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1
Sukuk Market Overview & Structural Trends
IIFM Industry Seminar on Islamic Capital and Money Market
Hosted by Bank Indonesia
Tuesday, 6th May 2014, Jakarta
Ijlal Ahmed Alvi
Chief Executive Officer
IIFM
Recent Sukuk Trends
Perpetual Sukuk issuances
Abu Dhabi Islamic Bank Perpetual Sukuk • Mudarabah Structure
Almarai Perpetual Sukuk • Hybrid – Mudarabah and Murabah
GEMs School Perpetual Sukuk • Mudarabah
Malaysian Airline System Perpetual Sukuk • Al Mushrakah
Covered Sukuk
Malaysia Building Society (under planning)
– Consumer Finance as security with no title change
1 IIFM Industry Seminar on Islamic Capital and Money Market, 6th May 2014, Jakarta
2
Recent Sukuk Trends (continued)
Sovereign Benchmark Sukuk
Turkey Government Sukuk
Indonesian Government Sukuk
UAE, Qatar, Saudi Arabia (Corporates)
Fixed Profit Rate & Lower Pricing
Longer Tenors including Perpetual
2 IIFM Industry Seminar on Islamic Capital and Money Market, 6th May 2014, Jakarta
3
Sukuk Al Ijarah (45,946) 44%
Sukuk Al Musharakah (11,611) 11%
Sukuk Al Salam (1,958) 2%
Sukuk Al Murabahah (7,489) 7%
Hybrid Sukuk (6,709) 7%
Sukuk Al Wakalah (18,075) 17%
Sukuk Al Mudharabah
(6,325) 6%
Islamic Exchangeable
Sukuk (6190) 6%
IIFM Industry Seminar on Islamic Capital and Money Market, 6th May 2014, Jakarta
Source: IIFM Sukuk Database
3
4
Sukuk Al Musharakah (84,187) 16%
Sukuk Al Salam (3,334) 1%
Sukuk Al Murabahah (273,494) 53%
Bai' Bithaman Ajil (34,634) 7%
Hybrid Sukuk (22,882) 4%
Sukuk Al Wakalah (7,271) 1%
Sukuk Al Mudharabah (10,772) 2%
Islamic Exchangeable Sukuk
(408) 0%
Sukuk Al Istisna'a (3,456) 1%
Sukuk Al Ijarah (80,675) 15%
IIFM Industry Seminar on Islamic Capital and Money Market, 6th May 2014, Jakarta
Source: IIFM Sukuk Database
What is Required for the Development & Success of the Sukuk Market
Sovereign and Quasi-Sovereign
Implicit versus explicit guarantee
Sizeable Issuance
2012 as well as 2013 were record years & continuation in 2014
Quality Corporate issuer
Market Makers
5 IIFM Industry Seminar on Islamic Capital and Money Market, 6th May 2014, Jakarta
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6
Corporate (55,881)
54%
Quasi Sovereign (16,944)
16%
Sovereign (31,476)
30%
International
Corporate (185,332)
34%
Quasi Sovereign
(28,214) 5%
Sovereign (326,889)
61%
Domestic
IIFM Industry Seminar on Islamic Capital and Money Market, 6th May 2014, Jakarta
Source: IIFM Sukuk Database
Future Prospects
We have only begun to tap the potential that exists in the global Sukuk market
Islamic banks are becoming prominent Sukuk issuers to support their balance sheet
Project finance Sukuk
Asset-backed Sukuk
Covered Sukuk & Mortgage-backed Sukuk
Convertible/Exchangeable Sukuk
Use of Islamic Hedging products
7 IIFM Industry Seminar on Islamic Capital and Money Market, 6th May 2014, Jakarta
5
Future Prospects: Final Remarks
It is clear that the Sukuk supply side is becoming quite robust. The challenge for Islamic financial institutions is to develop the following four strategic areas:
Develop Trading Capabilities
Sell down to private and retail investors
Development of Sukuk & Balanced Fund
Liquidity Financing capabilities
8 IIFM Industry Seminar on Islamic Capital and Money Market, 6th May 2014, Jakarta
9 IIFM Industry Seminar on Islamic Capital and Money Market, 6th May 2014, Jakarta
1,172 1,371 7,057 9,465 13,698 33,837
50,041 24,264
37,904 52,978
92,403
137,499 136,714
12,135
610,539
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014-Jan Total
Source: IIFM Sukuk Database
6
10
International Sukuk Issuances 2001 – January 2014 (All Amounts in USD Millions)
IIFM Industry Seminar on Islamic Capital and Money Market, 6th May 2014, Jakarta
425 1,130 1,680 2,503 3,413
11,915 13,859
2,140 7,000
4,098 8,444
20,169 21,539
860
99,175
0
20,000
40,000
60,000
80,000
100,000
120,000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014-Jan Total
Source: IIFM Sukuk Database
Breakdown of Global Sukuk Issuances – By Region Jan 2001 – Jan 2014 (All Amounts in USD Millions)
11
Asia & Far East (473,708) 74%
GCC & Middle East
(135,833) 21%
Africa (19,137) 3%
Europe & Others (15,866) 2%
IIFM Industry Seminar on Islamic Capital and Money Market, 6th May 2014, Jakarta
Source: IIFM Sukuk Database
7
12
Malaysia (433,376) 67%
Pakistan (7,739) 1%
Qatar (22,599) 4%
Saudi Arabia (45,727) 7%
Singapore (1,273) 0%
Sudan (18,883) 3%
Turkey (14,592) 2% UK (309) 0%
UAE (49,587) 8% USA (767) 0%
Bahrain (14,722) 2% Yemen (253) 0%
Brunei Darussalam (5,255) 1%
France (1) 0%
Gambia (121) 0%
Germany (178) 0%
Hong Kong (196) 0%
Indonesia, (24,684) 4%
Japan (190) 0%
Jordan (119)
0% Kazakhstan (77) 0%
Kuwait (2,502) 0%
IIFM Industry Seminar on Islamic Capital and Money Market, 6th May 2014, Jakarta
Source: IIFM Sukuk Database
13
Malaysian Ringgit (MYR) 67%
Pakistani Rupees (PKR)
1%
Qatar Riyals (QAR) 2%
Saudi Riyals (SAR) 5%
Sudanese Pounds (SDG)
3%
Singapore Dollars (SGD)
1%
Turkish Lira (TRY) 0%
US Dollars (USD) 15%
Yemeni Riyals (YER) 0%
Emirati Dirhams (AED) 1%
Bahraini Dinars (BHD) 1%
Bruneian Dollars (BND)
1%
Chinese Yuan Renminbi (CNY)
0% Euros (EUR) 0%
British Pounds (GBP) 0%
Gambian Dalasi (GMD)
0%
Indonesian Rupiah (IDR) 3% Jordanian Dinars
(JOD) 0%
Kuwait Dinars (KWD) 0%
IIFM Industry Seminar on Islamic Capital and Money Market, 6th May 2014, Jakarta
Source: IIFM Sukuk Database
8
Sukuk Issuances Pre & Post Financial Crisis - Analysis
The record growth rates achieved by the
sukuk industry between 2001 and 2007
were impressive.
The 2008 crisis came as a reality check
for all markets and players, reshaping the
priorities of governments, banks, issuers,
and investors.
As a result, the number and value of
issued sukuk has came down significantly
Although the 2008 financial crisis created
tight liquidity environments in many
markets.
Return of Sukuk Market Growth from
2011
Impressive Sukuk Issuances in 2012
14
425 1,130 1,680 2,503 3,413
11,915 13,859
2,140
7,000 4,098
8,444
20,169
17,000
0
5,000
10,000
15,000
20,000
25,000
International Sukuk Issuances 2001- Nov 2013 (USD Millions)
425 1,130
1,680 2,503
3,413
11,915
13,859
2,140
7,000
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
2001 2002 2003 2004 2005 2006 2007 2008 2009
International Sukuk Issuances 2001-2009 (USD Millions)
IIFM Industry Seminar on Islamic Capital and Money Market, 6th May 2014, Jakarta
Source: IIFM Sukuk Database
2008 Global Financial Crisis & International Sukuk
The Nakheel Group – UAE
Gulf Holding Company (Villamar Sukuk) – Bahrain
Dana Gas – UAE
Gulf Finance House – Bahrain
Tabreed Sukuk – UAE
15
International Investment Group - Kuwait
Saad Group (Golden Belt)- Saudi Arabia
Arcapita Bank – Bahrain
The Investment Dar – Kuwait
East Cameron Partners – USA
IIFM Industry Seminar on Islamic Capital and Money Market, 6th May 2014, Jakarta
Source: IIFM Sukuk Database
9
2008 Global Financial Crisis & Impact on International Sukuk - All Amounts in USD Millions
16
Total International Sukuk Issuances
2001- 2008 (37,065) 83%
Total International Sukuk
Restructured / Defaulted 2001-2008 (3,166) 7%
The Nakheel Group - Not Defaulted
(4,270) 10%
IIFM Industry Seminar on Islamic Capital and Money Market, 6th May 2014, Jakarta
Source: IIFM Sukuk Database
Structural Breakdown of International Sukuk Defaulted/Restructured during 2008 Global Financial Crisis All Amounts in USD Millions
17
Source: IIFM Sukuk Database
Hybrid Sukuk (200) 6%
Sukuk Al Ijarah (950) 30%
Sukuk Al Murabahah (210)
7%
Sukuk Al Musharakah (606)
19%
Sukuk Al Mudharabah, (1,200) 35%
IIFM Industry Seminar on Islamic Capital and Money Market, 6th May 2014, Jakarta
10
Shukaran Wassalamu ‘Alaikum
International Islamic Financial Market (IIFM) Office No. 72, 7th Floor, Zamil Tower (Main Tower), P.O. Box: 11454, Manama, Kingdom of Bahrain Tel: +973 17500161 , Fax: +973 17500171, Email: [email protected], 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.