Opportunities & Trends in Islamic Finance - Euromoney

Islamic capital markets: stillbreaking recordsThe slowdown in the global capital market has yet to dent the Islamic sector, with the value ofsukuk deals doubling in 2007. Indications are that the vast infrastructure investments planned forthe Middle East and South Asia will help keep the trend on an upward pathFor the Islamic market, 2007 was another year of impressive growth,despite the sharp slowdown at the primary level of the global capitalmarket. By mid-December, total issuance in the sukuk market hadreached a record $43 billion in 177 deals, according to data published byIFIS. Although this represented a decrease on the total number of transactionscompleted the previous year (199), it represented an increaseof 80% on the amount raised in the global sukuk market in 2006, whendeals worth $27 billion were completed. That total compares with $12billion in 2005 and just $7 billion in 2004.Chart 1: Global sukuk issuance (US$ mn)50,00045,00043,13940,00035,00030,00027,16625,00020,00015,00012,03410,0007,2115,7175,0002003 2004 2005 2006 2007Source: IFIS 19 Dec 2007issuance from Africa and (predominantly) the Middle East in 2007. In2006, borrowers in the Africa and Middle East region raised a over $10billion in the global sukuk market; in 2007, this rose to almost $20 billion.In Malaysia, by contrast – which is comfortably the main source of Asiansukuk issuance – total volumes rose around 40% from $15 billion in 2006to $21 billion in 2007.Within the Middle East, the most striking development in 2007 was thevery clear emergence of the United Arab Emirates (UAE) as the centreof gravity for issuance of sukuk. In 2006, six UAE-based borrowers raised$21.435 billion in the sukuk market, with issuance driven by a smallhandful of very large transactions. Those included the highly successful$3.5 billion Dubai Ports deal at the start of 2006, led by Barclays Capitaland Dubai Islamic Bank, and the $3.52 billion transaction for Nakheel atthe end of the year, led by the same banks. In 2007, however, volumesin the UAE market for sukuk transactions exploded to $22.276 billion in26 transactions.Elsewhere in the GCC, issuance in Saudi Arabia posted a healthy rate ofgrowth from $818 million in 2006 to over $5 billion in 2007, althoughby December. Foremost among those transactions is the $4.1 billiontransaction for the fast-growing National Air Services (NAS), which in2007 placed orders for 98 new aircraft as part of a growth strategy thatwill see its total fleet expand to 142 planes by 2012.Behind the aggregate totals, however, were a number of highly significanttrends. The most striking of these was the conspicuous increase inAnother fast-growing market is Qatar, where total issuance was lessthan $270 million in 2006. In 2007, announced or issued volumeChart 2: Sukuk issuance by countryKuwait 3%Pakistan 2%Bahrain 2%2006 2007Other 2%Brunei 1%Saudi Arabia 3%Pakistan 1%Brunei 2%Bahrain 3%Other 2%Saudi Arabia 13%Kuwait 4%Malaysia50%UAE 31%Malaysia54%UAE 27%Source: IFIS 19 Dec 2007