137,499 136,714

12,135

610,539

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014-Jan Total


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10

International Sukuk Issuances 2001 – January 2014 (All Amounts in USD Millions)


425 1,130 1,680 2,503 3,413

11,915 13,859

2,140 7,000

4,098 8,444

20,169 21,539

860

99,175

0

20,000

40,000

60,000

80,000

100,000

120,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014-Jan Total


Breakdown of Global Sukuk Issuances – By Region Jan 2001 – Jan 2014 (All Amounts in USD Millions)

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Asia & Far East (473,708) 74%

GCC & Middle East

(135,833) 21%

Africa (19,137) 3%

Europe & Others (15,866) 2%



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12

Malaysia (433,376) 67%

Pakistan (7,739) 1%

Qatar (22,599) 4%

Saudi Arabia (45,727) 7%

Singapore (1,273) 0%

Sudan (18,883) 3%

Turkey (14,592) 2% UK (309) 0%

UAE (49,587) 8% USA (767) 0%

Bahrain (14,722) 2% Yemen (253) 0%

Brunei Darussalam (5,255) 1%

France (1) 0%

Gambia (121) 0%

Germany (178) 0%

Hong Kong (196) 0%

Indonesia, (24,684) 4%

Japan (190) 0%

Jordan (119)

0% Kazakhstan (77) 0%

Kuwait (2,502) 0%



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Malaysian Ringgit (MYR) 67%

Pakistani Rupees (PKR)

1%

Qatar Riyals (QAR) 2%

Saudi Riyals (SAR) 5%

Sudanese Pounds (SDG)

3%

Singapore Dollars (SGD)

1%

Turkish Lira (TRY) 0%

US Dollars (USD) 15%

Yemeni Riyals (YER) 0%

Emirati Dirhams (AED) 1%

Bahraini Dinars (BHD) 1%

Bruneian Dollars (BND)

1%

Chinese Yuan Renminbi (CNY)

0% Euros (EUR) 0%

British Pounds (GBP) 0%

Gambian Dalasi (GMD)

0%

Indonesian Rupiah (IDR) 3% Jordanian Dinars

(JOD) 0%

Kuwait Dinars (KWD) 0%



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Sukuk Issuances Pre & Post Financial Crisis - Analysis

The record growth rates achieved by the

sukuk industry between 2001 and 2007

were impressive.

The 2008 crisis came as a reality check

for all markets and players, reshaping the

priorities of governments, banks, issuers,

and investors.

As a result, the number and value of

issued sukuk has came down significantly

Although the 2008 financial crisis created

tight liquidity environments in many

markets.

Return of Sukuk Market Growth from

2011

Impressive Sukuk Issuances in 2012

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425 1,130 1,680 2,503 3,413

11,915 13,859

2,140

7,000 4,098

8,444

20,169

17,000

0

5,000

10,000

15,000

20,000

25,000

International Sukuk Issuances 2001- Nov 2013 (USD Millions)

425 1,130

1,680 2,503

3,413

11,915

13,859

2,140

7,000

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2001 2002 2003 2004 2005 2006 2007 2008 2009

International Sukuk Issuances 2001-2009 (USD Millions)



2008 Global Financial Crisis & International Sukuk

The Nakheel Group – UAE

Gulf Holding Company (Villamar Sukuk) – Bahrain

Dana Gas – UAE

Gulf Finance House – Bahrain

Tabreed Sukuk – UAE

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International Investment Group - Kuwait

Saad Group (Golden Belt)- Saudi Arabia

Arcapita Bank – Bahrain

The Investment Dar – Kuwait

East Cameron Partners – USA



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2008 Global Financial Crisis & Impact on International Sukuk - All Amounts in USD Millions

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Total International Sukuk Issuances

2001- 2008 (37,065) 83%

Total International Sukuk

Restructured / Defaulted 2001-2008 (3,166) 7%

The Nakheel Group - Not Defaulted

(4,270) 10%



Structural Breakdown of International Sukuk Defaulted/Restructured during 2008 Global Financial Crisis All Amounts in USD Millions

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Hybrid Sukuk (200) 6%

Sukuk Al Ijarah (950) 30%

Sukuk Al Murabahah (210)

7%

Sukuk Al Musharakah (606)

19%

Sukuk Al Mudharabah, (1,200) 35%


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Shukaran Wassalamu ‘Alaikum

International Islamic Financial Market (IIFM) Office No. 72, 7th Floor, Zamil Tower (Main Tower), P.O. Box: 11454, Manama, Kingdom of Bahrain Tel: +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.

sukuk market overview & structural trends - iifm market... · sukuk al istisna'a (3,456)...

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