Analysis of Sukuk Market
Analysis of the Sukuk Market
Dubai, April 25, 2007
Overview
Introduction What is a Sukuk?
Types of Sukuk
Composition of the Sukuk Market Breakdown of the Sukuk Market Expected Growth of the Sukuk Market
Introduction
1974 beginning of the first Islamic Financial Institution by the creation of the inter-governmental Islamic Development Bank (IDB) 2001 first GCC Sukuk issuance • Bahrain Monetary Agency USD100 Million 2002 World’s first Islamic global bond issue • Federation of Malaysia USD600 Million
What is a Sukuk?
A Sukuk is an Islamic Bond compliant with Shariah law, which pays a return based on tangible assets in lieu of an interest rate. Similarity with Conventional Bonds : Bonds contractually obligate the issuer to pay specific interest and principal to the bondholders meanwhile Sukuk holders are entitled to share in the proceeds of the realization of the Sukuk assets.
Types of Sukuk
14 Eligible Asset Classes according to AAOIFI are: • SUKUK AL-IJARAH • SUKUK IJARAH MOWSUFA BITHIMA • SUKUK MANFAA IJARAH • SUKUK MANFAA IJARAH MOWSUFA BITHIMA • SUKUK MILKIYAT AL-KHADAMAT • SUKUK AL-SALAM • SUKUK AL-ISTISNA’A • SUKUK AL-MURABAHA • SUKUK AL-MUSHARAKA • SUKUK AL-MUDARABA • SUKUK AL-WAKALA • SUKUK AL-MUZRA’A • SUKUK AL-MUSAQA • SUKUK AL-MUQARASA
Composition of the Sukuk Market
Actual Size of the Market ~ USD 53 Billion Syndicated loans vs Conventional Sukuk: • Banks vs Capital Markets • Different client base • Cheaper for issuer but not for investor Malaysia vs GCC Sukuk: • Bay’ Al Dayn • Underlying assets Convertible vs Plain Vanilla: • USD 2 Billion+ and USD 50-500 Million
Composition of the Sukuk Market
Most popular types of Sukuk are: • Ijarah: Sukuk that represent ownership of equal shares in a rented real estate or the usufruct of the real estate giving owners the right to own the real estate and receive the rent. 79 issues since 2001 / USD16.22 Billion • Musharaka: Investment Sukuk that represent ownership of Musharaka
Dubai, April 25, 2007
Overview
Introduction What is a Sukuk?
Types of Sukuk
Composition of the Sukuk Market Breakdown of the Sukuk Market Expected Growth of the Sukuk Market
Introduction
1974 beginning of the first Islamic Financial Institution by the creation of the inter-governmental Islamic Development Bank (IDB) 2001 first GCC Sukuk issuance • Bahrain Monetary Agency USD100 Million 2002 World’s first Islamic global bond issue • Federation of Malaysia USD600 Million
What is a Sukuk?
A Sukuk is an Islamic Bond compliant with Shariah law, which pays a return based on tangible assets in lieu of an interest rate. Similarity with Conventional Bonds : Bonds contractually obligate the issuer to pay specific interest and principal to the bondholders meanwhile Sukuk holders are entitled to share in the proceeds of the realization of the Sukuk assets.
Types of Sukuk
14 Eligible Asset Classes according to AAOIFI are: • SUKUK AL-IJARAH • SUKUK IJARAH MOWSUFA BITHIMA • SUKUK MANFAA IJARAH • SUKUK MANFAA IJARAH MOWSUFA BITHIMA • SUKUK MILKIYAT AL-KHADAMAT • SUKUK AL-SALAM • SUKUK AL-ISTISNA’A • SUKUK AL-MURABAHA • SUKUK AL-MUSHARAKA • SUKUK AL-MUDARABA • SUKUK AL-WAKALA • SUKUK AL-MUZRA’A • SUKUK AL-MUSAQA • SUKUK AL-MUQARASA
Composition of the Sukuk Market
Actual Size of the Market ~ USD 53 Billion Syndicated loans vs Conventional Sukuk: • Banks vs Capital Markets • Different client base • Cheaper for issuer but not for investor Malaysia vs GCC Sukuk: • Bay’ Al Dayn • Underlying assets Convertible vs Plain Vanilla: • USD 2 Billion+ and USD 50-500 Million
Composition of the Sukuk Market
Most popular types of Sukuk are: • Ijarah: Sukuk that represent ownership of equal shares in a rented real estate or the usufruct of the real estate giving owners the right to own the real estate and receive the rent. 79 issues since 2001 / USD16.22 Billion • Musharaka: Investment Sukuk that represent ownership of Musharaka