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Sunday, 11 May 2014

Three Omani firms plan sukuk issue

Muscat: At least three Omani companies are planning to float sukuk issues this year for raising funds for their expansion programmes. These companies are engaged in construction, property development, telecommunication and logistics services near port, Dr Mohd Daud Bakar, a prominent global Sharia scholar and chairman of Amanie Advisors, told Times of Oman on the sidelines of a seminar on sukuk. However, he declined to name the companies that are eying sukuk funds for their expansion programmes.

"Every one is looking at more than OMR100 million worth of sukuk issue. The second sukuk issue will be for more than OMR100 million," he added. Tilal Development started the first sukuk issue in Oman by raising OMR50 million.

Benefits of sukuk
"We have been speaking to a few potential corporate issuers in Oman. Some of them are very positive, some others are looking for government to take a lead, and few others are very new to understand the benefits of sukuk," noted Dr Bakar. He said Amanie Advisors, which was an advisor for Tilal Development, is trying to educate the potential Omani issues on the benefit of sukuk instrument.

"This is the good time to come out with a sukuk issue as investors are interested in parking their funds in sukuk instrument," he further added.

Dr Bakar said it takes another six months for these companies to float their issues, if the managements accept the cost of fund.

'Islamic banking emerges as fastest growing sector'
Dr Bakar said if Oman government comes out with a token sovereign sukuk issue, it will give a confidence and a benchmark for corporate issuers. A small amount issued by the government can be easily absorbed by Omani institutions. This will not require assets to be transferred to overseas markets since the buyers are Omani institutions. "Government can allocate assets like ports, airports, hospitals or designated land for construction. These are good assets for securitisation." 

In the case of Oman, within a short span of less than one-and-a-half years, Islamic banking and finance has emerged as one of the fastest growing segments within the financial services industry in Oman since the issuance of the Islamic Banking Regulatory Framework in December, 2012 and the establishment of two new dedicated Islamic banks and six Islamic banking windows. 

Since then, three Sharia funds had been launched, a corporate sukuk had been issued, the new MSM Sharia Index was launched for the Muscat Securities Market, two new takaful operators are currently operating in the market and the proposed issuance of first sovereign sukuk soon. 

Key role for Islamic banks
Based on what has been seen so far, Islamic banking and the Islamic capital market will play a key role in meeting the funding requirements of the country and growth in the economy, including for the small and medium enterprises.

Islamic finance, based on principles and values that are universally-accepted, offers a viable alternative to conventional finance, which has been widely affected by the recent global financial crisis and the current economic turmoil in some of the industrialised nations. 

The seminar, Capital Market Authority (CMA) in collaboration with Amanie Advisors, highlighted the rapid and continuing growth that has been seen in Islamic finance, the Islamic capital market and the Sukuk market over twenty years, from just a small and niche market, to becoming part of the mainstream global financial system. 

The expert speakers had also highlighted the advantages of issuing a sukuk versus conventional bonds due to the wider investor base, improved pricing dynamics and stable secondary market performance.

As more jurisdictions and players participate in the industry, the Islamic capital market is expected to contribute to a more efficient mobilisation and allocation of funds across regions, thus strengthening international financial and economic linkages between jurisdictions and bringing mutual benefits to all stakeholders.

(Times Of Oman / 10 May 2014)
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