ASEAN Muslim scholars unite on issuing fatwas

In anticipation of modern developments in various fields, international Muslim clerics and muftis have decided to establish a committee on fatwas for Muslims in Southeast Asia.

The regional Fiqh council aims to produce fatwas as well as share knowledge on existing fatwas and deliberation methodology in various countries, said Muhyiddin Junaidi, head of the international relations division of the Indonesian Council of Ulema (MUI).

Closer co-operation between fatwa-issuing authorities in different countries would be suitable not only for Southeast Asian Muslims but also for Muslims worldwide, he suggested.

"For a start, we are going to streamline the deliberation process of issuing a fatwa at the regional level," Muhyiddin told Khabar Southeast Asia.

Fatwas declare various subjects as haram (sinful), such as violent jihad, terrorism, suicide bombings, a meningitis vaccine imported from Europe for hajj pilgrims, blocking public streets to conduct mass sermons, and vasectomies.

An ASEAN initiative

Establishment of an ASEAN Fiqh council to respond to contemporary problems faced by Muslims was one of 11 recommendations issued at the end of an international conference on fatwa held in Jakarta in late December 2012.

The committee is expected to provide solutions in co-operation with the Islamic Fiqh Council -- a body within the Muslim World League, based in Saudi Arabia -- and fatwa-issuing bodies in other countries.

"They can share their experiences in deliberating a fatwa including the methodology and exchange knowledge regarding the fatwas issued in their respective countries," said Secretary General of Islamic Fiqh Council Soleh Zabin Al-Marzouqi.

The majority of ASEAN's 230 million Muslims live in the three predominantly Muslim countries – Indonesia, Malaysia, and Brunei – while sizeable Muslim minorities live in Cambodia, Laos, Burma, Thailand, Singapore, the Philippines and Vietnam.

Contemporary Islam

Indonesian Minister for Religious Affairs Suryadharma Ali told reporters that a line of Islamic experts on fatwa has agreed to convene biannually to discuss how they can best respond to, among others, advances in medicine, astronomy, social dynamics, science and technology.

"We would monitor the developments over the past two years and see which ones need [Islamic] laws because not all existing fiqh can cater to the needs of today's world. We would need to issue new fiqh as a reference for Islamic conduct suitable to the current context," Suryadharma said.

He said the committee does not intend to centralise the issuance of fatwa to increase their legitimacy, but he did not rule out the possibility that a fatwa could affect government policies.

The MUI has issued approximately 8,000 fatwas since it was founded in 1975. Suryadharma cited an example from 2009 when the Indonesian government halted using a meningitis vaccine produced by a European pharmaceutical after the MUI declared it haram because it had traces of porcine enzymes. The government had to buy a new stock of vaccine.

"A fatwa should be adopted collectively. The more congregations that endorse a fatwa, the more legitimate it would be for the Muslim people," said the politician from the Islam-based United Development Party (Partai Persatuan Pembangunan/PPP).

Ratna Shofi Inayati, an ASEAN expert at the Indonesian Institute of Sciences (LIPI), told Khabar that the establishment of a regional forum that allows ASEAN Muslim clerics to exchange information on fatwa-issuing matters is a good effort. It is a form of people-to-people relations that is encouraged in ASEAN community blueprints.

"However, it is better to also co-ordinate their activities with the governments of ASEAN member states – especially those that have Muslim minority populations," she said.

(Khabar Southeast Asia / 14 Feb 2013)


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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
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Sukuk market to grow 30% in 2013

JEDDAH – The sukuk (Islamic bond) market is expected to grow by around 30 percent this year, buoyed by sovereign sukuk that will continue to dominate, supported by emerging of new countries that issue sukuk, Kuwait Finance House (KFH) said in a recent report.

Sukuk issuance will grow this year by 20-30 percent after the momentum witnessed by the issuance process last year that was worth $131 billion, the report, compiled by the KFH-Research, showed.

The share of the Middle East of issuance in 2012 increased; especially in Saudi Arabia and UAE, it said, noting that the returns on sukuk increased during the same year, compared to returns in 2011.

Sukuk remain a major facet of the Islamic finance industry in 2013. The Islamic capital market now stands aflush with more than $230 billion in outstanding sukuk papers, having developed as a crucial platform for international liquidity and fund raising activities, it said.

Renewed struggles in Europe have hampered growth in advanced economies, leading to capital flows into emerging markets and alternative investments.

Despite this, economic growth in 2012 is estimated to have remained subdued even in emerging economies on the back of lower global demand for goods and services. This sustained sentiment has kept investors in the bond markets in a year that has seen benchmark 10-year US Treasury yields lose 9.3 percent, it said.

In 2012, a total of $131.2 billion worth of sukuk papers were recorded from the primary market, representing a y-o-y increase of 54.2 percent. The amount dwarfs that of previous years and even represents three times the size of the primary sukuk market pre the global financial crisis. Since 2008, total yearly issuances have grown at a compound annual growth rate of 67.4 percent.

Sovereign issuers led the market share in 2012 despite a record amount of corporate sukuk placed during the year. Total issuances from sovereign entities throughout 2012 reached $80.2 billion as compared to $58.9 billion in 2011, representing a 36.0 percent y-o-y increase. Despite the dominant market share of 61.1 percent, sovereign papers were overshadowed by significant growth in both corporate and government-related entities which grew by 92.4 percent and 103.0 percent to $36.5 billion and $14.5 billion, respectively, the report indicated.

By region, issuances from Central and East Asia continued their growth momentum, climbing by 60.1 percent y-o-y to $104.8 billion during 2012. This was led by Indonesia (+131.1 percent y-o-y, $6.0 billion) and Malaysia (+59.4 percent y-o-y, $97.1 billion).

Meanwhile, issuances from the Middle East and North Africa also increased by 34.4 percent y-o-y to $26.3 billion, mainly led by the 278.2 percent y-o-y jump in issuances from Saudi Arabia to $10.5 billion and the 49.3 percent y-o-y increase in issuances from the UAE to $6.1 billion.

(Saudi Gazette / 16 Feb 2013)

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
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KFH-Research: Sukuk market growth expected to reach 30% this year

KFH-Research issued a report stating that Sukuk issuance will grow this year by 20-30% after the momentum witnessed by the issuance process last year that was worth USD 131 billion. The momentum of sovereign issuance is expected to be maintained as several other countries seek to enter the Sukuk issuance field, in order to receive required funding.

The report mentioned that the share of the Middle East of issuance in 2012 increased; especially in Saudi Arabia and UAE. It noted that the returns on Sukuk increased during the same year, compared to returns in 2011.

Sukuk remain a major facet of the Islamic finance industry in 2013. The Islamic capital market now stands aflush with more than USD230bln in outstanding sukuk papers, having developed as a crucial platform for international liquidity and fund raising activities.

The industry has maintained strong growth rates post the global financial crisis as issuers returned to the market and the slower than expected global economic recovery pushed investors into fixed income instruments, which in turn led to better credit terms for issuers of conventional bonds and sukuk. Renewed struggles in Europe has hampered growth in advanced economies, leading to capital flows into emerging markets and alternative investments. Despite this, economic growth in 2012 is estimated to have remained subdued even in emerging economies on the back of lower global demand for goods and services. This sustained sentiment has kept investors in the bond markets in a year that has seen benchmark 10-year US Treasury yields lose 9.3%.

As usual there were a number of sukuk issuers from debut jurisdictions during 2012, although total contribution to the size of the industry remained small. The dominant countries domicile to sukuk issuances prior to 2012 witnessed a large upscale in issuances, mainly due to the lower yields and an opportunity to take advantage of strong investor demand, a significant increase in sovereign issuances, as well as a number of new corporations venturing into the sukuk market.

In 2012, a total of USD131.2bln worth of sukuk papers were recorded from the primary market, representing a y-o-y increase of 54.2%. The amount dwarfs that of previous years and even represents three times the size of the primary sukuk market pre the global financial crisis. Since 2008, total yearly issuances have grown at a compound annual growth rate of 67.4%.

Sovereign issuers led the market share in 2012 despite a record amount of corporate sukuk placed during the year. Total issuances from sovereign entities throughout 2012 reached USD80.2bln as compared to USD58.9bln in 2011, representing a 36.0% y-o-y increase. Despite the dominant market share of 61.1%, sovereign papers were overshadowed by significant growth in both corporate and government-related entities which grew by 92.4% and 103.0% to USD36.5bln and USD14.5bln, respectively.

By region, issuances from Central and East Asia continued their growth momentum, climbing by 60.1% y-o-y to USD104.8bln during 2012. This was led by Indonesia (+131.1% y-o-y, USD6.0bln) and Malaysia (+59.4% y-o-y, USD97.1bln). Meanwhile, issuances from the Middle East and North Africa also increased by 34.4% y-o-y to USD26.3bln, mainly led by the 278.2% y-o-y jump in issuances from Saudi Arabia to USD10.5bln and the 49.3% y-o-y increase in issuances from the UAE to USD6.1bln.

Within the corporate sukuk market, USD26.8bln worth of papers or 73.5% of total issuances were issued in Malaysia, while USD4.2bln (11.5%) was issued in the UAE and USD3.4bln (9.3%) was issued in Saudi Arabia. The largest corporate issuance for the year was the USD9.7bln worth 23-tranche sukuk Musharakah issued by Projek Lebuhraya Utara-Selatan (PLUS) Berhad, followed by the USD1.0bln worth perpetual sukuk Mudharabah issued by Abu Dhabi Islamic Bank (ADIB).

On the sovereign and quasi-sovereign side, Malaysia continued its leading market share in 2012 with USD70.3bln worth of sovereign and quasi-sovereign papers or 74.2% of the total market, mainly led by the central bank and numerous government-linked corporate entities such as Cagamas, Telekom Malaysia and Khazanah Nasional. This was followed by Saudi Arabia with USD7.1bln or 7.4% of the total and Indonesia with USD5.8bln or 6.2% of the total.

Global sukuk outstanding rose to USD231.4bln at the end-2012 from USD178.2bln at the end-2011 representing y-o-y growth of 29.9% (2011: 23.5%).

Sukuk yields continued their decline throughout 2012, in line with the trend in conventional bond yields, as fixed income instruments remain a preferred investor asset class amidst slower global economic growth. The HSBC/Nasdaq SKBI Yield Index showed a drop in sukuk yields from 3.991% at the end-2011 to 2.810% at the end-2012, the lowest since inception.

In terms of total return performance, the HSBC/Nasdaq SKBI Total Return Index, which tracks the return of an emerging sukuk portfolio consisting of 46 USD/GBP/JPY/EUR-denominated fixed/floating rate vanilla issuances, returned 9.69% during 2012, up from 7.13% in 2011.

Based on the issuance momentum seen in 2012, the global sukuk issuance for 2013 is expected to illustrate strong but moderated growth of 20%-30%, supported by the following:

· Prospects for strong economic growth in 2013 remains doubtful given the tough challenges that still lie ahead. The IMF projects the world GDP growth of 3.6% in 2013, lower than earlier projections of 3.9%, which will keep investors focussed on safer fixed income assets. Furthermore, the high sovereign levels in Europe and the increasing US debt burden may well push investors away from conventional assets and into highly-rated sukuk papers.

· More sovereign issuers are anticipated to tap the sukuk market in 2013 as governments will continue to raise funds to support economic growth and fund fiscal deficits.

· New emerging market players as well as new non-Islamic issuers are expected to tap the sukuk market.

· Increasing demand and popularity for Shariah-compliant products and structures post the global financial crisis will form a strong demand base for sukuk.

· A number of new jurisdictions have shown interest in issuing sukuk, such as Egypt, Senegal, Libya, Tunisia and Nigeria and continue to make regulatory inroads for future issuances.

(Zawya / 16 Feb 2013)

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Consultant-Speaker-Motivator: www.ahmad-sanusi-husain.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com