x Abu Dhabi, UAEFriday 19 January 2018

IDB $10bn sukuk plan to lift Dubai’s global Islamic finance ambitions

Approval is awaited for the Sharia-compliant bond issues, with trading likely to begin over the next year.

A planned US$10 billion rolling programme of sukuk issues by the Islamic Development Bank (IDB) will be a major boost for Dubai’s ambitions to be a global hub of the Islamic economy, financial experts predict.

The IDB announced it had sought the approval of regulators at the Nasdaq Dubai stock exchange for the series of Sharia-compliant bond issues, which could begin trading over the next year. It would more than double the value of sukuk listed on Nasdaq Dubai so far this year.

The IDB announced the programme after the World Islamic Economic Forum in London last week, where it was also decided that the next forum would be held in Dubai in 2014.

This would be the first time that the IDB has issued sukuk outside the two main Islamic trading centres of London and Kuala Lumpur.

Ahmad Mohamed Ali Al Madani, the president of the IDB, said: “As the IDB plans a significant expansion of its activities, Dubai’s world-class exchange and regulatory architecture, together with its commitment to providing Islamic finance solutions of the highest quality, make it a natural home for our securities.

“Supported by sukuk listings on Nasdaq Dubai, the IDB is well placed to finance its activities in sectors ranging from energy to transportation and agriculture to health and education across the Islamic world.”

Mohammed Abdullah Al Gargawi, the UAE Minister of Cabinet Affairs who is responsible for implementing Dubai’s three-year plan to become a global Islamic hub, said: “We are confident that the continuing growth of the Islamic finance sector in the UAE, as Dubai further builds up its expertise and capacity in Islamic financing solutions, will make an increasingly valuable contribution to economic development and the well-being of communities in the UAE, the region and internationally”.

Based in Jeddah, the IDB is an international investment organisation established to channel funds into infrastructure, as well as social and educational development in the Islamic world.

Funded by its 56 member governments but with Saudi Arabia as its main backer, it is rated AAA, top investment grade, by major credit ratings agencies.

It has listed tens of billions of dollars worth of sukuk on the Malaysian and British markets, but the planned Nasdaq Dubai programme is a first for the Middle East.

Financial experts welcomed the announcement.

Sayd Farook, global head of Islamic capital markets for the information group Thomson Reuters, said: “‘Although this is still the early stages, the IDB sukuk issuance programme will accelerate Dubai’s aim to become a capital for the Islamic economy. If fostered with more market makers and an active secondary market, the listing will also enhance the liquidity of sukuk, a key point for the Islamic capital markets. This will be an important contribution of Dubai to the global Islamic capital markets.”

He added: “It will facilitate the depth of local exchanges in the markets in countries of the Organisation of Islamic Co-operation, which have long seen liquidity flow out of the region into developed markets.”

Essa Kazim, soon to become governor of the Dubai International Financial Centre, said: “As sukuk issuance expands worldwide, we look forward to further listings from the private and public sectors as well as multilateral organisations.”