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Friday, 7 September 2007

A unified sukuk market is estimated to take five years to standardise, says a financial expert

MANAMA: A unified sukuk market is estimated to take five years to standardise, says a financial expert. "The main targets are to unify sukuk products and structures, their documentation and industry common practises," International Islamic Finance Market chief executive Ijlal Ahmed Alvi told delegates at the 'Regional Forum on the Role of Islamic Financial Institutions in Financing for Development' held at the Ritz-Carlton Bahrain, Hotel and Spa yesterday. Harmonising sukuks will require a clear method of interpretation and documentation that will aid transparency and effectively establish a conducive infrastructure that will not allow for disparity between GCC states and non-GCC states, he said. "Initiatives currently in progress include the Islamic hedging master agreement," Alvi said. "By the end of the year we hope to have produced one document to offer information on achieving uniformity on this topic," he added. "The total corporate sukuk industry has exceeded $63 billion since January 2004. The sovereign sukuk industry exceeded $6.5bn in mid-2007," Lebanese American University professor of finance Rima Turk Ariss told the conference. "Bahrain is responsible for 30 per cent of the total value of all sukuks and holds 70pc of the total number of sukuks issued. "The GCC is responsible for 55pc of the market as a whole and the remaining 45pc is located in non-GCC countries. "There has been an exponential growth in sukuk as a whole and we are witnessing more and more competition in the sukuk market," Ariss said. "Recent trends in the sukuk market include the mega-sukuk, some worth up to $10bn, and the convertible sukuk which can be converted to initial public offering shares. "Corporate sukuk funding is contained to a few sectors, and with some sukuks requiring a minimum subscription of $1 million they are limited to high net worth individuals." Other initiatives in progress include a treasury murabaha master agreement and those under consideration include a sukuk primary market, a specific research database, coordination in training for professionals and an Islamic capital market system, Ariss said. "In corporate sukuks different providers have conflicting data on their sukuk, what is required is to harmonise data," she added. - (GDN, 6 Sep 07)
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