Secondary market and regulation are necessary to take sukuk to the next level
For the global sukuk market to deepen, clear regulation and a secondary trading platform are essential, writes Faisal Sarkhou, executive vice president at KAMCO.
ZAWYA
June 4, 2012
06 June 2012 The Islamic finance sector has become a dynamic, fast-growing global phenomenon. 2011 proved to be a watershed moment for the industry as global Shariah-compliant assets crossed the USD 1,000 billion mark. According to 'The Banker', the number of institutions reporting Shariah-compliant activity has increased from 221 in 2007 to 348 in 2011. Similarly, the number of institutions registered to conduct Shariah-compliant activities has risen from 525 in 2007 to 675 in 2011. The industry is expected to record a compound annual growth rate (CAGR) of 15% to 20% until 2015.
In 1990, the first sukuk was issued in Malaysia by Shell MDS, a foreign-owned, non-Islamic corporation. It was a Malaysian ringgit-denominated issue of MYR 125 million (equivalent to USD 30 million approximately) based on the principle of Bai' Bithaman Ajil.
From 2001 to 2010, total global sukuk issuance increased from USD 1.1 billion to USD 45.1 billion, representing a CAGR of 50%. During this period, 2,114 sukuk were issued, representing USD 197.6 billion in total financing. Corporates represented the majority of the issuers (63%), while sovereign (34%) and quasi-Sovereign (3%) entities composed the remainder.
