Entries in English and Malay (Bahasa Melayu)

Wednesday, 13 May 2015

Saudi set to foster sukuk market as bourse opens

Opening its $568bn stock exchange to foreigners for the first time may be the push Saudi Arabia needs to boost its sukuk market.

The Riyadh-based Capital Market Authority plans to make the process of structuring bonds that comply with Islam’s ban on interest easier, according to Adel al-Ghamdi, chief executive officer of the Saudi Stock Market Tadawul. The kingdom’s debt capital market needs improvement, he said at the Euromoney Saudi Arabia Conference last week.

Saudi Arabia, the birthplace of Islam and home to two of the religion’s holiest sites, has a relatively undeveloped debt market as banks flush with cash offer competitive lending rates. While Saudi companies have borrowed $6.7bn in Shariah-compliant loans so far this year, none have sold sukuk. Islamic loans have outpaced sukuk sales for four of the past five years.

“To grow and deepen the Saudi debt capital markets, it is important to streamline process and regulations to facilitate listing of sukuk,” Rizwan Kanji, a partner at law firm King & Spalding who helps structure Islamic deals in Saudi Arabia, said by phone from Dubai on May 6. “This will create incentives for a wider pool of investors and improve appetite for trading of sukuk over the exchange.”

Saudi Arabia’s Islamic banking assets total about $122bn and are the world’s biggest after Iran’s $482bn, according to Dubai government data. There will be a push to improve the nation’s debt capital market this year, the CMA’s Chairman Mohammed al-Jadaan said last week in Riyadh.

“Saudi Arabia is one of the world’s most important markets when it comes to Islamic financing,” Hamed Hassan Merah, secretary general of the Accounting and Auditing Organization for Islamic Financial Institutions, a Bahrain-based group that drafts standards for the industry, said in an interview in Riyadh on May 6. The regulator should set out clear guidelines if it wants to emulate Malaysia, the world’s biggest sukuk market, he said.

The kingdom is pursuing a $130bn spending plan to diversify its economy away from oil, and has vowed to invest in major projects including railroads, power stations, desalination plants and universities. Even with its underdeveloped sukuk market, Saudi borrowers raised $7.9bn from the sale of Islamic bonds in 2014, the most in the world after Malaysia.

For now, pricing means many companies prefer the loan market. Saudi Arabian Oil Co, the world’s largest oil exporter, secured a $10bn loan in March, including a 7.5bn riyal ($2bn) Shariah-compliant tranche priced at 11 basis points over the three-month Saudi Riyal Interbank Offered Rate, or about 0.88%.

The three-month Saibor, used as a benchmark for some local- currency loans, is less than half the five-year midswap rate. It has risen less than one basis point to 0.774% since falling to the lowest in more than three years on March 23. That compares with 1.67% for midswaps at 11.24am in London on Monday.

(Gulf Times / 12 May 2015)
Alfalah Consulting - Kuala Lumpur:
Islamic Investment Malaysia:

Islamic finance makes waves in the Maldives

Bank of Maldives Plc began offering Shari’ah-compliant retail deposits on 22 January and promised that retail and commercial loans would follow within two years.

Speaking to Bloomberg, Deputy Minister for Islamic Affairs Aishath Muneeza said that the new offering will help drive an increase in Shari’ah complaint financial assets to five per cent of holdings this year from three per cent.

“The growth of Islamic finance will be at a very fast pace,” she said. “I hope that we will be able to create an Islamic finance centre, which will act as the leader for Islamic finance and the Halal industry in the South Asia region.”

The first Islamic bank in the country, Maldives Islamic Bank (MIB) opened in March 2011 with capital of MVR 150 million ($12 million), operating both a consumer and a corporate unit. At the time, CEO Harith Harun said that there was a strong demand for Islamic banking services in the country.

The Government has since established a Shari’ah advisory board and laid the regulatory groundwork for Sukuk investment. 

According to Bloomberg, the tourism-dependent island nation is looking to diversify its economy by luring Islamic debt sales and deposits from India, where there is a Muslim population of 166 million but no Sukuk or Shari’ah lenders because of opposition from Hindu politicians.

“What the Maldives has going for them is the fact that they’re not as regulated as Sri Lanka or Pakistan,” Baiza Bain, a Director at Islamic finance consultancy Amanie Advisors Pty Ltd., told Bloomberg. “They are more nimble in that sense compared to their bigger rivals in South Asia.

“Maldives has taken the positive step in terms of issuing the initial regulations but what they need to do is attract one of the major players. If you have one of the big banks set up operations there, that alone will be a very positive reinforcement for other banks to consider setting up a presence,” Baiza said.

The Maldives Monetary Authority began selling Shari’ah-compliant treasury bills in 2013 and in the same year, the Housing Development Finance Corporation Plc sold the first Shari’ah compliant bonds. The Government has also been keen to develop the Halal sector, particularly in fish exports.
(Albawaba Business / 12 May 2015)
Alfalah Consulting - Kuala Lumpur:
Islamic Investment Malaysia:

Latest Posts

Upcoming Events on Islamic Finance, Wealth Management, Business, Management, Motivational

Alfalah Consulting's facebook


Alfalah Consulting is NOT providing any kind of loan to finance project etc and asking for a fee. If you've received any email claiming to be from Alfalah Consulting, offering loan to you, please ignore it or inform us for further actions. Our official email is If you've received an email from, that's NOT from us. Be cautious!