JEDDAH – Sukuk market proved resilient in the face of the crisis, with funds raised through sukuk issues grew from $2.8 billion in 2001 to $53.2 billion in 2010 and even during the tumultuous period of 2008-2009 funds raised from sukuk increased significantly, NCB Chief Economist Dr. Jarmo Kotilaine said at the 7th World Islamic Funds Conference held recently in t Bahrain under the theme “Global and Regional Economic Outlook: Assessing the Impact on the Performance of Islamic Funds.”
“Sukuk are also emerging as a new asset class for investors, since asset-backed/based instruments provide relative capital protection and predictable returns to investors, while In addition, a near-absence of long term financing tools and a growing importance of long term capital projects launched in the region have also increased the attractiveness of sukuk,” he said.
“After a brief setback in 2010, increasing private sector activity is driving the revival in the GCC sukuk market.
Funds raised through sukuk in the GCC in 2011 reached 38 percent ($17 billion) of global issuance up to September 2011, compared to only 28 percent ($7.6 billion) and 22 percent ($6.1 billion) in 2009 and 2010 respectively. Corporate issuance of sukuk in 2011 accounted for around 87 percent ($14.6 billion) of total issuance compared to 77 percent ($4.6 billion) of total issue in 2010.”
Kotilaine said “strong growth in Islamic banking continues apace,” noting that global Islamic banks’ assets have increased considerably from $145 billion in 2002 to $1,033 billion in 2010.
The Jeddah-based Islamic Development Bank (IDB) will be preoccupied with two developments in 2011 apart from its established plan of action. This is the progress toward the launch of its mega bank project and the other is the continuation of its trust certificate (sukuk) program.
Ahmad Muhammad Ali, president of the Islamic Development Bank Group, said earlier that IDB has issued a $400-million debut sukuk; followed by a $500 million sukuk and the $850 million sukuk in 2009.
It closed its latest offering in October - a $500 million sukuk, bringing the total volume of IDB Sukuk offerings to date to $2.25 billion - the largest volume of sukuk issuances by any supranational. The IDB’s ceiling of its current Trust Certificate Issuance Program is $3.5 billion. This leaves $1.25 billion of issuances to come.
Islamic finance is gaining prominence in non-Islamic countries.
In the UK, the government has set an objective to make London the hub for Islamic finance and there are plans to issue sovereign sukuk and amend tax laws on Islamic finance.
France, Germany, Japan, Singapore and South Korea are other countries where the governments are taking active steps to promote Islamic banking and finance, while Hong Kong aims to become the Islamic finance gateway to China.
Kotilaine further said that while the global economic crisis negatively impacted the Islamic banking sector after growing at double-digit pace for a number of years, resulting in Islamic banking assets slowing down to 9.8 percent in 2009, growth accelerated again to 26 percent in 2010 and the interest for Islamic finance continues to grow even in non-Islamic countries as reflected by the fact that there are over 300 Islamic financial institutions worldwide across 75 countries.” – SG