Sukuk

GCC Fixed Income: Ratings outlook of Saudi Arabia and Bahrain upgraded to stable

Saudi Arabia and Bahrain saw outlook upgrades in November. Moody’s has revised Saudi Arabia’s outlook from negative to stable on expectation that country would reverse most of its 2020 debt increase while maintaining fiscal buffers. S&P has revised Bahrain's outlook to stable from negative, citing the fiscal reforms undertaken to strengthen its economy. Higher oil prices and support from other GCC members are also expected to help the country improve its fiscal position. The countries had also issued bonds during...

GCC Fixed Income: UAE issues debt for the first time at federal level

UAE federal government has raised USD 4 billion in its debt capital market debut with orders over USD 22.5 billion, an oversubscription of 5.6x. This is the first time that UAE raises funds at a federal level. The bonds were issued in three tranches with 10, 20 and 40 year tenors. It plans to issue more dollar-denominated bonds in 2022 and would also be exploring green bonds and local currency debt. Another issuance is that of Saudi Arabia. The country...

Flurry of Bond issuances – How are GCC countries placed?

The year 2020 has seen bond issuances totaling USD 42billion so far by GCC governments as they try to raise funds in the market to plug record deficits due to the oil price crash and the COVID-19 crisis. GCC Sovereign yields have come down since the market selloff in March at the height of the crisis. As on October 6, 10-year yields for Kuwait Government bonds stands at 1.48% (a fall from 2.37%, 2020-start) while that of Saudi Arabia, Abu...

How to improve the Secondary Market for Sukuk Bonds

This article was first published in Islamic Finance news Volume 17 Issue 22 dated the 3rd June 2020 Sukuk bonds have been gaining in popularity since their first issuance in 1990. According to the International Islamic Financial market (IIFM), Global Sukuk Issuances with maturity over 18 months totalled USD 42 billion in 2019, a growth of 6% over 2018 and nearly 40% over 2009. However, in-spite of the rise in issuances, the secondary market for Sukuk Bonds has remained illiquid...

Secondary Market of Sukuk: An Overview

This article was first published in Islamic Finance news Volume 17 Issue 1 dated the 8th January 2020 Sukuk are useful instruments, both for issuers as well as investors. They can be an alternative source of funds for governments and conventional institutions, a liquidity management tool for Islamic banks and institutions whose investments must be Shariah compliant and a source of portfolio diversification for conventional institutions. However, in order to benefit from the advantages of Sukuk, the primary and secondary...

Securitization platform for Islamic liquidity management

This article was originally published in Islamic Finance News (IFN). Liquidity management has been one of the major hurdles faced by Islamic banks since inception, owing to the dearth of instruments that help maintain liquidity while complying with Shariah laws. Due to the unavailability of compliant instruments, Islamic banks typically hold a large amount of liquid assets in their balance sheets until maturity and are dependent on their balance sheet assets for liquidity management. The excess idle cash adds pressure...

Why GCC Corporates have shunned the Sukuk market

This article was first published in Islamic Finance news Volume 15 Issue 18 dated the 1st May 2018. The sukuk segment of the Islamic financial industry, witnessed a lot of activity in 2017. There was a global sale of nearly USD 100 bn in sukuk which increased the amount raised by 40% from 2016 as there was sustained growth in the GCC region along with the continuation in non-Islamic markets like U.K and Australia and entry by new markets like Nigeria....

Islamic Finance: Areas for Innovation

Islamic finance industry has evolved and grown considerably since its inception in a rudimentary form during 1960s. The focus of the Islamic finance industry during its initial stage of inception was to create customer awareness and product development. However, the increased recognition and awareness, along with high demand resulted in rapid growth in the value and transformation of the industry over the next few decades. The global Islamic finance industry realised $2.1tn of assets in 2014 and is gearing up...

GCC: Sukuk – Key questions?

KEY QUESTION 1: What are Basel III norms and why are they important for application in Islamic Banking? The Basel III norms were introduced after the 2008 crisis to make the banking system more robust. Under the norms, banks shall hold 6% of Tier-I capital and 2% of Tier II capital. Tier I capital includes 4.5% of common equity and 1.5% of additional Tier-I capital which includes preferred stock and hybrid securities. Basel III norms are mandatory for all banks,...