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Monday, 11 May 2015

Oman announces OMR200 million debut sovereign sukuk issue

Muscat: Oman government on Sunday officially announced the much-awaited maiden sovereign Sukuk issue of OMR200 million. 

The sovereign Sukuk issue will be through a private placement and will open for subscription soon.   

"The sovereign Sukuk issue will be through a private placement process and marketed primarily to Islamic financial institutions, and sophisticated investors with a minimum subscription amount of OMR500,000," said Tahir Salim Al Amry, who heads the Sukuk committee 

"We have secured the in-principle approval from the CMA and are in advance stages of the structuring and documentation of the transaction," added Tahir, who is also the director general of Budget & Contracts at the Ministry of Finance. 

The Government sees the debut sovereign Sukuk issue as a benchmark transaction that will form a key milestone in the evolution of the Sukuk market in Oman, while providing an essential domestic liquidity management instrument for Omani Islamic financial institutions and an alternative to conventional financial institutions. 

Elaborating on the objectives of the Government's first sovereign Sukuk, Tahir Salim Al Amry said, "The sovereign Sukuk is primarily aimed at addressing the need of the nascent but fast growing Islamic financial sector in Oman. The Sukuk will serve as a domestic investment and liquidity management instrument to Islamic financial institutions in the country." 

Creating a benchmark
"In addition, the issuance of the debut sovereign Sukuk will support the Government in fulfilling its development targets and creating a benchmark for capital market transactions in Oman in general and Sukuk in particular."

"This is important for Islamic banks as it will help them to manage their liquity," Abdullah Al Salmi, executive president of the Capital Market Authority, told Times of Oman. 

"The CMA considered the plans proposed by the Ministry of Finance, and provided an in-principle approval for the debut sovereign Sukuk issuance. We are confident that this will have a positive impact on Oman's capital market by serving as a benchmark for future Sukuk issuances," added Al Salmi. 
The face value of the Sukuk issue will be OMR1 and the investor community can buy the Islamic instrument once it is listed on the Muscat Securities Market, Al Salmi told Times of Oman.

Speaking on the role of the CMA, Al Salmi added, "This issuance forms an integral part of the overall strategy of the CMA to enable the capital market to play its vital role in the economic development of Oman, particularly in the fixed-income market, where Sukuk forms an important element, to further develop Oman's Islamic capital market." 

"The transaction will also enhance the depth and breadth of the overall capital market in Oman. In a short span of two years since the issuance of the IBRF, besides the establishment of Islamic banks and windows, the Islamic capital market has seen the launch of the new MSM Sharia Index, three Shariah compliant investment funds, the first corporate Sukuk, and two Takaful operators."  

Bank Muscat Investment Banking along with the bank's Sharia-compliant banking window Meethaq, and Standard Chartered Bank have been appointed to advise the Government on the transaction. 

The committee comprises a select team of professionals from the MoF, the Central Bank of Oman (CBO) and the Capital Market Authority (CMA). The committee is also being assisted by the MoF Coordination Team.Islamic banking in Oman has made notable progress and now represents approximately 5 per cent of the total banking sector in Oman. Since the enactment of the Islamic Banking Regulatory Framework (IBRF) by the CBO in December 2012, through Royal Decree No. 69/2012, the Islamic banking sector has grown to comprise two full-fledged Islamic banks and six Islamic windows of conventional banks, offering banking products and services in accordance with the principles of Shariah.

(Times Of Oman / 10 May 2015)
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