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كلمة المجلس العام

Abdelilah BELATIK

Secretary General of CIBAFI

Welcome to the 62nd edition of the Global Islamic Economics Magazine (GIEM).  As always, it is our pleasure to keep you updated with current challenges and prospects in the global Islamic financial services industry (IFSI). The GIEM also serves as the platform for CIBAFI to keep our stakeholders informed about our activities and key initiatives.

Sukuk has been an essential part of Islamic financial industry and is considered important for fuelling the industry’s overall growth. Latest industry statistics indicate that global Sukuk issuances during 2016 were approximately US$88 billion, an increase of 44% over the previous year’s issuances of around US$61 billion. A number of financial stakeholders around the world have recognised Sukuk as a viable alternative source of financing for governments, corporations and other issuers. In addition to the government (budgetary and treasury  requirements) and financial services (capital adequacy) related issuances, infrastructure related issuances have contributed a substantial portion of Sukuk issuances in 2016, including power and utilities, transportation and telecommunication, the real estate, education, agriculture, construction, and oil and gas sectors among others.

There has also been great interest for Sukuk from established sovereigns, quasi sovereigns, corporate, and financial institutions from wider international community, both from Muslim and non-Muslim jurisdictions, as a result of its unique and innovative features. In 2016 global Sukuk market witnessed new entrants such as government of Jordan, government of Togo, Etihad Airways, Oman Telecom and Neelum Jhelum (Pakistan) etc.

Growing capital needs in the infrastructure sector globally presents strong opportunities for Sukuk to enhance their role as an important source of financing for the development of the world and regional economies. The OECD estimates a minimum requirement of USD 71 trillion by 2030 to invest in infrastructure. Huge infrastructure development projects around the globe, especially around the GCC, African and South Asian regions have fuelled Sukuk market in the infrastructure sector and vice versa. Some of the Sukuk issuers in GCC include Saudi Electric Co., UAE’s utilities DEWA and real estate firms Aldar Properties, Emaar Properties, Damac Real Estate Development, in addition to Qatar’s Ezdan Holding Group which have tapped infrastructure Sukuk market. On the other hand, many of African countries used Sukuk to bridge the infrastructure gap in their countries, including Sudan, Gambia, Cote d’Ivoire, South Africa, Senegal and Togo. In June 2016, Senegal launched its second Sukuk issuance, valued at USD 350 million, to finance Senegal’s economic and social development projects, including the urban centres, a drinking water supply program, and a road and street lighting program.

As Sukuk market continues to evolve and broaden its appeal to newer jurisdictions, its regulation governance, and legal robustness are increasingly becoming crucial areas of focus. Islamic financial industry’s standard setting bodies such as Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI), Islamic Financial Services Board (IFSB) and International Islamic Financial Market (IIFM) have been playing a key role in issuing standards, guidance notes, and analytical reports to strengthen market confidence in the instrument. They have been involved in addressing challenges that come along with the growth of Sukuk industry. These international bodies aim to promote greater transparency, harmonisation, and confidence including documentation, product structures and risk management practices.

For increased transparency emphasis should also be placed on Sukuk issuers to make relevant disclosures to Sukuk holders and keep them updated and informed on material developments relating to the Sukuk, their risks, potential issues, cash flows etc. These disclosures must be included in their regular reporting as per the statutory requirements such as changes in ownership of the issuer, periodic distributions of profits, and other information about the issuer that may affect the market valuation of both Sukuk certificates and the issuer. Additionally, all disclosures must be made in a timely manner, and announced through a recognised disclosure mechanism.

Moreover, the traditional challenge of Shariah non-compliance and difference in Shariah opinions, calls for the establishment of centralised Shariah boards to ensure all covenants of the approved and signed Sukuk contact are fulfilled and Shariah rules and principles are binding on all parties of contract. And more important, this will ensure the issuance to remain valid from Shariah compliance perspective until the maturity and repayment, without any threat of non-execution of the terms of the contract. The existence of Centralised Shariah boards may also resolve any conflicts related to Shariah perspective of Sukuk issuance.

Tackling governance issues such as weaknesses in legal standing, incentives and powers rendered to the issuers will safeguard the interests of Sukuk holders, and help in dispute resolution in addition to understanding and resolving inconsistencies in interpretation of Shariah. While industry stakeholders continue to underline the need for stronger Shariah governance, a concerted effort by regulatory authorities and standard setting bodies will help tackle these regulatory and governance issues and help establish an effective and a comprehensive framework across jurisdictions.

CIBAFI will continue to highlight and help address important industry issues as part of its role to promote awareness and information sharing and develop the Islamic finance industry to ensure its continued progress. Stay tuned!

جميع الحقوق محفوظة لمجلة الاقتصاد الاسلامي العالمية 2017