Innovative Sukuk Structures & Their Impact on Development.

Innovative Sukuk Structures & Their Impact on Development

Outline

• Growing Role of Sukuk in Capital Markets• Deepening of Primary & Secondary Sukuk Markets and

Vehicles for Broader Public Participation• Rationale for Purpose Driven & Objective Focused Sukuk• Privatization Vehicle for Assets Backed Sukuk• Institutional Needs & Public Welfare Goals• Securitization of Privatization Assets• Suggested Modeling of New Sukuk Structures

Privatization – A New Direction For Sukuk Development

• New opportunities for Sukuk Structures• Sukuk for the Public• Privatized Assets Based Sovereign Sukuk

• Recently launched Sukuk in Asia and the Middle East have the potential of setting the stage for new fixed income securities that could be useful for the developing countries in managing their heavy debt burden and initiating a new growth strategy based on securitization of privatized government assets.

• New Sukuk Structures are a viable alternative for privatization of government owned assets in developing Muslim countries. Case studies of public utilities and other revenue generating entities.

• Sukuk ownership certificates are the alternative to widely marketed savings bonds in these countries.

Growth of Primary & Secondary Sukuk Markets

Source: Zawya Sukuk Monitor 2011

Recent Sukuk Data

Source: Zawya Sukuk Monitor 2011

Rationale For Sukuk Issuance Diversification

• A true sale between the originator and the special purpose vehicle (SPV) that issues the Sukuk. Assets to be owned by the SPV, returns derived from assets; asset prices may vary over time.

• The potential of hybrid Sukuk structures emphasizing Wakala principles.

• The pace of new Sukuk launches has picked up after the decline witnessed because of the global financial crisis of 2008 but the supply of new Sukuk still falls short of the demand from investors for fixed income securities.

Privatization Vehicle for Assets Backed Sukuk

Sukuk Structure Paradigm

Linkage of the Real & Financial Sectors

• The absence of a viable secondary market• Ijara based and non-Ijara based Sukuk• A pivotal role in project financing• A tool for treasury management and portfolio

management functions for the financial institutions.

New Sukuk Structures

• The potential of hybrid Sukuk structures emphasizing Wakala principles: – Recommendations for effective placement of

lower yield sovereign Sukuk in foreign currencies. – In the light of 2008 AAOIFI rulings on Sukuk,

unique Sharia issues associated with commonly used contracts such as sales, lease, partnership, and agency.

– Contrasted with Sukuk classifications based on commercial functions such as exchangeability and convertibility.

Source: Zawya Sukuk Monitor 2011

Recent Data

Questions

Email:[email protected]