Sukuk market sees strong growth in the Sultanate

MUSCAT, MARCH 17 -

The sukuk (Islamic bonds) segment of the Islamic banking and finance industry in the Sultanate continues to register strong demand fuelled in part by regulation that is conducive to the growth of sharia-compliant financing instruments, according to a high-ranking official of the Capital Market Authority (CMA).

Mohammed Said al Abri, Vice- President — Capital Market Sector, said the fledgling industry, which is still in its infancy in relative terms, has witnessed ramped up demand for sukuk investments over the past year alone.

Speaking at the IFN Oman Forum 2018, which was held in the city last week, Al Abri said the uptick in sukuk issuances not only caters to the developmental and funding needs of both government and private sector participants, but also helps diversify the financing base and risk away from the traditional banking sector.

The official underscored, in this regard, the role of the Capital Market Authority in nurturing the growth of the sukuk and Islamic capital market in the Sultanate. “The regulator by nature is also the facilitator of the market’s growth. Our role should be to nurture the development of this sector and make life for the market participants easier, without exposing either side (issuer and investor) to untoward risk,” he said. In that sense, the CMA’s role is significantly different from the traditional role of regulators as defined in other jurisdictions around the world, he noted.

In line with its distinctive role as regulator and market facilitator, the CMA issued regulations governing the issuance of sukuk three years ago with built-in flexibility that allows for the introduction of different kinds of instruments based on a variety of structures, he said. Additionally, no tariffs or taxes have been imposed on sukuk issuances, while the fees levied by the Authority on the issuer are very minimal, he pointed out.

“We allow the issuance of different kinds of sukuk structures, in different currencies, and in dual listings in Oman and overseas jurisdictions,” the official said, noting that demand is particularly strong in the listing of sukuk in international jurisdictions.

For its part, the CMA, he stressed, was amenable to revising the regulations if necessary to accommodate new trends and developments that are conducive to growing the sukuk market in the Sultanate.

Significantly, the past year has seen a strong uptick in the number of corporates opting for sharia-compliant financing in a market hitherto dominated by the government and local Islamic financial institutions. Last month, the Omani business house Golden Group raised RO 50 million via sukuk as part of a RO 200 million sukuk programme set up on its behalf by Maisarah Islamic Services of BankDhofar. The sukuk, based on the Wakalah structure, is listed on the Muscat Securities Market.

Earlier, in November, Mazoon Electricity Company SAOC, a subsidiary of Nama Group, announced the successful pricing of its debut Reg S/144A $500 million 10-year Sukuk offering. It was the first international corporate Sukuk issue out of Oman, and the first RegS/144A corporate Sukuk out of the MENA region since May 2016. The Sharia compliant Ijara structure was adopted for issue of the Sukuk certificates, which are listed on the Irish Stock Exchange.

And in June last year, the Omani government raised $2 billion via the largest ever sukuk issuance by the Sultanate.

It comes on the back of the $5 billion triple tranche offering ($1 billion 3.875 per cent notes due 2022, $2 billion 5.375 per cent notes due 2027 and $2 billion 6.5 per cent notes due 2047) issued by the Sultanate in March 2017, as well as a total of $4.5 billion bond and sukuk offerings by the Sultanate issued in 2016.