Sukuk resilient!

MANAMA: The sukuk market has suffered from the global financial crisis triggered by the US subprime crisis, but it is in good shape to bounce back.

That was the consensus view at the First International Conference For Islamic Sukuk, which opened at the Diplomat Radisson SAS Hotel yesterday.

The conference was opened by the Central Bank of Bahrain deputy governor Anwar Khalif Al Sadah.

He said Bahrain was the first country to issue sukuk and it had now issued more than $1 billion of these instruments.

Islamic sukuk have become one of the fastest growing financial instruments in the world, Investment Dar chairman and managing director Adnan Al Musallam told delegates at the opening session.

He said sukuk worth more than $15 million were being used to social projects and added that the value of the sukuk market was worth around $120bn, including $47bn from the Gulf.

More than 170 delegates and speakers are attending the two-day event, which has attracted people from across the Arab world and as far away as New York, London and South Africa.

"The credit crisis has impacted Islamic finance both in pricing and access and a lot of sukuk supposed to be launched towards the end of last year were put on hold until there is more calm in the market place," said Dow Jones Islamic Index global director Rushdi Siddiqui.

"The sukuk market has seen tremendous growth in the last two years and that will continue. Because sukuk are asset-based you have an underlying undertaking that generates cash and that makes it a good investment in these times," he added.

"In the last two years the industry has boomed from talking in millions to billions," said conference organiser and managing director of Sama Group Waleed Al Qadoumi.

"Sukuk is a relatively new product in the commercial market which has created great demand both for government and private sector fund raising.

"Almost every Islamic finance conference has a session on sukuk but we decided it was necessary for a specific conference on the product and we will be repeating this next year."

He said that it was not possible to keep the sukuk outside the effects of the international markets and that accounted for the slowdown.

"Bahrain is the banking and financial centre of the Middle East and is in the forefront of the future of the sukuk," he added.

"London is the financial centre of the world and if they are looking at launching sukuk then you know the industry has a good future. Sukuk is no longer limited to Islamic institutions."

The entire sukuk market is now worth about $50 billion, or even more, according to ABC Islamic Bank vice-president and head of marketing Hammad Hassan.

'The market started about five to 10 years ago financing real estate but now it has moved on by leaps and bounds covering leases, other receivables and ship finance.

"The industry has been slowed by the global crisis and also about uncertainty about the GCC states dollar peg. Recent successes have been in regional currencies rather than dollars."

"The market will continue to grow," he added.

"We need more sukuk to be issued for a secondary market. At present most investors hold sukuk to maturity with the exception of those that are convertible into equity."