08 May 2012
The Central Bank of Yemen closed subscription to an Islamic sukuk issue that is part of its Salam program -- worth 50 billion Yemeni riyals ($234 million) -- in April.
That was the first Salam issue devoted to the purchase and sale of petroleum products. Subscription to the issue was restricted to Islamic commercial banks in Yemen.
The Central Bank introduced Islamic sukuk in Yemen in February 2011 and devoted the first issue, valued at four billion riyals ($18.7 million), to finance three road projects.
Kamal al-Rabie, director of Islamic bonds for the Central Bank said that the Salam sukuk were issued to help the government raise funds to purchase consumer commodities for the public.
"We conducted a potential market return study and determined that the profit margin would range between 15% and 18%, which offered financial benefits for the government, commercial banks and the community through the provision of strategic commodities such as oil derivatives," he said.
Dr. Mohammed Abdul-Hamid Farhan talked about the economic relevance of issuing bonds in Yemen as following: providing good opportunities to invest the surplus liquidity among the public who are unwilling to deal with the treasury bills, and among the Islamic banks that operate in accordance with the Islamic law, supporting capital and development expenditure through the establishment of strategic projects, providing a tool for additional monetary policy for the Central Bank that suits Islamic banks, diversifying the funding of investment projects in the State budget, offering a development alternative for treasury bills issued by the Government and which have adversely affected the country's economy, contributing to the achievement of the goal of economic justice in the community through people's engagement in possession of strategic projects that will be implemented using the funds of the bonds' holders, including those of individuals, avoiding negative economic impacts caused by the privatization policies imposed on developing countries including our country, the diversity of bonds and instruments is a real advantage that reflects the potential of using them to meet the requirements of various economic sectors in the country with great flexibility.
Farhan said, "It is necessary that the authorities adopt Islamic bonds as an alternative to treasury bills through which the economic goals that the treasury bills have failed to achieve will be accomplished." He continuing saying, "This requires undertaking a set of immediate steps, including a committee of experts and specialists that will be formed with a mission to develop the necessary plans to initiate implementation, including the development of a specific strategic plan governed by a time schedule.
This will be for development projects to be developed or created on the basis of a scientific and specialized vision that guarantees the achievement of economic and developmental goals.
Farhan said the second requirement is to accelerate the preparations of the legislative infrastructure to apply the bonds either through the development of the current public debt law or by drafting a new law that governs the issuance of Islamic instruments and their circulation. In terms of the third requirement, he said "Quick preparation of the institutional structure for bonds' implementation by establishing the appropriate institutional framework for application as well as the appropriate institutional framework for the process of circulating bonds."
The Central Bank of Yemen closed subscription to an Islamic sukuk issue that is part of its Salam program -- worth 50 billion Yemeni riyals ($234 million) -- in April.
That was the first Salam issue devoted to the purchase and sale of petroleum products. Subscription to the issue was restricted to Islamic commercial banks in Yemen.
The Central Bank introduced Islamic sukuk in Yemen in February 2011 and devoted the first issue, valued at four billion riyals ($18.7 million), to finance three road projects.
Kamal al-Rabie, director of Islamic bonds for the Central Bank said that the Salam sukuk were issued to help the government raise funds to purchase consumer commodities for the public.
"We conducted a potential market return study and determined that the profit margin would range between 15% and 18%, which offered financial benefits for the government, commercial banks and the community through the provision of strategic commodities such as oil derivatives," he said.
Dr. Mohammed Abdul-Hamid Farhan talked about the economic relevance of issuing bonds in Yemen as following: providing good opportunities to invest the surplus liquidity among the public who are unwilling to deal with the treasury bills, and among the Islamic banks that operate in accordance with the Islamic law, supporting capital and development expenditure through the establishment of strategic projects, providing a tool for additional monetary policy for the Central Bank that suits Islamic banks, diversifying the funding of investment projects in the State budget, offering a development alternative for treasury bills issued by the Government and which have adversely affected the country's economy, contributing to the achievement of the goal of economic justice in the community through people's engagement in possession of strategic projects that will be implemented using the funds of the bonds' holders, including those of individuals, avoiding negative economic impacts caused by the privatization policies imposed on developing countries including our country, the diversity of bonds and instruments is a real advantage that reflects the potential of using them to meet the requirements of various economic sectors in the country with great flexibility.
Farhan said, "It is necessary that the authorities adopt Islamic bonds as an alternative to treasury bills through which the economic goals that the treasury bills have failed to achieve will be accomplished." He continuing saying, "This requires undertaking a set of immediate steps, including a committee of experts and specialists that will be formed with a mission to develop the necessary plans to initiate implementation, including the development of a specific strategic plan governed by a time schedule.
This will be for development projects to be developed or created on the basis of a scientific and specialized vision that guarantees the achievement of economic and developmental goals.
Farhan said the second requirement is to accelerate the preparations of the legislative infrastructure to apply the bonds either through the development of the current public debt law or by drafting a new law that governs the issuance of Islamic instruments and their circulation. In terms of the third requirement, he said "Quick preparation of the institutional structure for bonds' implementation by establishing the appropriate institutional framework for application as well as the appropriate institutional framework for the process of circulating bonds."
© Yemen Observer 2012
