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Tuesday, 3 May 2016

CMA Oman's sukuk regulation aims to provide transparency

KUALA LUMPUR: Capital Market Authority of Oman (CMA Oman) recently issued new sukuk regulations that aim to provide clarity and transparency to market players, while providing protection to investors in sukuk transactions. 

At the forefront of the historical initiative is Kemal Rizadi Arbi, a Malaysian who is an adviser at CMA Oman as well as a member of the Oman government’s sukuk committee.

“It is to be noted that not all jurisdictions have specific and separate sukuk regulations, particularly in the Gulf Cooperation Council (GCC) countries, with many just having a conventional bond regulatory framework with some additions made on the syariah requirements. 

“In addition, it has been drafted to provide flexibilities and spur innovation in the market, among others introducing a new trust regulation and structure and allowing the issuance of a sukuk programme,” said Kemal in an email to Business Times recently. 

He said the issuance of the new sukuk regulation formed an integral part of the overall strategy of the Oman CMA to enable the capital market to play a vital role as a fund-raising platform for companies 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.

“This new sukuk regulation will form a key milestone in the evolution of the sukuk market in Oman and hopefully boost sukuk issuances, particularly from private sector players in order to meet their development and funding needs, while diversifying the financing base and risk away from the traditional banking sector,” he said.

 Kemal said sukuk issuances would also provide an essential liquidity management instrument and investment avenue for both Islamic and conventional financial institutions, investment funds and takaful/insurance operators in Oman.

“Hence, it will not only provide a wider investor base for both conventional and syariah-compliant investors, but also attract the required foreign investments into the country via foreign investors. 

“We are confident that this new regulation will have a positive impact on Oman’s capital market and the economy,”

 he said. Kemal said within three years since the issuance of the Islamic Banking Regulatory Framework in December 2012 and the establishment of two Islamic banks and six Islamic windows, the Islamic financial market in Oman has seen the launch of the new Muscat Securities Market (MSM) Syariah Index with 30 syariah-compliant listed companies.

esides that, Oman has also seen the launch of three syariah-compliant investment funds, the first Oman sovereign sukuk and also the first corporate sukuk, and the establishment of two takaful operators, including the issuance of the new takaful law. 

“This is another important milestone and will lay the foundation to boost the development of the sukuk market and Islamic finance in Oman,”

he said. According to recent media reports, several Omani companies — including financial institutions, property developers and oil firms, are exploring the feasibility of floating sukuk issues, with the new regulation on syariah compliant bond instrument in place.

The Times of Oman said this was in line with global trends where GCC states, along with Malaysia, Indonesia, Turkey, Singapore, and Pakistan,

have issued US$11.1 billion (RM43 billion) worth of sukuk in the first three months of this year. 

“These countries are choosing to issue more of their debt as sukuk rather than conventional bonds. “These countries issued 39.3 percent of their debt as sukuk — the highest ratio of sukuk to conventional debt in eight years, based on data from Fitch Ratings,” it said.

(News Strait Times Online / 03 May 2016)
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