Different Direction: New Sukuk for a New Year

With the new year beginning recently in both the Hijra and Gregorian calendars, it is a good time to consider what direction Islamic finance should take in the year ahead. The Dubai World debt crisis that coincided with the maturity of the $3.52 billion Nakheel sukuk has brought unwelcome attention to the Islamic finance industry and the lack of clarity about what rights investors in sukuk... Read More

Resisting the Storm: Nakheel Brings Up Big Questions

The immediate crisis created by a potential default by Nakheel on its sukuk has ended with Abu Dhabi stepping in to repay the sukuk, but it has generated intense media attention greater than the size of the sukuk. Despite the resolution of the Nakheel situation, there remain some important questions for the Islamic finance industry as a whole, as well as for sukuk in particular.... Read More

On the Scales: Weighing Innovation in Islamic Finance

The financial industry is currently experiencing a period of introspection in the wake of the global financial crisis that began with the failure of off-balance sheet structured investment vehicles that invested in long-date securitised sub-prime mortgages financed with short-term capital. What began as a relatively new way for banks to increase their returns ended up creating one of the largest... Read More

Meeting in the Middle: Balancing Innovation and Increase in the Sukuk Markets

The past two years have seen momentous developments in the sukuk markets. Sukuk, more than any other area of Islamic finance, represent one of the most publicised segments of the growing Islamic financial industry, particularly in newspapers and magazines not specifically focused on Islamic finance or regions where Islamic finance is most concentrated. However, reports have been concerned largely... Read More

The TID Sukuk Default

On May 12, The Investment Dar (TID) became the first GCC-based sukuk issuer to default. The default provoked significant reaction in terms of how the Islamic finance industry would respond to sukuk defaults. However, the specific default of TID was less surprising because the company was reported to be considering sales of its non-core businesses to strengthen its balance sheet. There were also reports of a Kuwaiti government bailout, although these were strenuously denied by TID. ... Read More

Tackling Issues: Systemic Risk in Islamic Finance

The Islamic finance industry has recently recognised that it is not immune from crisis despite its more conservative outlook and focus on ensuring that finance remains directly connected to the underlying economic activities it funds. At the recent 6th Islamic Financial Standards Board Summit hosted by the Monetary Authority of Singapore, the heads of two prominent bodies in the industry focused discussion on an important topic for the industry to address: systemic risk in Islamic finance. ... Read More

Capital Rules May Have to Change to Bring Islamic Finance Forward

Listening to a rhetorical exposition of the Islamic finance industrys raison detre, it would seem that most of the financial intermediation would involve structures along the lines of mudaraba and musharaka. ... Read More

Fostering Sukuk Transparency

Rapid growth in Sukuk issuance began after the Malaysian governments first sovereign Sukuk in 2002. Between 2002 and 2007, the peak year in new issues, annual growth in Sukuk issuance was rapid, with annual growth rates above 115 percent on average. More Sukuk were issued in 2007 than in any year before or since: US$46.65 billion worth, according to the Islamic Finance Information Service (IFIS). When IFIS tallied issues from 2008, new issuance had tumbled to US$15.77 billion, the lowest annual ... Read More

Islamic Venture Capital Could Play an Important Role in the GCC

The Islamic finance industry is becoming both deeper and more sophisticated as private equity firms, hedge funds, Islamic banks and asset managers develop innovative new products. However, there is one area in which Islamic finance, particularly in its largest market, the Gulf Cooperation Council (GCC) countries, has lagged: venture capital.... Read More