Mr. Khalid Hamad
Chairman of the International Islamic Financial Market,

Mr. Ijlal Ahmed Alvi
Chief Executive Officer of the International Islamic Financial Market,

Distinguished Guests,
Ladies and Gentlemen,

Assalaamu’alaykum Warahmatullahi Wabarakatuh and good morning/good afternoon.

It is my great honour to welcome you all to this webinar, to launch the latest edition of annual Sukuk Report published by International Islamic Financial Market (IIFM). This is the first time we are launching this report on a virtual basis, due to the Covid-19 pandemic. While the COVID-19 pandemic has triggered major uncertainties in global markets and people’s lives towards the new norm, sukuks are set for a renaissance once the financial landscape has settled and issuers and investors have readjusted. This webinar is indeed an interesting platform in bringing together the best of minds to discuss on the prospects and challenges of the global sukuk market as well as its immense role in the global economic development. Pairing up with the launch of the 9th edition of Sukuk Report, we hope that all participants or rather the sukuk stakeholders, ranging from issuers to investors, will benefit from this webinar in which the full potential of Islamic bond market can be realised.

Ladies and Gentleman,

The IIFM Sukuk Report series, which was first launched in 2011, has become an important benchmark publication, providing useful information on the global Sukuk market, structure trends, key developments and prospects, case studies, articles and country focused reports on IIFM member countries. This flagship Report serves as part of IIFM’s mandate/agenda to facilitate Shariah’s harmonisation through introducing and developing Shariah compliant standard financial contracts and product templates relating to the Capital & Money Market, Corporate Finance and Trade Finance segments for the Islamic Financial Services Industry (IFSI).

The report aims to provide in-depth analysis to create deeper understanding of sukuk, which remains the most popular financial instrument of the Islamic finance industry. Ultimately, the report has certainly benefited the industry stakeholders in their assessment of trend in the issuance of Sukuk, globally, in new issuers and also regions which have a high concentration of sukuk issuances.

Ladies and Gentlemen,

I would like to take this opportunity to congratulate IIFM secretariat for another successful work on the Report. My gratitude also goes to institutions that contribute in sharing their pearls of wisdom and knowledge in preparing this research report, as well as individuals who have provided insights, comments and expertise that greatly enhanced the substance of the report. I, on behalf of the IIFM, would like to thank all the industry stakeholders who have contributed to the completion of this important project. Certainly, this research report would not have seen light without the support and contributions of these institutions, individuals and the industry stakeholders who provided us with invaluable information, which assisted IIFM secretariat in completing this task through various stages.

We would like to express our deepest gratitude to the Central Bank of Bahrain (CBB) for its constant and continued support. We would also like to acknowledge and thank the IIFM Board of Directors, Founding Members, report sponsors and Members institutions for their unwavering and unreserved support to IIFM in its Islamic industry’s development endeavors. Lastly, IIFM is thankful to its research team for their review of and valuable contribution to this research report.

Ladies and Gentleman,

Alhamdulillah, Islamic finance has developed from just a novelty to become an increasingly integrated and internationalised financial system. Islamic finance continues to grow rapidly, transcending beyond geographical boundaries and becoming more entrenched in the global financial system. The global Sukuk issuances during 2019 stood at around USD150 billion, soaring a significant growth of around 19% over 2018 issuances of USD 124 billion. The growth is mainly driven by increased number of sovereign issuances from the Malaysia, United Arab Emirates (UAE), Saudi Arabia, Turkey, Indonesia and Bahrain (reference IIFM Sukuk Report).

Malaysia has maintained its position in the global sukuk market, constituting 47.5% of the global sukuk outstanding, followed by Saudi Arabia (22.5%) and Indonesia (12%) as at end 2019 . Sukuk supply has diversified geographically over the last decade, having initially been dominated by issuers from Malaysia and Bahrain. A more recent trend has been diversification by investor and issuer type. Robust demand from the traditional investor base of Islamic banks who buy for investment and liquidity management purposes has been boosted by other regional and international investors, some of whom have dedicated sukuk funds or sub-funds .

According to Fitch Rating report, the sukuk supply is expected to rise as issuers diversify their funding bases, continuing a trend of innovation in sustainable, green and hybrid sukuk seen in 1st half of 2020. The sharp slowdown in sukuk issuance in March and April reflected wider financial market volatility as the pandemic took hold around the world. This has had a larger impact on the sukuk market more than that of the conventional bonds market, as the former is very concentrated, much smaller and less liquid. Notwithstanding this, we expect sukuk supply to rise further in 2021. Sovereign supply should continue as oil prices remain low and fiscal policy responses to the pandemic are implemented. Issuance by financial institutions and corporates is likely to increase as they diversify their funding sources and take advantage of low funding costs.

Ladies and Gentlemen,

Today, we have gathered a panel of international industry experts to shed lights on vital subjects of the event such as the global sukuk market and its development, the impact of COVID-19 and how it has re-shaped the regulatory landscape, the scope of securitized sukuk, prospects for SRI and Green Sukuk and some updates on IIFM sukuk documentation standard templates.

IIFM has so far published standards catering to liquidity management, hedging, margin maintenance and trade finance participation. The focus now is to develop standard documentations for Sukuk Al Ijarah and Sukuk Al Mudarabah which are critical standards for the Islamic capital markets. The IIFM Standards are developed with the directions of its Board, in consultation with legal and industry experts as well as with the guidance of distinguished Shariah scholars from ten different jurisdictions. Hence, these Standards offer Islamic financial institutions a complete set of widely accepted and legally robust financial documentation and product confirmations, bringing enormous benefits to the institutions in terms of significant cost reductions, ease of execution and greater transparency, consequently leading to increase in transactional volumes. Islamic financial institutions can therefore derive significant advantages from being members of the IIFM and adopting its standards. We hope more Islamic financial institutions would join the IIFM and play an active role in deliberating and shaping the standards being developed by the IIFM.

Conclusion

From the beginning, Islam has viewed commercial activity not only as divine but also a necessary aspect of human life, a source of social gratification and psychological pleasure. Work is considered necessary to establish an equilibrium between one’s individuality and social life. The Qur’an instructs Muslims to persistently work whenever and wherever possible: “Disperse through the land and seek of the bounty of God” (62:10), and “God has permitted trade and forbidden usury.” (2:275)

In summary, we acknowledge that the unique propositions of Islamic finance are drawn from its underlying Shariah principles, which are universally applied and reflect Islamic values which are ethical and fair. Any transactions that are contrary to Islamic principles are prohibited, thus promoting fairness, equality and justice. As such, Islamic finance practitioners are duty-bound to observe the norms of high ethical conduct to uphold the values and the sanctity of Shariah.
On this note, I wish you a productive webinar ahead and look forward to the constructive outcomes of this engagement. Thank you and Wassalaamu’alaykum Warahmatullahi wabarakatuh.