New sukuk guidelines to be studied at Dubai forum

DUBAI: New guidelines for the booming sukuk market will be debated at the premier international Islamic finance forum in Dubai later this month.

The forum takes place at the Jumeirah Beach Hotel, Dubai, from April 13 to 17 under the patronage of UAE Vice-President, Prime Minister and ruler of Dubai Shaikh Mohammed bin Rashid Al Maktoum, who has supported the forum since it was launched in Dubai in March 2002.

Following concerns that many sukuk may not be fully conforming to the teachings of Islam, the guidelines were drawn up by the board of 18 religious advisers to Bahrain-based Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI).

The organisation's secretary general Dr Mohamad Nedal Alchaar will deliver a keynote address on the harmonisation of Islamic finance practice.

"The guidelines drawn up by a panel of Islamic scholars are vitally important to the sukuk market which has grown to a total value of around $100 billion in under ten years," said International Islamic Finance Forum conference manager Swati Taneja.

"In their guidelines, the scholars are making it clear that in future sukuk must be clearly asset-backed rather than just asset-based."

"Initially, the rules may make it somewhat more costly for companies to issue Islamic debt at a time when conventional borrowing is shrinking because of the credit crisis," Ms Taneja said.

Sales of sukuk have dropped to $856 million so far this year from $4.7 billion in the first quarter of last year.

But Dow Jones Islamic Index global director Rushdi Siddiqui believes sukuk will continue to see tremendous growth. "Because sukuk are asset-backed you have an underlying undertaking that generates cash and that makes it a good investment in these times," he said.

AAOIFI religious advisers group chairman Shaikh Muhammad Taqi Usmani does not believe the revised rules will make Sukuk too costly.

"The new structure may yield more revenue if it is based on real sharing of profits and losses," he said.