The Central Bank of Bahrain on Wednesday applauded the steps taken by the industry aimed at creating a sustainable Islamic finance industry.
This was stated by Khalid Hamad, Chairman of the IIFM, during his speech at the IIFM/IRTI Sukuk restructuring consultative seminar, held at Sheraton Hotel.
The theme of today’s consultative seminar “Sukuk Restructuring in case of default” is most timely and relevant to the industry effort in promoting a sustainable development of Islamic finance and to form a coherent strategy. Accordingly I look forward to the insightful views of the distinguished speakers and participants on the latest developments of the global Islamic Sukuk markets, the prospects and opportunities that lie ahead, and any further ideas to bring Sukuk markets to the global financial mainstream,” he said.
The seminar was organised by Al-Baraka Banking Group in co-operation with IRTI and IIFM.
“For the past 8 years IIFM had been proactive in seeking the needs and requirements of the industry, and got involved in several thought provoking consultative forums aimed at developing both the Islamic money and capital markets. Such efforts had led to the issuance of several standard master agreements that are in compliance with Sharia principles. The Interbank Commodity Murabaha, Tahawut Master Agreement, the Profit Rate Swap Agreement, the Unrestricted Interbank Wakala are the major of those issuances,” Khalid Hamad said.
“The size of the global Islamic capital and money markets has expanded many folds since the 1990s. Islamic Finance thereafter has become an integral part of the global financial system not only catering for the needs of Muslims, but also attracting other investors and fund raisers, regardless of their backgrounds. As such, we witnessed an increasing variety of products and services, ranging from financing products and Sukuk, to Islamic equities, Islamic funds and takaful products.
“In spite of the recent global financial crisis and the European sovereign debt problems, the Islamic capital and money markets have shown unique and unparalleled resilience over the past few years. In particular, the Sukuk market climbed to new heights for the third year in a row, with global Sukuk issuance exceeding $137billions in 2012 and continues to grow in 2013. In general, this remarkable market deepening process has not been hindered by the challenging financial landscape.
“Bahrain has developed a well-established Islamic finance infrastructure, and it has the required intellectual capital, hence it’s well-placed to meet the strong investment demand from other parts of the world for the Middle East related Islamic financial products and vice versa. Also Bahrain can provide an ideal platform for issuers from the other parts of the world to issue Islamic financial instruments for satisfying market funding needs.
“Given the Sharia requirements, structuring Sukuk often involves the originator setting up a special purpose vehicle (SPV) for the purposes of issuing Sukuk, and multiple transfers of underlying assets between the originator and the Sukuk issuer in order to generate profits. Hence, it is crucial for fund raisers and investors to be aware of the benefits of Islamic capital market instruments and understand their structures and operations as these complex structures are not required for conventional bonds. , IIFM have therefore been working very closely with all stakeholders in the market in organizing a number Islamic finance seminars, consultative meetings and workshops for the global market participants, like the consultative seminar today, in an effort to raise the awareness and deepen the knowledge in Islamic finance among the financial community across the globe.
“With the gathering of such a distinguish speakers and participants today, I am sure that we shall obtain useful insights and get a clearer picture on how to prepare ourselves for the exciting developments in the years to come. And how to deal with unpleasant circumstances and issues if it’s occurred such as default in Sukuk and their structuring. The current worldwide environment requires all interested stakeholders to cooperate and work together on the further development of Islamic finance. Solo initiatives will not work anymore,” he added.