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Friday, 8 January 2016

UAE emirate Sharjah plans sukuk issue in Q1 - sources

DUBAI, Jan 5 The emirate of Sharjah is planning to raise funds through a dollar-denominated Islamic bond, sources aware of the matter said on Tuesday, in what could be the first sovereign sukuk issuance from the Gulf region this year.
The sources said the issue would be of "benchmark size", traditionally understood to mean in excess of $500 million.
Six local and international banks have been mandated to arrange the sukuk including HSBC, which is leading the transaction, two of the sources said, speaking on condition of anonymity as the information isn't public.
The sovereign is aiming to issue the sukuk in the first quarter of the year and could announce investor meetings for the deal as early as this month, the sources added.
However, the diplomatic spat between Saudi Arabia and Iran could disrupt the timing of the issuance if it hits confidence among international investors.
An official at the department of finance in Sharjah, the third largest emirate of seven in the United Arab Emirates (UAE), declined to comment.
A successful offering could help Sharjah narrow its budget deficit and pave the way for other Gulf issuers to access the bond market.
As well as banks - seeking cash as local liquidity is squeezed - and companies, Gulf sovereigns are expected to make rare forays into international debt markets this year to cover budget shortfalls, including Qatar, Kuwait and Saudi Arabia.
Sharjah has coped comparatively well with low oil prices thanks to its diversified economy, according to credit ratings agency Standard & Poor's (S&P), which rates it as A.
In November, S&P said it expected Sharjah's government deficit to narrow towards 1 percent of GDP in 2018 from a peak of 2.7 percent in 2014. It added the calculations were made without access to Sharjah's GDP data, which is not made public.
Total expenditures in Sharjah's 2015 budget were forecast to be around 17.7 billion dirhams ($4.8 billion).
Sharjah's government budget is small relative to GDP, largely because the UAE federal budget covers a large share of public services in the emirate.

Any sukuk issue would be only its second ever offering after it sold a $750 million 10-year Islamic bond in 2014. The deal attracted significant interest from investors, who pledged orders worth 10 times its final size.
(Reuters / 05 January 2016)
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Summit to build sustainable and responsible finance ecosystem in emerging markets

Both ecosystems share many common challenges (e.g. the need to mainstream) and similar traits (e.g. strong risk management). A $2 trillion industry, Islamic finance has a strong footprint in emerging markets and appears to have reached a turning point in its global recognition, presenting an ideal opportunity to boost its appeal beyond its usual consumers. In parallel, practitioners in responsible finance are trying to shed the industry's reputation as a "niche" one and face a credibility issue with conventional finance in developed markets.
Even as Islamic finance has been able to demonstrate an ability to profitably implement a values-based approach, it aspires to develop a more positive and impact-driven approach, given its existing harmonized exclusionary screening approach. This should enable the industry to create a robust value proposition that incorporates universal values-based impact, good governance and environmental sustainability.
Moving towards these common principles can benefit from approaches used in developed markets by responsible investment institutions. RFI Foundation Chairperson of its Board of Trustees, Professor Datuk Rifaat Abdel Karim, noted "by promoting the shared principles that underlie the motivations for responsible finance, Islamic finance can play an instrumental role in expanding it, particularly in the emerging markets where Islamic finance has developed its deepest roots."
Prof. Datuk Abdel Karim continued, "Malaysia represents a particularly instructive case where regulatory bodies have supported convergence between Islamic finance and traditional responsible finance towards equitable, inclusive and sustainable economic development."
The Summit will focus on identifying ways that the industry, regulators, and other stakeholders can increase the footprint of responsible finance in emerging markets and make Islamic finance better integrated within the global responsible finance industry.
The Securities Commission's (SC) new Sukuk regulatory framework paved the way for the world first issuance of an SRI Sukūk by Khazanah Nasional, the sovereign investment arm of the Malaysian government, to fund educational investments with a structure that lowers finance cost if certain impact metrics are achieved. 
"Developing both global and domestic responsible finance markets that help investors integrate environmental, social and governance factors are crucial for expanding responsible finance in emerging markets," said Blake Goud, the CEO of RFI Foundation.
He continued, "I believe that Islamic finance has an important role--through capital markets, banking, insurance--in supporting inclusive economic development and Malaysia's efforts demonstrate how to make responsible finance industry more inclusive and globally integrated."
The Responsible Finance Summit will take place at Sasana Kijang, a renowned center for knowledge and learning excellence established by Bank Negara Malaysia.
(C P I Financial / 07 January 2015)
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