Islamic banking gif
tions then and now. Naturally, new innova- tive structures and more complex ones will emerge, consequently bringing with it new challenge and concerns. Accordingly, and under the present market conditions with the intimidation of possible global recession, the time is right for the Sukuk to move to the next level of its development and advance- ment, as well as carving a place for Sukuk in the global debt market.
With that said, I want to reiterate my previ- ous and ongoing public calls through various venues by stating a few pointers on how can we make Sukuk more appealing in the new world order of the global financial market as well as to our direct markets. Those point- ers are;
• SSB duties and mandates should go beyond issuing a signed and sealed Fatwa for Sukuk or any product for that matter, SSB must be fully responsible and accountable as well as proactive, from the concept level passing by Fatwa process to implementation and execu- tion ending with operations and trad- ing, and eventually the attainment of the maturity for the instrument or secu- rity. (This role should apply to all related Shariah-complaint structures and prod- ucts, which should be in line with IFI governance as well) where the Shariah Compliance and/or audit Officer should spearhead such crucial functions un- der a direct mandate from the Shariah board.
• Introduce Sukuk at the retail level by al- locating sizeable tranches to the retail segment thus expanding the trading platform of Sukuk to augment accessi- bility, consequently expanding second- ary market. In the same time add an- other attractive and viable asset class for investors (i.e. Sukuk) beside the tra- ditional equity and real estate
• Contribute to the expansion of the sec- ondary market by issuing larger Sukuk to address the volume concerns, which will enhance its liquidity and market- ability.
• Increase the number of Long Term Sukuk (10 years or greater) which will enlarge diversity and attractiveness of the Sukuk, particularly for long term in- vestors (i.e. pension funds and Takaful companies).
• Advance and encourage issuance of Sukuk for the other two terms (short/ medium) to expand the breadth and depth of secondary market as well as number and diversity of Sukuk.
• Governments as an issuer to promote Sukuk as a saving instrument option for individuals through allowing them at the retail level to participate in major issuances through creating a retail por- tions for private individuals.
• Sukuk issuance cost to be to driven down, allowing cash starving Med- Cap businesses to become issuers to finance their expansion and growth to fulfil their vital role in the economy mainly jobs creation, this could come mainly through more standardisation in terms of Sukuk structures and types that is lead by AAOIFI for both format, (i.e. asset based and asset backed Su- kuk).
• Infrastructure, development and mega projects originators and issuers both governments and quasi-governments should utilise Sukuk for its financing needs instead of using their surpluses, thus expanding the volume of Sukuk market while directing those surpluses to more needed and pressing issues at the social level like education and healthcare.
• Explore and encourage innovative fea- tures and structures that is hybrid in nature beyond the 14 Sukuk types of AAOIFI to enhance versatility and adapt- ability in meeting issuer’s complex needs and situations.
• Encourage new asset classes as the un- derlying asset other than the traditional assets (i.e. real estate and IFIs) such as infrastructure, education, and health care sector thus widen its diversity as well as the risk profile and currency.
Considering those pointers and recommen- dations which mainly address the creation of vibrant secondary market as well as ac- cessibility, will enhance the growth and confidence in Sukuk and attract sizeable liquidity by opening a new window for private individual’s savings which an area that yet to be developed, also expanding secondary market.
By the same token, give more choices and flexibility to asset manager for better asset allocations as well as developing more inno- vative products in the fixed income products sector with different tenors, returns and risks involving Sukuk, particularly Sukuk fund that is battling to gain market share in the mu- tual and fixed income funds sector as well
2012 April Global Islamic Finance 63
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