Post on 10-Mar-2020
Developments in the Global Sukuk Market
IIFM Awareness Seminar on Islamic Finance Hosted by Bank Indonesia
Tuesday, 12 November 2019
Multi Function Room, 3rd Floor, Building B, Bank Indonesia, Jakarta
Ijlal Ahmed Alvi
Chief Executive Officer
IIFM
Total Sukuk Issuances
Total GLOBAL Sukuk Issuances (Jan 2001 - Dec 2018) - All Tenors, All Currencies (in USD Millions)
Source: IIFM Sukuk Database Total Global Sukuk Issuance USD 1,101,502 Million
66,830
50,184
24,33737,927
53,125
93,173
137,599135,557
107,300
67,818
87,784
116,717123,150
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
1IIFM Awareness Seminar on Islamic Finance, 12th November 2019, Jakarta
Total INTERNATIONAL Sukuk Issuances (Jan 2001 - Dec 2018) - All Tenors, All Currencies (in USD Millions)
Total International Sukuk Issuance USD 251,440 Million Source: IIFM Sukuk Database
21,556
14,002
2,210
7,0234,248
8,684
20,26922,992
26,730
21,880
31,210
37,648
32,988
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
2IIFM Awareness Seminar on Islamic Finance, 12th November 2019, Jakarta
Total DOMESTIC Sukuk Issuances (Jan 2001 - Dec 2018) - All Tenors, All Currencies (in USD Millions)
Total Domestic Sukuk Issuance USD 850,062 Million Source: IIFM Sukuk Database
45,27536,182
22,12730,904
48,877
84,490
117,331112,565
80,570
45,93856,574
79,06990,162
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
3IIFM Awareness Seminar on Islamic Finance, 12th November 2019, Jakarta
Total SHORT-TERM (GLOBAL) Sukuk Issuances (Jan 2001 - Dec 2018) - All Currencies, Tenor 12 Months or Less, in USD Millions
14,667
3,6718,552
20,932
35,264
43,365
65,227 62,72556,601
15,990
23,34017,074
34,459
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
Total Global Short Term Sukuk Issuance 401,869 Millions Source: IIFM Sukuk Database
4IIFM Awareness Seminar on Islamic Finance, 12th November 2019, Jakarta
Total SHORT-TERM (INTERNATIONAL ) Sukuk Issuances (Jan 2001 – Dec 2018) - All Currencies, Tenor 12 Months or Less, in USD Millions
1,910
48 0 0 19 0 01,018
5,800
7,576
9,3009,850
8,110
0
2,000
4,000
6,000
8,000
10,000
12,000
Total International Short Term Sukuk Issuance 43,631Millions Source: IIFM Sukuk Database
5IIFM Awareness Seminar on Islamic Finance, 12th November 2019, Jakarta
Total SHORT-TERM (DOMESTIC) Sukuk Issuances (Jan 2001 – Dec 2018) - All Currencies, Tenor 12 Months or Less, in USD Millions
12,757
3,6238,552
20,932
35,245
43,365
65,22761,708
50,801
8,41414,040
7,224
26,323
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
Total Domestic Short Term Sukuk Issuance 358,211Millions Source: IIFM Sukuk Database
6IIFM Awareness Seminar on Islamic Finance, 12th November 2019, Jakarta
Total SHORT-TERM (GLOBAL) Sukuk Issuances (Jan 2001 – Dec 2018)– All Currencies, Tenor 12 Months or Less, in USD Millions
ASIA & FAR EAST Number of Issues Amount USD Millions % of Total Value
Brunei Darussalam 136 8,571 2.13%
Bangladesh 4 37 0.01%
Indonesia 77 7,759 1.93%
Malaysia 2,864 342,384 85.20%
Pakistan 8 141 0.04%
Singapore 3 221 0.05%
Total 3,092 359,113 89.4%
GCC & MIDDLE EAST Number of Issues Amount USD Millions % of Total Value
Bahrain 340 15,995 3.98%
Oman 1 130 0.03%
Saudi Arabia 6 1,301 0.32%
United Arab Emirates 1 100 0.02%
Yemen 1 234 0.06%
Total 349 17,760 4.4%
AFRICA Number of Issues Amount USD Millions % of Total Value
Gambia 252 365 0.09%
Sudan 21 16,520 4.11%
Total 273 16,885 4.2%
Europe & OTHERS Number of Issues Amount USD Millions % of Total Value
Turkey 265 8,112 2.02%
Total 265 8,112 2.02%
Grand Total 3,979 401,869 100%
7IIFM Awareness Seminar on Islamic Finance, 12th November 2019, Jakarta
Total SHORT-TERM (GLOBAL) Sukuk Issuances (Jan 2018- Dec 2018) – All Currencies, Tenor 12 Months or Less, Amount In USD Millions)Currency Breakdown
BHD, 1,897, 5.51%GMD, 228, 0.66%
IDR, 3,674, 10.66%
MYR, 15,853, 46.01%
SDG, 86, 0.25%
TRY, 4,611, 13.38%
USD, 8,110, 23.54%
Source: IIFM Sukuk Database
8IIFM Awareness Seminar on Islamic Finance, 12th November 2019, Jakarta
Corporate, 5,333, 15.48%
FI’s, 4,955, 14.38%
Quasi-Sovereign, 9,487, 27.53%
Sovereign, 14,684, 42.61%
Source: IIFM Sukuk Database
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Total SHORT-TERM (GLOBAL) Sukuk Issuances (Jan 2018- Dec 2018) – All Currencies, Tenor 12 Months or Less, Amount In USD Millions)Breakdown by Issuer Type
IIFM Awareness Seminar on Islamic Finance, 12th November 2019, Jakarta
Hybrid Sukuk , 472, 1%
Hybrid Sukuk - Wakalah /Murabahah,
7, 0.02%
Sukuk Al Ijarah, 4,482, 13%
Sukuk Al Mudharabah, 3,264, 10%
Sukuk Al Murabahah, 11,026, 32%
Sukuk Al Musharakah, 469, 1.36%
Sukuk Al Salam, 1,368, 4%
Sukuk Al Wakalah, 13,371, 39%
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Total SHORT-TERM (GLOBAL) Sukuk Issuances (Jan 2018- Dec 2018) – All Currencies, Tenor 12 Months or Less, Amount In USD Millions)Structure Breakdown
Source: IIFM Sukuk Database
IIFM Awareness Seminar on Islamic Finance, 12th November 2019, Jakarta
Sukuk Issuances Breakupby Issuer Status
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Total GLOBAL SOVEREIGN Sukuk Issuances (Jan2001-Dec2018) - All Tenors, All Currencies (in USD Millions)
Source: IIFM Sukuk Database Total Sovereign Sukuk Issuance USD 606,391 Million
11,324
6,874 7,58510,637
24,881
34,071
67,765
87,09383,211
68,788
33,429
41,255
62,09767,381
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
IIFM Awareness Seminar on Islamic Finance, 12th November 2019, Jakarta
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Total GLOBAL CORPORATE Sukuk Issuances (Jan2001-Dec2018) - All Tenors, All Currencies (in USD Millions)
Source: IIFM Sukuk Database Total Corporate Sukuk Issuance USD 278,459 Million
19,185
23,420
39,702
12,549
8,856
14,77816,052
23,235
34,585
12,67514,731
19,81716,835
22,039
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
IIFM Awareness Seminar on Islamic Finance, 12th November 2019, Jakarta
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Total GLOBAL QUASI-SOVEREIGN Sukuk Issuances (Jan2001-Dec2018) - All Tenors, All Currencies (in USD Millions)
Source: IIFM Sukuk Database Total Global Quasi-Sovereign Sukuk Issuance USD 158,864 Million
1,979 1,448 1,497855
3,996
2,881
5,651
21,649
12,793
21,635
11,503
21,317
28,622
23,038
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
IIFM Awareness Seminar on Islamic Finance, 12th November 2019, Jakarta
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Total GLOBAL FI’s Sukuk Issuances (Jan2001-Dec2018) – All Tenors, All Currencies (in USD Millions)
Source: IIFM Sukuk Database Total FI’s Sukuk Issuance USD 57,789 Million
735
1,8641,400
296 193
1,395
3,706
5,6234,969
4,202
8,155
5,395
9,163
10,693
0
2,000
4,000
6,000
8,000
10,000
12,000
IIFM Awareness Seminar on Islamic Finance, 12th November 2019, Jakarta
Global Sukuk IssuancesBy Currency Breakdown
GLOBAL Sukuk Issuances (Jan 2001-Dec2018) - All Tenors (in USD Millions)by Currency Breakdown
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Source: IIFM Sukuk Database
AED, 8,324, 0.76%
BDT, 37, 0.00%
BHD, 19,453, 1.77%
BND, 10,257, 0.93%
CFA, 1,434, 0.13%
CNY, 236, 0.02%
EURO, 2,151, 0.20%
GBP, 1,385, 0.13%
GMD, 383, 0.03%
IDR, 62,889, 5.71%
JOD, 483, 0.04%
KWD, 332, 0.03%
LKR, 5, 0.00%
MAD, 105, 0.01%
MVR , 10, 0.001%
MYR, 611,373, 55.50%
NGN , 714, 0.06%
OMR , 1,070, 0.10%
PKR, 12,523, 1.14%
QAR, 16,816, …
SAR, 70,492, 6.40%
SDG, 19,516, 1.77%
SGD, 2,735, 0.25%
TRY, 17,711, 1.61%
USD, 240,816, …
YER, 253, 0.02%
IIFM Awareness Seminar on Islamic Finance, 12th November 2019, Jakarta
Global Sukuk Issuance Breakup by Sukuk Structure
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INTERNATIONAL Sukuk Issuances (Jan2018-Dec2018)- All Tenors (in USD Millions) by Structure Breakdown
Hybrid Sukuk , 1000, 3%
Hybrid Sukuk - Wakalah /Murabahah, …
Hybrid Sukuk -…
Hybrid Sukuk -…
Hybrid Sukuk -Murabahah/ Mudharabah, 2,000, 6%
Sukuk Al Ijarah, 5,722, 17%
Sukuk Al Mudarabah/Wakalah,
1,690, 5%Sukuk Al Mudharabah,
1,955, 6%
Sukuk Al Murabahah, 700, 2%
Sukuk Al Wakalah, 16,570, 50%
Source: IIFM Sukuk Database
IIFM Awareness Seminar on Islamic Finance, 12th November 2019, Jakarta
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Hybrid Sukuk , 1,512, 2% Hybrid Sukuk - Wakalah /Murabahah, 509, 1%
Hybrid Sukuk -Murabahah/ Mudharabah, 14,108, 16%
Sukuk Al Ijarah, 17,342, 19%
Sukuk Al Mudharabah, 4,186, 5%
Sukuk Al Murabahah, 37,442, 41%
Sukuk Al Musharakah, 2,172, 2%
Sukuk Al salam, 1,386, 1%
Sukuk Al Wakalah, 11,506, 13%
DOMESTIC Sukuk Issuances (Jan2018-Dec2018) - All Tenors (in USD Millions) by Structure Breakdown
Source: IIFM Sukuk Database
IIFM Awareness Seminar on Islamic Finance, 12th November 2019, Jakarta
Challenges In Sukuk Market
Challenges in Sukuk Market
1) Limited availability of tangible assets leads to over reliance on certain Sukukstructures
2) Asset title transfer law particularly for sovereign assets
3) Investor’s preference and risk appetite tilted towards balance-sheet risk rather than direct risk on a tangible asset
4) Utilization of Sukuk in liquidity management & product range
5) Absence of insolvency & close-out netting law in most of OIC Countries leads to structuring challenges (title transfer versus security interest)
18IIFM Awareness Seminar on Islamic Finance, 12th November 2019, Jakarta
6) Legal Framework & Enhancement of Shari’ah monitoring (Dana Gas Sukuk legal case)
7) Corporate Sukuk issuances below par contribution
8) Equity linked Sukuk issuances to be encouraged i.e Exchangeable Sukuk
9) Tax Neutrality
10) Quasi Sovereign Sukuk Implicit and Explicit Government Guarantee
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Challenges in Sukuk Market (Continued)
IIFM Awareness Seminar on Islamic Finance, 12th November 2019, Jakarta
1) Use of Sukuk/Islamic Securities as Collateral
IIFM Collateralized Murabahah Standard
2) Currency and Rate of Return Risk Mitigation
IIFM Hedging Standards
3) Established conventional bond issuance process vs Sukuk issuance process (structuring, documentation, market guidelines)
IIFM Sukuk Standards and Guidelines Under Development
Solutions to Challenges
20IIFM Awareness Seminar on Islamic Finance, 12th November 2019, Jakarta
Update on IIFM Standardized Sukuk Documentation
Initiative
Key Considerations
Objective: create non-jurisdictional specific, English law benchmark suite of Islamic finance
documents for Sukuk Al-Ijarah and Sukuk Al-Mudarabah (both senior unsecured and also a
subordinated, Tier 1 issuance)
Market preference is asset based Sukuk not asset backed
Defaults and recourse to underlying assets
Asset backed Sukuk documentation may be considered at a later stage
Structuring Tier 1 transactions (Mudarabah transactions)
Governing law
Shari’ah representation
21IIFM Awareness Seminar on Islamic Finance, 12th November 2019, Jakarta
Market Update - Shari’ah Representation
Inclusion of standard Shari’ah representation in Sukuk documentation due to market developments:
Shari’ah Compliance
– Each of the [Company] and the [Trustee] agree that it has accepted the Shari’ah compliant nature of this Agreement; and:
a) it shall not claim that any of its obligations under this Agreement (or any provision thereof) is ultra vires or not compliant with the principles of Shari’ah;
b) it shall not take any steps or bring any proceedings in any forum to challenge the Shari’ah compliance of this Agreement; and
c) to the extent permitted by law, none of its obligations under this Agreement shall in any way be diminished, abrogated, impaired, invalidated or otherwise adversely affected by any finding, declaration, pronouncement, order or judgment of any court, tribunal or other body that this Agreement is not compliant with the principles of Shari’ah.
22IIFM Awareness Seminar on Islamic Finance, 12th November 2019, Jakarta
Sukuk Standards
Sukuk Al-Ijara h(senior unsecured):
Sale and Purchase Agreement
Ijarah Agreement
Service Agency Agreement
Purchase Undertaking
Sale and Substitution Undertaking
Skeleton Prospectus – summary of principal transaction documents and structure diagram and principal cashflows.
Declaration of Trust
Note: capital market documents (subscription agreement, agency agreement) are not part of the current standardisation project; the key is to have a template suite of Islamic finance documentation.
23IIFM Awareness Seminar on Islamic Finance, 12th November 2019, Jakarta
Sukuk Standards
Sukuk Al-Mudarabah (senior unsecured):
Mudarabah Agreement
Skeleton Prospectus – summary of principal transaction documents and structure diagram and principal cashflows
Declaration of Trust
Note: No purchase undertaking. Take full risk on the performance of the Mudaraba.
Sukuk Al-Mudaraba h(Tier 1, subordinated issuance):
Mudarabah Agreement
Skeleton Prospectus – summary of principal transaction documents and structure diagram and principal cashflows
Declaration of Trust
However, Tier 1 regime is entirely linked to the regulatory regime in the applicable jurisdiction and must tie into Shari’ah requirements of the relevant organisation / jurisdiction.
24IIFM Awareness Seminar on Islamic Finance, 12th November 2019, Jakarta
Process and Timeline
Clifford Chance appointed to prepare suite of standardised Sukuk documentation.
Working group consisting of financial, legal and Shari’ah institutions to review documents.
Sukuk Al-Ijarah
Initial drafts circulated in February 2018 to working group.
Responses from working group received from April to June 2019.
Second drafts circulated in October 2018.
Responses from working group received in January 2019.
Third drafts circulated in February 2019.
Working party call on 14 March 2019.
Responses on third drafts received in March 2019.
Revised drafts circulated in April 2019 for IIFM Shari’ah guidance process.
First Shari’ah guidance meeting in July 2019.
Revised drafts incorporating Shari’ah guidance recommendations circulated in September 2019.
Shari’ah guidance process to continue in December 2019.
25IIFM Awareness Seminar on Islamic Finance, 12th November 2019, Jakarta
Process and Timeline
Sukuk Al-Mudarabah
Initial drafts were circulated in November 2019.
Working group comments received March 2019.
Second drafts circulated in April 2019.
Working group comments received in July 2019.
Revised drafts to be circulated in November 2019.
Working party call and Shari’ah guidance process to follow thereafter with expected completion date of Q1 2020.
Sukuk market guidelines
Currently under assessment
26IIFM Awareness Seminar on Islamic Finance, 12th November 2019, Jakarta
ShukranWassalamu ‘Alaikum
International Islamic Financial Market (IIFM)Office 72, 7th Floor, Zamil Tower , Government Avenue, P.O. Box: 11454, Manama, Kingdom of BahrainTel: +973 17500161 , Fax: +973 17500171, Email: info@iifm.net, Website: www.iifm.net
Disclaimer: The information herein has been obtained from sources believed to be reliable but cannot be guaranteed. The views or opinions expressed are subjected to change at any time. Neither the information nor any opinion expressed can be construed as a solicitation for the purchase or sale of any securities. International Islamic Financial Market disclaims liability in this respect.