Global Sukuk Market - Overview & Trends - IIFM 1 - Sukuk Market Overview... · Global Sukuk Market - Overview & Trends ... 7th November 2017, Diamond Room, Grand City Surabaya, Surabaya

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Global Sukuk Market - Overview & Trends Current Status, Developments and Key Challenges

IIFM Specialized Sessions on Islamic Finance: Sukuk, Islamic Hedging and Liquidity Management

Hosted by Bank Indonesia

7th November 2017, Diamond Room, Grand City Surabaya, Surabaya, Indonesia

Ijlal Ahmed Alvi

Chief Executive Officer

IIFM

About IIFM

History

IIFM was formed under Royal Decree No. (23) Dated 2002 and is hosted by the Central Bank of Bahrain as a non-profit standard-setting organization.

IIFM was founded due to the collective efforts of Central Bank of Bahrain, Islamic Development Bank, Autoriti Monetari Brunei Darussalam, Bank Indonesia, Bank Negara Malaysia (delegated to Labuan Financial Services Authority), and the Central Bank of Sudan.

IIFM Vision Active and well regulated trading and capital flows across the full spectrum of Shari’ah compliant financial instruments internationally.

IIFM Mission To achieve the Vision by catalyzing both national and international trading infrastructure, product innovation and information flow within strong, transparent and well regulated standards and guidelines. Promote acceptance and integration with mainstream markets.

Mandate

As a standard setting organization, the mandate of IIFM is to develop standardized Islamic financial documentation and product templates.

1 IIFM Specialized Sessions on Islamic Finance, Surabaya, Indonesia, 7th November 2017

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Current Focus

IIFM focuses on providing well defined services to the Islamic Financial Services Industry (IFSI) as follows:

Addressing the standardization needs of the industry in the areas of Islamic Capital & Money Market, Corporate Finance & Trade Finance

Provide universal platform by bringing regulatory bodies, multilateral institutions, financial institutions, law and business advisory firms, stock exchanges, industry associations, infrastructure service providers and other industry stakeholders on a common platform through the creation of project specific global working groups and committees

Facilitate market unification by introducing best practices at international level and achieving Shari’ah harmonization as well as legal and regulatory reforms through its efforts for the creation of a robust, transparent and efficient IFSI

Creating industry awareness by organizing specialized seminars/technical workshops as well as standardization specific market consultative meetings

Carry out research and publish reports specifically on Sukuk

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About IIFM

IIFM Specialized Sessions on Islamic Finance, Surabaya, Indonesia, 7th November 2017

Overall Objectives

Development and promotion of Islamic Financial Services Industry

Standardization of Islamic financial contracts and products templates relating to Islamic Capital & Money Market and Islamic Corporate & Trade Finance

Achieving the required transparency and robustness of Islamic financial markets under the guidance of the IIFM Shari’ah Board

Integration of Islamic financial markets into mainstream conventional markets

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About IIFM


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IIFM Published Standards To date, IIFM has published 10 documentation and product standards, a number of papers and reports as follows:

2017: Islamic Credit Support Deed for Cash Collateral (Variation Margin)

Credit Support Deed for Cash Collateral (VM)

Schedule to Credit Support Deed for Cash Collateral (VM)

2016: Islamic Foreign Exchange Forwards (IFX Forwards)

Single Binding Wa’ad based Standard

Two Unilateral and Independent Wa’ad based Standard

Guidance Memorandum and Product Description

2015: Islamic Cross-Currency Swap (ICRCS)

First Leg Cross-Currency Swap (Wa'ad - Two Sales)

Second Leg Cross-Currency Swap (Wa'ad - Two Sales)

Product Description

2014: Master Collateralized Murabahah Agreement

Master Agreement

Operational Guidance Memorandum


IIFM Published Standards continued …

2013: Interbank Unrestricted Master Investment Wakalah Agreement

Master Agreement

Operational Guidance Memorandum

2012: Islamic Profit Rate Swap (IPRS)

Two Sale Wa’ad Structure

Fixed Profit Rate

Floating Profit Rate

Single Sale Wa’ad Structure

Fixed Profit Rate

Floating Profit Rate

Product Description

2010: Tahawwut (Hedging) Master Agreement

Master Agreement

Explanatory Memorandum

2008: Master Agreements for Treasury Placement

Master Murabahah Agreement

Master Agency Agreement for the Purchase of Commodities

Structure Memorandum


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Research Papers

IIFM Paper on EMIR & Dodd-Frank Act on Derivatives and Impact on Islamic Hedging Products

IIFM Reference Paper on I’aadat Al Shira’a (Repo Alternative) and Collateralization (Structuring Possibilities)

IIFM Concept Paper on Islamic Profit Rate Swap

IIFM Concept Paper on Unrestricted & Restricted Wakalah

IIFM Concept Paper on Sukuk Standardization

IIFM Structure Papers on Islamic Foreign Exchange hedging products

Numerous presentations on Islamic Liquidity Mangement, Hedging in Islamic Finance, Sukuk and other topics

Sukuk Reports

Sixth Edition (2017)

Fifth Edition (2016)

Fourth Edition (2014)

Third Edition (2013)

Second Edition (2012)

First Edition (2010)

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IIFM Published Standards continued …


IIFM Standards Under Development Current Priority Areas of Work

Risk Participation Agreement (funded and unfunded) for Islamic trade finance related business is in market consultation phase

Sukuk Standard Documentation and Guidelines (project to commence in 2018)

Islamic Syndicated Financing Documentation standardization

– Consultative meeting under planning for Q3 2018

Islamic FX & Commodity Hedging/Investment Standards

– Consultative meeting under planning Q2 2018

Gold related products and documentation standardization

- Consultative meeting under planning for Q1 2018


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Sukuk Market Current Status

a) Total Global Sukuk Issuances (International & Domestic)


Total GLOBAL Sukuk Issuances (Jan 2001 – September 2017) All Tenors, All Currencies, in USD Millions

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Total Global Sukuk Issuances as September 2017 USD 918,913 Millions

Source: IIFM Sukuk database


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Total INTERNATIONAL Sukuk Issuances (Jan 2001 – Sept 2017) All Tenors, All Currencies, in USD Millions

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Total International Sukuk Issuances as of September 2017 USD 212,727 Millions



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Total DOMESTIC Sukuk Issuances (Jan 2001 - September 2017) All Tenors, All Currencies, in USD Millions

Total Domestic Sukuk Issuances as of September 2017 USD 706,186 Millions



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b) Total Global Sukuk Issuances – Breakdown by Issuer Status


Global Sovereign Sukuk Issuances (Jan 2001 – Dec 2016)

All Tenors, All Currencies, in USD Millions


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Global Corporate Sukuk Issuances (Jan 2001 – Dec 2016)



Global IFI’s Sukuk Issuances (Jan 2001 – Dec 2016)



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Global Quasi-Sovereign Sukuk Issuances (Jan 2001 – Dec 2016)



DOMESTIC Sukuk Issuances by Issuer Status All Tenors, All Currencies, in USD Millions


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DOMESTIC Sukuk Issuances by Issuer Status All Tenors, All Currencies, in USD Millions


INTERNATIONAL Sukuk Issuances by Issuer Status All Tenors, All Currencies, in USD Millions


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INTERNATIONAL Sukuk Issuances by Issuer Status All Tenors, All Currencies, in USD Millions



c) Total Global Sukuk Issuances - Country Wise Breakdown of Global Issuances


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REGIONAL BREAK-UP OF GLOBAL ISSUANCES (JAN 2001 -DEC 2016)


REGIONAL BREAK-UP OF GLOBAL ISSUANCES (JAN 2001 -DEC 2016) Continuation


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d) Global Sukuk Issuances – Structural Breakdown (International & Domestic)


Structural Breakdown of INTERNATIONAL Sukuk Issuances - All Tenors, All Currencies, in USD Millions


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Structural Breakdown of INTERNATIONAL Sukuk Issuances - All Tenors, All Currencies, in USD Millions (continued)


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Structural Breakdown of INTERNATIONAL Sukuk Issuances - All Tenors, All Currencies, in USD Millions (continued)


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Structural Breakdown of DOMESTIC Sukuk Issuances - All Tenors, All Currencies, in USD Millions


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Structural Breakdown of DOMESTIC Sukuk Issuances - All Tenors, All Currencies, in USD Millions (continued)


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Structural Breakdown of DOMESTIC Sukuk Issuances - All Tenors, All Currencies, in USD Millions (continued)



e) Global Outstanding Sukuk (International & Domestic)


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Total GLOBAL Sukuk Outstanding as of 31st December 2016



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Total GLOBAL Sukuk Outstanding by Issuer Status as of 31st December 2016, All Tenors, All Currencies, in USD Millions


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Total DOMESTIC Sukuk Outstanding as of 31st December 2016, All Tenors, All Currencies, in USD Millions


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Total DOMESTIC Sukuk Outstanding by Issuer Status As of 31st December 2016, All Tenors, All Currencies, in USD Millions


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Total INTERNATIONAL Sukuk Outstanding As of 31st December2016, All Tenors, All Currencies, in USD Millions


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Total INTERNATIONAL Sukuk Outstanding by Issuer Status As of 31st December 2016 (in USD Millions)


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Countries Wise Breakdown of GLOBAL Sukuk Outstanding As of 31st December 2016, All Tenors, All Currencies, in USD Millions


Key Challenges In Sukuk Issuances

1) Limited availability of tangible assets leads to over reliance on certain Sukuk structures

2) Asset title transfer law particularly for sovereign assets

3) Investor’s preference and risk appetite tilted towards balance-sheet risk rather than direct risk on a tangible asset

4) Tax Neutrality

5) Quasi Sovereign Sukuk Implicit and Explicit Government Guarantee

6) Currency & Rate of Return risk mitigation


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Islamic Hedging and its Role in Sukuk Market Development

IIFM-ISDA Hedging Standards

Tahawwut (Hedging) Master Agreement

Islamic Foreign Exchange Forward (IFX Forward)

Islamic Cross-Currency Swap (ICRCS)

Islamic Profit Rate Swap (IPRS)

Islamic Credit Support Deed for Cash Collateral (VM)


Thank You

International Islamic Financial Market (IIFM) Office No. 72, 7th Floor, Zamil Tower , P.O. Box: 11454, Manama, Kingdom of Bahrain Tel: +973 17500161 , Fax: +973 17500171, Email: [email protected], Website: www.iifm.net Disclaimer: The information herein has been obtained from sources believed to be reliable but cannot be guaranteed. The views or opinions expressed are subjected to change at any time. Neither the information nor any opinion expressed can be construed as a solicitation for the purchase or sale of any securities. International Islamic Financial Market disclaims liability in this respect.

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Global Sukuk Market - Overview & Trends - IIFM 1 - Sukuk Market Overview... · Global Sukuk Market - Overview & Trends ... 7th November 2017, Diamond Room, Grand City Surabaya, Surabaya