IIFM Sukuk Report (3rd Edition) a Comprehensive Study of the Global Sukuk Market

8/10/2019 IIFM Sukuk Report (3rd Edition) a Comprehensive Study of the Global Sukuk Market

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S U K U K R E P O R TA comprehensive study of the Global Sukuk Market


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From the light of the Holy Quran

Allah Almighty Said:

We ask not of you a provision: We provide for you.

And the good end is for righteousness (Surat Ta-Ha, (20) 132)

:


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I

Central Bank of Bahrain

Labuan Financial Services Authority, Malaysia

Islamic Development Bank, KSA

Central Bank of Sudan

Bank of Indonesia

Autoriti Monetari Brunei Darussalam

State Bank of Pakistan

Dubai International Financial CentreCrdit Agricole Corporate & Investment Bank

Al Salam Bank, Bahrain

Kuwait Finance House, Kuwait

National Bank of Kuwait, Bahrain

Al Baraka Banking Group, Bahrain

Khaleeji Commercial Bank, Bahrain

Bank Islam Malaysia Berhad, Malaysia

Kuwait Finance House, Bahrain

Standard Chartered Saadiq, UAE

Abu Dhabi Islamic Bank, UAE

Jordan Islamic Bank, Jordan

Ahli United Bank, Bahrain

ABC Islamic Bank, Bahrain

Global Banking Corporation, Bahrain

Al Hilal Bank, UAE

Mashreq Al-Islami, UAE

Ithmaar Bank, Bahrain

Bahrain Islamic Bank

Gulf International Bank, Bahrain

The National Commercial Bank, KSA

IIFM is the International Islamic Financial Services Industrys standard setting organization focused on the Islamic

Capital & Money Market (ICMM) segment of the industry. Its primary focus lies in the standardization of Islamic

financial products, documentation and related processes at the global level. Moreover, IIFM also contribute in

the development of ICMM by organizing specialized Seminars, Workshops & Consultative meetings as well as

research on Sukukissuances around the globe.

IIFM was founded with the collective efforts of the Central Bank of Bahrain, Islamic Development Bank, Autoriti

Monetari (i.e. Monetary Authority) Brunei Darussalam, Bank Indonesia, Central Bank of Sudan and the Bank

Negara Malaysia (delegated to Labuan Financial Services Authority) as a neutral and non-profit organization.

Besides the founding members, IIFM is supported by other jurisdictional members such as State Bank of

Pakistan, Dubai International Financial Centre as well as a number of regional and international financial

institutions and other market participants.

About IIFM

Bank Muscat SAOG, Oman

HSBC, UAE

Bank Kerjasama Rakyat Malaysia

Malaysian Rating Corporation Berhad, Malaysia

Emirates Securities & Commodities Authority, UAE

Ernst & Young, Bahrain

DDCAP Limited, UK

United Gulf Bank, BahrainFirst Habib Modaraba, Pakistan

Clifford Chance LLP, UAE

Allen & Overy LLP, UAE

Zaid Ibrahim & Company, Malaysia

The Islamic Bank of Asia Limited, Singapore

The Royal Bank of Scotland, UK

Istanbul Stock Exchange, Turkey

Seera Investment Bank, Bahrain

Bank Al Jazeera, KSA

Boubyan Bank, Kuwait

Bank of London and the Middle East

Kuveyt Trk Participation Bank Inc.

RAM Rating Services Berhad

Iraqi Islamic Bank

Islamic International Arab Bank plc

Bank Islam Brunei, Darussalam

IIFM MEMBERS

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IIFM has prepared this publication for general information purposes only and this does not

constitute an invitation or solicitation to purchase, subscribe for or sell any Sukukor to engage in,

lead into, conclude or refrain from engaging in any transaction.

IIFM or the author/s accept no liability whatsoever for any direct, indirect, consequential, or other

damages and loss arising from any use of this publication.

The information contained herein has been obtained from sources considered to be reliable. IIFM

or the author/s makes no guarantee, representation or warranty as to its accuracy or completeness.

DISCLAIMER

IVII


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Research & Review Team

Mr. Ijlal Ahmed Alvi

Chief Executive Officer

Dr. Ahmed Rufai

Head of Shariah Department

Mr. Ismail Dadabhoy

IIFM Advisor

Mr. Usman Mohammad Naseer

Business Development Officer

Database Maintenance

Mr. Babar Naseer

Mr. Tareq Fouad

Design & Printing

Mr. Sayyed Zarrar

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The growth of the Islamic financial market worldwide has been very impressive and remarkable.

The innovations have changed the dynamics of the industry especially, in the area of Sukukwhich

is a means of raising government finance through sovereign issues, and also a way for companies

to obtain funding through offering corporate Sukuk.

This third edition of the IIFM Sukuk research report aims to shade light on the growth and

development of international and domestic Sukukissuances in recent years and to highlight as

well on the different Sukukstructures used in various jurisdictions active in issuing Sukuk.

This research report highlighted and analyzed some selected case studies from the international

Sukukmarkets based on widely used structures for the purpose of achieving a deeper understanding

of the mechanism of these unique and most popular and commonly used financial instruments in

the Islamic Capital and Money Market.

The report presents invaluable information on the benefits of Sukukfor all the stake holders in the

industry.

Abstract

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On the very outset of this research report, IIFM would like to take this opportunity to express its

deep sense of gratitude and thanks to individuals and institutions for their cordial support to

complete this research report.

The report would not have been seen light without the support of such individuals, the industry

institutions and the stakeholders in general.

Our sincere gratitude and highly thankful goes also to all institutions and stakeholders who provide

us with invaluable information that helped us to complete this task through various stages.

We take this opportunity to express our profound gratitude and deep regards to the Central Bank

of Bahrain (CBB) for its constant and continued support. We would also like to acknowledge and

highly thank IIFM Board of Directors and Members for their unreserved support for IIFM in its

general endeavors.

IIFM is very much thankful to Mr. Ismail Dadabhoy for his review and voluble contribution to this

report. We are also thankful to Ms. Shazia Farooq for her time and effort in jointly preparing the

case studies of this research report.

Lastly, IIFM is also thankful to Ministry of Finance Indonesia, Clifford Chance, Linklaters, HSBC

Bank, Al Hilal Bank, Noor Islamic Bank & FWU Group for providing case studies & articles on specific

Sukukstructures institutions contribution.

Acknowledgements

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From IIFM Chairman & Executive Director - Banking Supervision Central Bank of Bahrain (CBB)

In the Name of Allah, the Most Gracious, the Most Merciful

All the praises and thanks be to Allah Almighty. May peace and blessings of Allah Almighty be upon His

Messenger Prophet Muhammad (S.A.W.) his family and all his companions.

The continuing evolution of the SukukMarket is critical to the sustainability of the future growth of Islamic

finance. Reliable research which provides data in respect of Sukukissuance is a key factor in understanding

the way in which the market is developing, and this in turn can be used to inform decisions as to when

to issue a Sukuk; the anticipated terms of the issuance; and to facilitate the monitoring of any secondary

market.

In 2010, the International Islamic Financial Market (IIFM) successfully published the first edition of a Sukuk

Research Report, followed by the second edition in 2011. The two reports provided a comprehensive

analysis of the market at the respective times. It has been encouraging to note the level of praise and

admiration both reports received from existing and potential market participants.

The latest Research Report builds upon the previous success, and it goes a long way to strengthen

and deepen the understanding of global Sukukstructures and issuance. The Report provides a reliable

database, with accompanying professional analysis, and this can be used as a benchmark by regions

which have a high concentration of the worlds Sukukissuance.

This research report aims to provide information for industry decision makers in their assessments of

trends in the issuance of Sukukglobally. The report also amply illustrates the importance of this field of

transactions to all stakeholders, and clearly demonstrates the way in which Sukukissuance and utilisation

has evolved.

I believe that the IIFM research team can be confident that there will be many grateful readers who will

gain a broader perspective of the Sukukstructure and how stakeholders can optimize the benefits of the

Sukukmarket as a result of their efforts.

Mr. Khalid Hamad

April 2013

VIIIVI

Foreword


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From The Chief Executive Officer, International Islamic Financial Market (IIFM)

In the Name of Allah, the Most Gracious, the Most Merciful

All the praises and thanks be to Allah Almighty, the Lord of all that exists. And may peace and blessings of Allah Almighty be

upon His Messenger Prophet Muhammad, his family and all his companions.

There is no doubt that Sukukplay an essential role in the development of Islamic Capital and Money Market and alsoplay an important role in contributing to the economic growth and prosperity of Islamic countries. IIFM efforts in this

respect as reflect in its 1stand 2ndEditions of the SukukReports are evident. The two reports were very well received

by the practitioners. Considering the value addition provided by IIFM in terms of Sukukissuance database and issues

covered in the reports.

I have a great satisfaction in introducing this third edition of the IIFM SukukReport to the stake holders in the industry

in particular, governments, Islamic financial institutions and corporates. This report provides valuable information

obtained through data analysis, regarding the Sukukissuances for the years January 2001 January 2013.

This report will pay particular attention on the prospects and overview trends of the global SukukMarket and it will

highlight on major issuances around the globe.

This report is an excellent example of cooperative endeavor among a number of institutions and individuals from

different jurisdictions. They have put in their efforts and contributed to the successful completion of this report. I will like

to acknowledge their contribution individually but the constraint of space restricts me from that. The motivation and

commonality among the stakeholders of the research objective despite their belonging to divergent jurisdictions helped

IIFM to complete this important task without obstructions. The varied information of the collaborating institutions which

have been brought into this report, the issuance specific data and the profound analysis make the report immensely

useful and valuable.

I am very much thankful to Securities Commission Malaysia, Bank Indonesia, Ministry of Finance Indonesia, State Bank

of Pakistan and Central Bank of Sudan for their continued support and enriching t he IIFM database with valuable Sukuk

data information and verification.

I must place on record my profound gratitude to the Central Bank of Bahrain (CBB), IIFM board of directors and Members

for their continued support. I must also wholeheartedly thank the IIFM research team who through their hard work,

devotion and sincerity has completed this challenging task of Sukukreport successfully. It is my hope that the reader

will find this report useful and of value.

Mr. Ijlal Ahmed Alvi

April 2013

IX VII

Foreword


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CONTENTS

CONTENT PAGE

Disclaimer ii

Research Team iii

Abstract iv

Acknowledgments v

Foreword (from the IIFM Chairman & CEO) vi

Contents viii

List of Tables ix

List of Charts ix

INTRODUCTION 1

CHAPTER ONE : SUKUK AL- ISTITHMAR(INVESTMENT SUKUK): 3 MEANING AND TYPES1 Introduction 3

2 SukukAl-Istithmar 3 2.1 Definition 3

2.2 Types of SukukAl-Istithmar 4

2.3 Characteristics of SukukAl-Istithmar 7

3 Fundamental differences between SukukAl-Istithmar and Bonds 7

4 Conclusion 7

CHAPTER TWO : OVERVIEW OF THE GLOBAL SUKUKMARKET 9

2.1 Resurgence of SukukMarket 9

2.2 Global SukukIssuances 9

2.3 Distribution of Global SukukIssuance by Issuer Status 14

2.4 International SukukMarket 192.5 Domestic SukukMarkets 22

2.6 Structural Break-up of Global SukukMarket 24

2.7 Short Term SukukMarket 29

CHAPTER THREE : CASE STUDIES OF SELECTED INTERNATIONAL SUKUKISSUES 30

3.1 Abu Dhabi Islamic Bank (ADIB) Shirkat-Ul-MilkBased Sukuk 2011 30

3.2 Khazanah Nasional Wakalah Based Sukuk2011 34

3.3 Majid Al Futtaim (MAF) Wakalah Based Sukuk2012 38

3.4 Saudi Electricity Company (SEC)Al IjarahBased Sukuk2012 43

3.5 Projek Lebuhraya Usahasama Berhad (Plus Berhad)Musharakah Based Sukuk2012 46

CHAPTER FOUR : CASE STUDIES & ARTICLES ON SPECIFIC SUKUKSTRUCTURES 49INSTITUTIONS CONTRIBUTION

4.1 Government of Indonesia SukukIssuances (SukukNegara) 49

4.2 Republic of Turkey 56

4.3 Abu Dhabi Islamic Bank PJSC Mudaraba-Based Tier 1 Capital Sukuk2012 59

4.4 Article on SukukHeading Forward 63

4.5 Article on SukukSecondary market overview (Q4 2012 Q1 2013) 66

4.6 FWU Group SukukCASE STUDY 66

CONCLUSION 68GLOSSARY 71

REFERENCES 73

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LIST OF TABLES

TABLE PAGE

Table 1: Selected Hall Mark GlobalSukukIssues & Trends -2011- Jan 2013 - 11

Year wise latest first USD 700 Millions or greater (International & Domestic)

Table 2: Selected the Non-Local Currency hallmark global Sukukissuances 13

during last 2 years

Table 3: landmark Fixed Profit RateSukukIssuances during Jan 2011 Jan 2013 period 14

Table 4: Global SukukIssuances by Issuer Status 2001- Jan 2013 15

Table 5: Global Sovereign SukukIssues -Selected Value Leaders 2011-2013 - 15

(International & Domestic)

Table 6: Global Corporate SukukIssues -Selected Value Leaders 2011-2013 - 16

(International & Domestic)

Table 7: Global Quasi-Sovereign SukukIssues -Selected Value Leaders 2011-2012 - 18(International & Domestic)

Table 8: Regional Break-Up of the Total International SukukIssuance 2001-Jan 2013 20

Table 9: International SukukIssues -Selected Value Leaders in USD 2011- Jan 2013 - 21

(Corporate, Sovereign & Quasi-Sovereign)

Table 10: Regional break-up of the Total Domestic SukukIssuance 2001-Jan 2013 22

Table 11: Domestic SukukIssues -Selected Value Leaders in Local Currency 2011- 2013 - 23

(Corporate, Sovereign & Quasi-Sovereign)

Table 12: Cross Border International SukukMaturing 2013 26

Table 13: Cross Border International SukukMaturing 2014 26

Table 14: Domestic SukukMaturing 2013 27

Table 15: Domestic SukukMaturing 2014 28

Table 16: Total Global Short-Term SukukIssuance All Currencies 29

LIST OF CHARTS/FIGURES

CHART PAGE

Chart 1: Total Global SukukIssuance (All Currencies) 10

Chart 2: Total Global SukukIssuance (All Currencies) Breakdown by Issuer Status 18

Chart 3: Total Global SukukIssuance by Value (All currencies) Structural Breakdown 25

Chart4: Total Global SukukIssuance by currency Breakdown 2001- Jan 2013 25

Chart 5: Total Global SukukIssuance by Regional Breakdown 2001- Jan 2013 26

Chart 6: Total Global Short-Term SukukIssuance by Currency 29

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The International Islamic Financial Market (IIFM) over the past years has been in the forefront of global initiativesand efforts to help in establishing a sustainable, viable and feasible global Islamic Capital and Money Market

industry through its comprehensive documentation and product standardization initiatives that cater not onlyIslamic Financial Industry but also to ensure that the Islamic Capital and Money Market products and servicesremain attractive to all investors, creditors and Sukukissuers across the Globe.

In an attempt to further strengthen efficiency, awareness and enhance competitiveness of the Islamic Capital andMoney Market industry, in 2010 IIFM has published its first Sukukresearch report (IIFM SukukReport 1stEdition) aspart of its efforts to help the industry move forward in a comprehensive manner.

In 2011 the 2ndedition of IIFM Sukukresearch report (IIFM SukukReport 2ndEdition) was published in order to meetthe growing and increasing needs of those interested in the SukukMarket by providing them useful informationon the latest developments of Sukukmarket.

The two reports covered a number of important issues related to Sukukissuances across the globe over the periodof 2001 to 2010.

With the continued rise in global SukukIssuances whether its domestic or international, sovereign or corporate,it has become very much necessary and essential to shed more light on the evolution of this important financialsector in the Islamic finance industry.

This third edition of Sukuk report as the previous reports provides information and relevant details of Sukukissuances during the period of 2011 -2012 The main objective here is to highlight the development of the Sukukmarket during this period, in particular, in the GCC countries, Asia represented by Malaysia, Indonesia and othercountries such as Turkey, Pakistan etc., by analysing the transition and practices that have taken place. In doingso, some of the relevant issues related directly to Sukukissuances globally during this period of time is discussedand analyzed.

As far as the International Sukuk secondary market is concern, there has been some improvement given therecord issuances during last two years, however, the data is not yet available to IIFM in order to assess the level ofsecondary market Sukuktrading hence, our intention is to continue work on Sukuksecondary market and publishthe report at a later date.

Research methodology

Both quantitative and qualitative methods have been used in writing this report.

A quantitative method mainly involves data collection on various Sukukissuances from January 2011 to January

2013 and also further data verification for 2001 to 2010 period. The main focus in this method is to collate datafrom writing materials relating to the topic of the research. This includes prospectuses, publications, articles,magazines, online research, and information service providers. Data collected was then filtered with respect todifferent criteria such as chronology, geographic distribution, issuer status, country of origin, etc and depicted inthe form of tables and/or charts for better understanding. Moreover, certain IIFM Member jurisdictions as well asinstitutions have also assisted IIFM in data verification.

However, in a qualitative method the main focus is to collect and analyze materials or data in respect to Sukukissuance acceptability. This includes the types of structures used, legal, innovation and Shariahissues.

This research report is organized into four standalone chapters which are organized as follows:

Introduction

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Chapter One explains the meaning, concept and types of SukukAl-Istithmar(An Arabic term ofinvestment Sukuk) and common mistakes in this regard.

Chapter Two discusses overview of the Sukukissuances over the period of January 2011 to January2013.

Chapter Three comprises of selected Sukukcase studies of international & domestic Sukukissuancesprepared by IIFM.

Chapter Four consists of case studies & articles on specific Sukukstructures, written and prepared bymembers & other institutions.

Among the the objective of this research report is to help the stake holders in the industry in particular,governments, Islamic financial institutions and corporate, evaluate and asses their decisions on Sukukissuanceas well as in their decision making and policy formulation. Also to orient those interested in the SukukMarket tothe nature of Sukukfield and how it can be useful for those who need to gain some basic as well as more in-depthknowledge and background on the level of research in this field. In order to maximize the benefit of the report,some case studies and articles on specific Sukukstructures and issues have been included.

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3

SUKUK AL- ISTITHMAR(AN ARABIC TERM OF INVESTMENT SUKUK)

MEANING AND TYPES

By: Ahmed Rufai - IIFM

Abstract

Every so often question is raised on whether there is any difference between Sukuk Al-Istithmarand SukukAl-Mudarabahor SukukAl-Wakalah biAl-Istithmaror SukukAl-Salametc. Some suggested in their writings on Sukukthat SukukAl-istithmarshould be distinguished from Sukukal- Mudarabahand Sukukal-Wakalah bi Al-Istithmarwithout realizing that all these contracts in this context are in general termed or called Sukuk Al-Istithmar.Therefore, the objective of this chapter is to explain the meaning and types of Sukuk Al-Istithmar based on theAAIOFIShari ahStandard, without going into details of itsShari ah provisions and practical applications.

1. IntroductionSukukin general reflect participation in the underlying asset so that what is traded is not a merely debt as eachcertificate must represent an undivided interest in the asset. This is because in the light of the prohibition of Riba(i.e. interest) under theShari ahtrading in pure debt instrument is forbidden. Therefore, Sukukare structured toachieve a desired economic objective in a manner conform to the principle and sprit ofShari ah.

Investment in tangible assets, used for productive purposes and reaping the rewards arising from those assets isthe core principle of Islamic finance and it is this principle on which Sukuksecuritization structures are founded.

Moreover, for a Sukukstructure to comply withShari ahprinciples the underlying asset must also comply withtheShari ahprinciples as well. In other words the underlying asset must be lawful from theShari ahperspective.

As mentioned in the abstract that the primary purpose of this chapter is to give general information on SukukAl-Istithmarwithout digging deep into its Sahriah provisions and practical applications but to know that theseSukukmust be structured on the basis of the known Islamic investment transaction contracts such as Mudarabah,or Wakalahor Ijarahor Salametc. all of which are called/termed/categorized as Sukuk Al-Istithmaraccording toAAIOFI ShariahStandard.

2. SukukAl- Istithmar

2.1 Definition

The early Muslims have used the wordAssakk,

which means certificate or order of payment. Andthe plural of this Arabic term is Sukuk1 .

They used Sukukin those early days as a form of papers representing financial obligations originating from tradeor any other commercial activities. However, in the modern day Islamic financial system, Sukukare known asinstruments of the Islamic capital Market and it is one of the best financial instruments and mechanisms that arecommensurate with the needs of issuers/originators and investors.

Chapter One

1. Sheikh Ahmad Al- Fayyumi Al- Muqri, Al-Misabah Al-Munir, Kitab Al-Saad, Al-Saad ma a Al-Kaf.


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4

Sukuk Al-Istithmaris defined as follows:

Investment Sukukare certificates of equal value representing undivided shares in ownership of tangible

assets, usufructs and services or (in the ownership of) the assets of particular projects or special investment

activity2.

The concept of Sukuk Al-Istithmar can be extracted from this definition as certificates of equal value issuedand sold to investors who, by virtue thereof, have proportional claims over the financial rights underlying thesecertificates as well as proportionately liable for obligations arising from these certificates i.e. benefits and risks.

2.2 Types of Sukuk Al- Istithmar

There are many types of Sukuk Al-Istithmar which can be issued in many forms and structured from any of theknown Islamic investment transaction contracts such as Wakalah contract or Mudarabah contract or Salamcontract or Ijarahcontracts etc. in other words SukukAl-Istithmar must be issued in accordance with one of theseknown contracts. The most important of such contracts in this regard as set out in the AAIOFI Shari ahStandard

are the following3:

2.2.1 SukukMilkiyyah Al-Maujudaat Al-Muajjarah (i.e. Certificates of ownershipin leased assets)

These are certificates that represent equal value and are issued by the owner of leased asset or a tangible assetto be leased by promise, or by his financial agent with the aim of selling asset and recovering its value fromsubscription. Thus, the holders of the certificates become owners of the assets.

In this transaction the Issuer is the seller of a leased asset or a tangible asset to be leased on promise, thesubscribers are the buyers of the asset, mobilized funds are the purchase price of the asset. The certificate holderswill become the owners of the assets jointly sharing the profits and losses on the basis of the partnership that existbetween them.

2.2.2 SukukMilkiyyah Al- Mana fi a(i.e. Certificates of ownership of usufructs)

These Sukukhave different types as explained bellow:

(a) SukukMilkiyyah Al- Mana fi a Al- a ayaan Al-maujudah(i.e. Certificates of ownership of

usufructs of existing assets

These are Certificates of equal value that are issued either by the owner of an existing asset or a financialintermediary acting on the owners behalf, with the purpose of leasing or subleasing this asset and receiving therental from the revenue of subscription. Thus, the holders of the certificates become owners of the usufruct of theasset.

In this transaction the Issuer is the seller of usufruct of an existing asset, the subscribers are the buyers of theusufructs and the mobilized funds are the purchase price of the usufructs. Thus, the certificate holders becomejointly the owners of the usufructs sharing its benefits and risks.

(b) Sukuk Milkiyyah Al- Mana fi a Al- a ayaan Al-mausufah fi Al- dhimmah(i.e. Certificates of

ownership of usufructs of described future assets)

These are certificates of equal value issued for the aim of leasing out tangible assets that the lessor is liable toprovide in the future whereby the rental is recovered from the subscription revenue. Thus, the holders of thecertificates become owners of the usufruct of these future assets.

2. Accounting and auditing organization for Islamic Financial Institutions (AAIOFI) ShariahStandards, 2010, item 2

Shariah Standard no. 17. PP. 307 309.

3. Ibid. (See the AAIOFI ShariaStandard no. 17 for more details on these Sukuk).


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In this transaction whereby the ownership of described usufructs to be made available in the future the Issuer is theseller of such usufruct, the subscribers are the buyers of the usufructs and the mobilized funds from subscriptionare the purchase price of the usufructs. Thus, the certificate holders become jointly the owners of the usufructssharing its benefits and risks.

(c) Sukuk Milkiyyah Al-Khadamaat min taraf mu ayyan(i.e. Certificates of ownership of services of a specified

party)

These are certificates of equal value issued for the aim of providing services through a specified provider (such aseducational benefits in a nominated university) and obtaining the value in the form of subscription income. Thus,the certificates holders become owners of the services.

(d) Sukuk Milkiyyah Al-Khadamaat min taraf mausufun fi Al- dhimmah (i.e. Certificates of ownership of

described future services)

These are certificates of equal value issued for the purpose of providing future services through described provider(such as educational benefits/ programs of determined specifications without mentioning the educationalinstitution) and obtaining the fee in the form of subscription income. Thus, the holders of the certificates becomeowners of the services.

In these transactions (c & d) the issuer is the seller of services, the subscribers are the buyers of the services and themobilized funds are the purchase price of the services.

The certificate holders are entitled to sell all types of usufructs of (b, c & d) in addition to the funds of reselling suchusufructs

4.

2.2.3 Sukuk Al- Istisna a

These are certificates that represent equal value issued with the aim of mobilizing required funds to be used forthe production of certain goods which to be owned by the certificate holders when its produced on Istisna abasis.

In this transaction the issuer of these certificates is the manufacturer (Seller), the subscribers are the buyers of the

goods to be produced and the mobilized funds are the cost of the goods. The certificate holders are entitled to thegoods or the selling price of the manufactured goods on the basis of a parallel Istisna aif any.

2.2.4 Sukuk Al- Murabahah

These are certificates that represent equal value issued for the purpose of financing the purchase of Murabahahcommodity and therefore, the certificate holders become the owners of the purchased commodity.

In this transaction, the issuer of these certificates is the seller of the Murabahahcommodity, the subscribers are thebuyers of that commodity and mobilized funds are the purchasing cost of the commodity. The certificate holdersown the Murabahahcommodity and are entitled to its sale price.

2.2.5 Sukuk Al- Musaqaah(i.e. Irrigation certificates)5

These are certificates that represent equal value issued on the basis of an irrigation contract for the purpose ofusing the mobilized funds for irrigating trees that produce fruits as well as meeting other expenses relating tothe maintenance of the trees and therefore, the certificate holders become entitled to a share in the crop as peragreement.

In this transaction, the issuer of these certificates is the owner of the garden/ land that consist of trees, the

5

4. Accounting and auditing organization for Islamic Financial Institutions (AAIOFI) ShariahStandards, 2010, item 5/1/5/2

ShariahStandard no. 17. P. 311.

5. This is a type of contract in which the owner of agricultural land shares its produce with another person in return for his

services in irrigating the garden.


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subscribers are those who assume the obligation of irrigation process on the basis of Al-Musaqah contract andthe mobilized funds stand as the maintaining cost of the garden/ trees. The certificate Holders are entitled to ashare in the produce of the trees as per the agreement.

2.2.6SukukAl- Musharakah (i.e. participation certificates)

These are certificates that represent equal value issued with the aim of using the mobilized funds for establishinga new project or developing an existing one or financing a business activity on the basis of any of partnership

contracts. Thus, the certificate holders become the owners of the project or the assets of the activity as per theirrespective shares.

SukukAl-Musharakahhowever, may be managed on the basis ofAl-Shirkahi.e. participation orAl- MudarabahortroughAl-Wakalahbil Istithmari.e. investment agency as explained below:

2.2.6.1 SukukAl- Sharikah (i.e. Participation certificates)

These are certificates representing projects or activities that are managed on the basis of Musharakah contract byappointing either one of the parties or any other party to manage the operation.In this transaction, the issuer is the inviter to a partnership with him in a specific project or determined activity,

the subscribers are the partners in the Musharakah contract and mobilized funds are the share contribution of thesubscribers in the Musharakah capital. Thus, the certificate holders own the assets of partnership including profitsand losses and they are entitled to share of profit, if any.

2.2.6.2 Sukuk Al- Mudarabah6

These are certificates that represent projects or activities that are managed on the basis of Mudarabahcontract byappointing Mudaribwho could be one of the partners or any other person for the management of the operation.

In this transaction, the issuer of these certificates is the Mudarib, the subscribers are the capital owners andmobilized funds are the Mudarabahcapital. Thus, the certificate holders own the assets of Mudarabahand sharethe profit as per the agreement. They also being the capital providers, bear the losses, if any.

2.2.6.3Sukuk Al Wakalah bil Istithmar(i.e. Certificates of investment agency)

These are certificates that represent projects or activities that are managed on the basis of investment agency byappointing an agent to manage the operation on behalf of the certificate holders.

In this transaction, the issuer of these certificates is the investment agent, the subscribers are the principals andthe mobilized funds are the entrusted capital of the investment. Thus, the certificate holders own the assetsrepresented by the certificates with its benefits and risks, and also they are entitled to the profits if any.

2.2.7 Sukuk Al- Muzaraah (i.e. sharecropping certificates)7

These are certificates of equal value issued for the objective of using the mobilized funds in financing a project onthe basis of a Muzaraah contract. Thus, the certificate holders become entitled to a share in the crop as per theterms of the agreement.

In this transaction the issuer of these certificates is the owner of the land, the subscribers are the cultivators whoinvest on the basis of Muzaraah contract and the mobilized funds are the cultivation cost. Thus, the certificateholders are entitled to a share of the produce of the land as per the agreement.

6

6. Al- Mudarabah orAl-Qiradh: Is a contract between a Rabbul Mal(capital provider) and (an entrepreneur) under

which the Rabbul Malprovides capital to be managed by the Mudariband any profit generated from the capital is shared

between the two parties (Rabbul maland Mudarib} according to mutually agreed profit sharing ratio whilst financial losses

are borne by the Rabbul Malprovided that such losses are not due to the Mudaribsmisconduct, negligence or breach of

specified terms of the contract.

7. This is a type of contract in which one person works on the land of another person in return for a share in the produce of the land.


19/86

2.2.8 Sukuk Al - Salam8

These are certificates of equal value issued for the aim of mobilizing Salamcapital so that the goods to be deliveredon the basis of Salamcontract are owned by the certificate holders.

In this transaction the issuer of these certificates is the seller of the Salamgoods, the subscribers are the buyers ofthe goods and the mobilized funds are the purchase price of the commodity, which is the Salamcapital. Thus, thecertificate holders are the owners of Salamgoods and they are also entitled to the sale price of the certificate or

the sale price of the Salamgoods sold through a parallel Salam, if any.

2.3 Characteristics of SukukAl- Istithmar9

Sukuk Al-Istithmaris characterized with many features that distinguish them from the non Shari ahcomplaintbonds. These features include:

(a) SukukAl-Istithmar are certificates of equal value issued in the name of investor therefore, a legitimate claimof its owner/investor over the financial rights and obligations represented by the certificate can be established.

(b)It represents a common share in the ownership of the tangible assets earmarked for investment, usufructs,services etc. and hence, it does not represent debt as in the case of non Shari ahcompliant bonds.

(c)It is issued on the basis of known and acceptable Shari ahinvestment contracts and in accordance with Shari ahprinciples which governing its issuance as well as its trading.

(d) Investors in SukukAl-Istithmarshare the profit according to the agreement set forth in the prospectus andalso bear the losses if any, based on the percentage/proportion owned by each investor.

3. Fundamental differences betweenSukuk Al- Istithmar and Bonds

Bond is defined as:

A debt investment in which an investor loans money to an entity (corporate or governmental) that borrows

the funds for a defined period of time at a fixed interest rate10

.

Based on this definition of the bonds, we can see that the fundamental differences between Bonds and SukukAl-Istithmaris in the fact that SukukAl-Istithmar are not fixed income securities, because they do not representdebts between the issuer and the investors. Rather, the investors share Sukukreturns and proceeds according topercentages stated in the prospectus, and bear losses in proportion to the number of the Sukukcertificates heldby them.

AAIOFI Shari ahStandard clearly stated that these SukukAl-Istithmarare investment Sukukin order to distinguishthem from shares, bonds etc. which, as well as other large part of the conventional securitization market, are notconform to theShari ah principles of transaction as its income element of the cash flow is considered to be Riba(i.e. interest) hence, could not be accepted as an asset class as well as it represent debt rather than Shariahhcompliant acceptable commodity.

4. Conclusion

The of this chapter can be summarized in the following points:

4.1 There is no any objection from theShari ahto issue SukukAl-Istithmarcertificate on the basis of any knownSahari ah investment contracts, such as Wakalahor Mudarabahor Salamor Ijarahcontracts etc. and the certifi-

8. Al Salami.e. Advance purchase contract.

9. Accounting and auditing organization for Islamic Financial Institutions (AAIOFI) ShariahStandards, 2010, item 4 Shariah

Standard no. 17. PP.309-310.

10. http://www.investopia.com/terms/b/bond.asp#ixzz2LWMKa0x6.

7


20/86

cates must be issued for asset that are tangible assets, usufructs and services by dividing them into equal sharesand issuing Sukukfor their value. In other words, it must be backed by aShari ahcompliant real underlying assetsthat are subject to aShari ahknown contracts and the rights and obligations of all parties in the transaction shouldbe spelled out clearly and identified in a transparent manner. Also its documentation must demonstrate that anyincome arising must derive from the underlying activities for which the funding has been used, and not simplycomprise Riba (i.e. interest) as these SukukAl-Istithmardeferred from bonds and fixed-income securities whichrepresent debts.

4.2 Under the umbrella of SukukAl istithmar there are different types of Sukukwith differentShari ahrulings andstructures. All these Sukukare called SukukAl istithmar in order to distinguish them from shares and bonds.

4.3 SukukAl-Istithmarrepresents undivided shares in the ownership of all the assets made available for invest-ment of whatever type. Therefore, the relationship between the investors and issuer is based on some kind ofpartnership in profit and loss sharing not on debt as debts owed as liability are not allowed inShari ahto securitizethem for the purpose of trading.

4.4 For the sake of information, SukukAl WakalahbiAl-Istithmar(i.e. Certificate of investment agency) is under theumbrella of SukukAl istithmar which includes as mentioned above, various Islamic contracts. Some in the Sukukindustry are not aware of this as they suggested in their writings that SukukAl-istithmarshould be distinguishedfrom SukukAl- Mudarabahand Sukukal-Wakalah biAl-Istithmar.

4.5 It is a Shari ahrequirement that SukukAl-Istithmarmust be structured and issued on the basis of any knownIslamic investment contracts, so that the transactions will be subjected to its (i.e. the investment contracts) gen-eral provisions and conditions. This is after closing subscription, receipt of the value of the certificates and puttingit to use as planned.

Below diagram illustrate the types of Sukuk Al- Istithmar where they must be structured and issued on the

basis of any of the Islamic nominated Investment contract:

8

12

Types

of

Sukuk

Al

-

Isthmar

Sukuk

Al-Ijarah

SukukAl-Murabahah

Sukuk

Al- Muzara'ah

Sukuk of ownership

of usufructs.These

Sukukhave different

types as follows:

Sukuk

Al- Issnaa

Sukuk Al-

Musaqaah

Sukuk

Al - Salam

Sukuk Al-

Musharakah maybe

managed on the

following basis

(a) Sukuk of ownership of

usufructs of exisng assets.

(b) Sukukof ownership of

usufructs of described

future assets.

( c) Sukukof ownership of

services of a specified

party.

(d) Sukukofownership of

described future

(a) SukukAl-Sharikah

(b)Sukuk Al-Mudharabah

(c ) Sukukof investment

agency (i.e.Al Wakalah

bil Isthmar)

Mixed asset

Sukukor

hybridSukuk

Combine two or

more forms of

Islamic

financingin

their structure.

The underlying

pool of assets

can comprise of

Issna,

Murabahah

receivables as

well as Ijarah

etc.


21/86

OVERVIEW OF THE GLOBAL SUKUK MARKET

2.1 Resurgence of Sukuk Market

Islamic Capital Market continued its upward trend in recent years and is led by the key Islamic fixed profile

instrument known as Sukuk. After a relatively large dip in the Sukukissuances in mid 2008 to 2009, the year 2010

showed the glimpse of true potential of Sukuk.

The global financial crisis had a direct impact on Sukukmarket and the few holders of troubled Sukukwere facing

the default and insolvency proceedings and uncertainty on legal difficulties in restructuring Sukuk. However, once

several defaulting Sukukwere restructured and legal certainty was established the market confidence returned.

The most recent restructuring of Sukukis Dana Gas US$ 1 billion Sukukwhich is expected to be soon approved

by the creditors. The Dana Gas restructuring involve partial cash repayment and issuance of US$ 425 million

Convertible Sukuk& US$ 425 million Sukukwhich shows that legal system is present to tackle such events though

further improvement may be required to tackle certain issues specific to Islamic Finance.

Furthermore, the Islamic jurisdictions also stepped in and started bench mark Sukuk issuances both in their

Domestic Market as well as in International Market. A number of Islamic countries such as Indonesia, Turkey,

Pakistan, GCC countries and others gave priority to developing the Islamic Financial Services Industry particularly

Sukukmarket.

The year 2011 & 2012 witnessed record Sukukissuances by Sovereigns, Quasi Sovereigns & Corporates and this

was in line with IIFMs SukukReport 2nd edition indication that Sukukmarket will grow and Islamic jurisdictionswill lead the Sukukmarket recovery.

The other helpful and much needed development is use of Sukuk in project financing as well as for aircraft

financing (Emirates Airline, Malaysian Airline, Air Asia) which are of long term nature and Sukukis well suited for

these kind of financing requirement.

Finally, financial institutions are no longer the majority investors in Sukukas fund managers; Takaful operators,

high Net worth Individuals and others are now investing in Sukukwhich is one of the reason why most of the Sukuk

are issued on fixed profit rate basis.

2.2 Global SukukIssuances

As illustrated in the below chart, the share of sovereign as well as Quasi Sovereign Sukukissuances has increased

a great deal during Jan 2011 Jan 2013 period and is contributing to the further development of Sukukmarket:

Chapter Two

9


22/86

Chart 1: Total Global SukukIssuance (All Currencies) - Jan 2001 Jan 2013 US$ Millions

Global Sukukmarket continued its positive upward momentum after the initial shock of the financial crisis. Sukukissuance enjoying a very successful runs that began in 2010 and recorded another pinnacle in 2012, and in doingso, it crossed the $100 Billion mark of financing arranged via Sukuk. The market achieved a very respectableissuance of US$ 137 Billion.

The Financial crisis of 2008, which pressured developed market financial institution into contracting anddeleveraging, played a big part in propelling Sukukissuance to new heights. Sukukis now establishing a firm baseas an alternative source of funding, not just for the GCC and Malaysian market but with interest gathering fromEurope, African continent and the CIS countries.

We witnessed many milestones in 2012, just to highlight a few:

a) The biggest Sukukissuance from PLUS - Malaysia

b) The biggest Saudi Sukukby the Civil Aviation Authority

c) First Intl Sukukissuance with a Saudi Sovereign Guarantee

d) Debut International Sukukby The Republic of Turkey

e) Debut Domestic Lira issuance by Republic of Turkey

f ) First Sukukissuance from a financial institution in Kazakhstan

g) First Perpetual Sukukby Abu Dhabi Islamic Bank

h) First Tier 1 Sukukby Abu Dhabi Islamic Bank

500,000

450,000

400,000

350,000

300,000

250,000

200,000

150,000

100,000

50,000

01,172 1,371 7,057 9,465

13,69833,837

50,041

24,26437,904

52,978

92,403

137,499

472,683

10,993

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

-Jan

uary

Total

10


23/86

The following table gives a clear picture on the hallmark Global Sukukissues during 2011 Jan 2013:

Table :1- Selected Hall Mark Global SukukIssues & Trends -2011- January 2013

(US$ 700 Millions or greater)

2012

PLUS

Berhad

Twenty Three Domesc Quasi-

Sovereign Sukuk issuances of various

tenors, Al Musharaka, issuer from

Malaysia

9,728 16

2012

AbuDhabi

Islamic

Bank

Internaonal Corporate, MudarabahSukuk, Tier 1 & perpetual, issuer

1,000 Perpetual

2012

Qatar Internaonal Islamic

Bank

InternaonalCorporate Hybrid

Sukuk

700 5

2012

Qatar

Islamic

Bank

Internaonal Corporate Sukuk Al

Wakalah

750 5

2012

Celcom

Transmission

Five Domesc Corporate Sukuk

Issuances, Al Murabahah, Issuer

from Malaysia

1,442 8

2012

Tanjung

Bin

Power

9 Nine Domesc Corporate Sukuk

Issuances of various tenors, Al

Ijarah, issuer from Malaysia

1,101 12

2012

Emirates

Islamic

Bank

Two Internaonal Corporate Sukuk

issuances, Al Musharaka, issuer from

Dubai

1,000 6

2012

Johor

Corporaon

Three Domesc Corporate Sukuk

issuances, Al Wakalah, issuer from

Malaysia

941 7

2012

Banque

Saudi

Fransi

Internaonal Corporate Sukuk, Al

Wakalah, Tier 2, issuer from KSA

750 5

Issue

Year

Issuer

Highlight

Amount inMillions USD or

USD Equivalent

Average Tenor

(Years)

2013 Sime Darby Berhad The World biggest Palm Oil producer

and lowest ever USD profitby any

corporaonglobally, two Sukuk

tranches having 5 & 10 years tenor

(Sukuk Al Ijarah Malaysian Issuer)

800 8

2013

Governmentof

Dubai

Internaonal Sovereign Sukuk Al

Ijarah Issuer Dubai,750 10

2012

Islamic

Development

Bank

Two Internaonal Quasi-Sovereign

Sukuk Issuances, Al Wakalah and

only AAA rated Sukuk

1,300 5

2012

Khazanah

Nasional

Bhd

Four Domesc Quasi-Sovereign

Sukuk issuances of various tenors, Al

Musharakah, Issuer from Malaysia ,

1,450 15

2012

NaonalHigher Educaon

Fund Corporaon

Malaysia

Two Domesc Quasi-Sovereign

Sukuk issuances, Al Murabahah,

Government of Malaysia

1,118 10

2012

Saudi

Electricity

Company

Two Internaonal Quasi-Sovereign

Sukuk Issuances, Al Ijarah,

issuerfrom KSA

1,750 8

2012

General Authority Of Civil

Aviaon

DomescQuasi-Sovereign Sukuk, Al

Murabahah, issuer from KSA

4,000 10

11


24/86

Continuous innovation together with more Debut Sukuk issuances and refinancing of maturing Sukuk is likelyto maintain the SukukVolume trajectory upwards in 2013 and beyond, as countries and corporate look to takeadvantage of extremely attractive low yields being priced by the market.

2011

Malaysian

Airline

Nine Domesc Quasi-Sovereign

Sukuk issuances of various tenors, Al

Murabahah

2,576 7

2011

Islamic

Development

Bank

1 InternaonalQuasi-Sovereign

Sukuk Al Wakalah from KSA

750 5

2011

Manjung Island Energy

Berhad

7 DomescCorporate Sukuk Al

Ijarah from Malaysia

1,242 9

2011

Saudi

Arabian

Aramco

DomescCorporate Sukuk Al

Musharakah longer tenor

1,000 14

2011

Nakheel

Group

DomescCorporate Sukuk Al Ijarah,

issuer from Dubai

1,034 5

2011

Sarawak

Energy Bhd

Four Domesc Corporate Sukuk

Issuances of various tenors,

AlMusharaka, issuer from Malaysia

990 9

2011

Central

Bank

of

Bahrain


Ijarah, 6.27% p.a. profitrate

750 7

2011

Government

of

Indonesia


Ijarah, 4% p.a. profitrate

1,000 7

2011

Government

of

Indonesia

Five Domesc Sovereign Sukuk

Issuances, Al Ijarah

2,033 10

2011

Government

of

Malaysia

Two Internaonal Sovereign Sukuk

Issuances, Al Wakalah,

2,000 8

2011

Governmentof

Malaysia

Two Domesc Sovereign Sukuk AlMurabahah,

984 9

2011 Government of Qatar DomescSovereign Sukuk Al Ijarah, 9,067 3

Source: IIFM Sukuk Issuance Database (Jan 2011 Jan 2013)

2012

Maxis

Berhad

DomescCorporate Sukuk, Al

Musharaka, issuer from Malaysia

811 10

2012

Sarawak

Energy

Bhd

Two Domesc Corporate Sukuk

issuances, Al Musharaka, issuer from

Malaysia

801 13

2012

Government

of

Malaysia

Seven Domesc Sovereign Sukukissuances of various tenors, Al

Murabahah

2,527 12

2012

Government

of

Indonesia


Ijarah 3.3% p.a. profitrate

1,000 10

2012

Government

of Turkey


Ijarah 2.8% p.a. profitrate

1,500 6

2012

Government

of

Qatar


issuances, avg profitrate of 2.67%

p.a. Al Ijarah

4,000 16

2012

Government

of

Indonesia

Thirteen DomescSovereign Sukuk

Issuances of various tenors, Al Ijarah

3,620 9

2012

Government

of

Pakistan

Six Domesc Sovereign

Sukuk Issuances, Al Ijarah

3,135 3

2012

Government

of

Dubai


issuances, Al Ijarah, avg. profitrate

4.39% p.a.

1,250 8

12


25/86

It is also interesting to note that Sukukpricing are now beginning to be more attractive than conventional as theliquidity and investors demand are creating pricing tension in favour of the issuer. While the market continues tokeep risk aversion strategy intact, this we will most likely see continued Sovereign and Sovereign linked Sukuktotake centre stage.

Against this backdrop, the hunt for yield continued apace and this has been reflected in the strong performanceof some previously unloved but relatively higher yielding issuers.

While more depth is created in the Sukukmarket, the issuance of Non-Local Currency Sukukby foreign issuersis a positive development and will contribute in the growth of the Sukuk market. These issuances have alsohighlighted the need of currency hedging which is one of the key contributions of IIFM to the Islamic FinancialServices Industry and standards developed by IIFM will be extremely beneficial in the risk mitigation arising fromsuch Sukukissuances.

Following Table will give a clear picture on the Non-Local Currency hallmark global Sukukissuances during

last 2 years:

Table: 2 - Selectd hallmark NM currency Sukukissues 2011 Jan 2013

Most of the Sukukbeing issued of late has been fixed rate, which is good for the Sukuk issuer as it locks in itsfunding cost at historic low rate. While the investor may well be pleased with its fixed return for now, but as soonas the global economy shows signs of growth, the yield will jack up and the investor may carry a book loss. SinceIIFM has developed the ISDA / IIFM Tahawwut agreement, it would be prudent to keep an eye on the returnsand at some point consider hedging to lock in a profit and Islamic Profit Rate Hedging is already used by severalinstitutions based in GCC & Malaysia.

Issue

Year

Issuer

Issuance

Currency

Issuer

Country

Type of

IssuedSukuk

Structure

Amount in

MillionsUSD

Equivalent

Average

Tenor(Years)

2012 First Resources Ltd MYR Singapore Corporate Sukuk Al Musharakah 319 5

2012

NatonalBank of

Abu Dhabi

MYR

United Arab

Emirates

Corporate

Sukuk

Al

Murabahah

163 15

2012

Golden

Agri-Resources Ltd

MYR

Indonesia

Corporate

Sukuk

Al Murabahah

481 5

2012

Abu Dhabi Natonal

Energy Company

MYR

United Arab

Emirates

Corporate

Sukuk

Al Murabahah

212 10

2012

Noble Group

Limited

CYN

Hong

Kong

Corporate

Sukuk

Al

Murabahah

195.8 3

2012

UMW Toyota

Capital

MYR

Japan

Corporate

Sukuk

Al

Musharakah

89.56 4

2012

Bahrain

Mumtalakat

Holding Company

MYR

Bahrain

Sovereign

Sukuk

Al

Murabahah

97.44 5

2012 Axiata Berhad MYR Malaysia Corporate Hybrid Sukuk 157.85 2

2012

Development Bank

of Kazakhstan

MYR

Kazakhstan

Quasi-

Sovereign

Sukuk

Al

Murabahah

76.71 5

2012

Gulf Investment

Corporaton

MYR

Kuwait

Corporate

Sukuk

Al

Wakalah

101.08 13

2011

Gulf Investment

Corporaton

MYR

Kuwait

Corporate

Sukuk

Al

Wakalah

451 5

2011

Khazanah Nasional

Bhd

Malaysia

Quasi-

Sovereign

Sukuk

Al

Musharakah

78.2 3

13


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Following are landmark Fixed Profit Rate SukukIssuances during Jan 2011 Jan 2013 period :

Table: 3 - Landmark Fixed Profit Rate SukukIssuances

2.3 Distribution of the Global SukukIssuance by Issuer Status

During the post financial crisis until 2011, the appetite for the corporate risk, especially in GCC, was subdued andthe Sovereign issuers have been main driver of growth in Sukukmarket. The share of Sovereign has increased to54% as compare to sovereign market share of 34% during 2001 to 2010 period while corporate share has droppedto 38% from 63%.

24-Jan-13 Government of Dubai Sovereign Internaonal Sukuk AlIjarah 750 3.88%

16-Nov-12 Government of Indonesia Sovereign Internaonal Sukuk AlIjarah 1,000 3.30%

12-Nov-12 Abu Dhabi Islamic Bank Corporate Internaonal Hybrid Sukuk 1,000 6.38%

11-Oct-12 Qatar InternaonalIslamic

Bank

Corporate

Internaonal

Hybrid

Sukuk

700

2.69%

3-Oct-12 Qatar IslamicBank Corporate Internaonal Sukuk Al

Wakalah

750 2.50%

26-Sep-12 Government of Turkey Sovereign Internaonal Sukuk AlIjarah 1,500 2.80%

18-Jul-12 Emaar Properes, Dubai Corporate Internaonal Sukuk AlIjarah 500 6.40%

11-Jul-12 Government of Qatar Sovereign Internaonal Sukuk AlIjarah 2,000 2.10%

11-Jul-12 Government of Qatar Sovereign Internaonal Sukuk AlIjarah 2,000 3.24%

25-Jun-12

IslamicDevelopment Bank Quasi-

Sovereign

Internaonal

Sukuk Al

Wakalah

800

1.36%

19-Jun-12 JebelAli

Free

Zone,

Dubai

Corporate

Internaonal

Sukuk Al

Wakalah

650

7.00%

15-Jun-12 NaonalHigher Educaon

Fund Corporaon Malaysia

Quasi-

Sovereign

Domesc

Sukuk Al

Murabahah

789

3.85%

14-Jun-12

Johor Corporaon,Malaysia

Corporate

Domesc

Sukuk Al

Wakalah

564

3.84%

30-May-12

Dubai

IslamicBank,UAE Corporate

Internaonal

Sukuk

Al

Ijarah

500

4.75%

22-May-12

Banque

Saudi

Fransi

Corporate

Internaonal

Sukuk Al

Wakalah

750

2.95%

25-Apr-12 Government of Dubai Sovereign Internaonal Sukuk AlIjarah 650 6.45%

25-Apr-12 Government of Dubai Sovereign Internaonal Sukuk AlIjarah 600 4.90%

28-Mar-12 Saudi

Electricity

Company

Quasi-

Sovereign

Internaonal

Sukuk

Al

Ijarah

500

2.67%

28-Mar-12 Saudi

Electricity

Company

Quasi

Sovereign

Internaonal

Sukuk Al

Ijarah

1,250

4.21%

18-Jan-12

GeneralAuthority Of Civil

Aviaon,SaudiArabia

Quasi-

Sovereign

Domesc

Sukuk Al

Murabahah

4,000

2.50%

18-Jan-12 First Gulf Bank,UAE Corporate Internaonal Hybrid Sukuk 500 4.05%

30-Nov-11 Abu Dhabi Commercial

Bank,UAE

Corporate

Internaonal

Hybrid

Sukuk

500

3.78%

22-Nov-11 CentralBank of Bahrain Sovereign Internaonal Sukuk AlIjarah 750 6.27%

21-Nov-11 Government of Indonesia Sovereign Internaonal Sukuk AlIjarah 1,000 4.00%

25-Aug-11 NakheelGroup ,UAE Corporate Domesc Sukuk AlIjarah 1,034 10.00%

2-Aug-11 First Gulf Bank Sukuk,UAE Corporate Internaonal Hybrid Sukuk 650 3.80%

2-Jun-11 HSBC Bank Middle East

Limited,UAE

Corporate

Internaonal

Hybrid

Sukuk

500

3.58%

25-May-11

Islamic

Development

Bank

Quasi-

Sovereign

Internaonal

Sukuk Al

Wakalah

750

2.35%

3-Feb-11 Emaar Properes, Dubai Corporate Internaonal Sukuk AlIjarah 500 8.50%

Issue

Date

Issuer

Typeof

Issued

Sukuk

Internaonal

or

Domestc

Structure

Amount in

Millions

USD or USD

Equivalent

Rateof

Return

Per

Annum

14


27/86

Table: 4 - Global SukukIssuances by Issuer Status 2001- Jan 2013

Following are the tables for Hall Mark SukukIssuances in Sovereign, Corporate and Quasi-Sovereign

Table: 5 - Global Sovereign SukukIssues -Selected Value Leaders 2011-2013 - Year wise latest first

US $ 100 Millions or greater (International & Domestic)

IssuerStatus

No. of

Issues

Value (USD

Millions)

% of Total

Value

Sovereign 1,034 255,506 54%

Corporate 2,743 179,416 38%

Quasi-Sovereign 98 37,762 8%

Total 3,875 472,683 100%

Issue

Year

Issuer

Number

ofIssues

Issuer

Country

Internaonal

or

Domesc

Structure

Amount in

MillionsUSD or USD

Equivalent

Average

Tenor(Years)

2013

Government

of

Dubai

1

United Arab

Emirates

Internaonal

Sukuk

Al

Ijarah

750

10

2012

Government of

Malaysia

7

Malaysia

Domesc

Sukuk Al

Murabahah

2,527

12

2012

Government of

Indonesia

1

Indonesia

Internaonal

Sukuk

Al

Ijarah

1,000

10

2012 Government of Turkey 1 Turkey Internaonal Sukuk Al Ijarah 1,500 6

2012

Central Bank of

Bahrain

1

Bahrain

Domesc

Sukuk

Al

Ijarah

424

5

2012 Government of Qatar 2 Qatar Internaonal Sukuk Al Ijarah 4,000 16

2012

Government of

Indonesia

13

Indonesia

Domesc

Sukuk

Al

Ijarah

3,620

9

2012

Government of

Pakistan

6

Pakistan

Domesc

Sukuk

Al

Ijarah

3,135

3

2012

Government

of

Dubai

2

United Arab

Emirates

Internaonal

Sukuk

Al

Ijarah

1,250

8

2011

Central Bank of

Bahrain

1

Bahrain

Internaonal

Sukuk

Al

Ijarah

750

7

2011

Government of

Indonesia

1

Indonesia

Internaonal

Sukuk

Al

Ijarah

1,000

7

2011

Government of

Indonesia

5

Indonesia

Domesc

Sukuk

Al Ijarah

2,033

10

2011 Government of 2 Malaysia Internaonal Sukuk Al 2,000 8

Malaysia Wakalah

2011 Government of Sudan 1 Sudan Domesc Hybrid Sukuk 286 5

2011

Government ofMalaysia

2

Malaysia

Domesc

Sukuk AlMurabahah

984

9

2011 Government of Qatar 1 Qatar Domesc Sukuk Al Ijarah 9,067 3

15


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Table: 6 - Global Corporate Sukuk Issues -Selected Value Leaders 2011- Jan 2013 -

Year wise latest first US $ 100 Millions or greater (International & Domestic)

Issue

Year

Issuer

Number

of

Issues

Issuer

Country

Internaonal

or

Domesc

Structure

Amount in

Millions

USD or USD

Equivalent

Average

Tenor

(Years)

2013 Sime Darby Berhad 2 Malaysia Internaonal Sukuk Al Ijarah 800 8

2013 Savola Group 1 Saudi Arabia Domesc Hybrid Sukuk 400 7

2013

MalakoffCorporaon

Berhad

3

Malaysia

Domesc

Sukuk

Al

Murabahah

696

9

2013 Segari Energy Ventures 1 Malaysia Domesc Sukuk Al Murabahah 559 15

2012

UEM Land Holdings

Berhad

1

Malaysia

Domesc

Sukuk

Al

Murabahah

196

5

2012

Banque

Saudi

Fransi

1 Saudi

Arabia

Domesc

Sukuk Al

Mudharabah

507

7

2012 Sime Darby Bhd 1 Malaysia Domesc Sukuk Al Murabahah 131 15

2012 First Resources Ltd 2 Singapore Internaonal Sukuk Al Musharakah 319 5

2012

NaonalBank of Abu

Dhabi

1

United Arab

Emirates

Internaonal

Sukuk

Al Murabahah

163

15

2012 Saudi Hollandi Bank 1 Saudi Arabia Domesc Sukuk Al Murabahah 373 7

2012 Imaz Sukuk Berhad 1 Malaysia Domesc Sukuk Al Musharakah 228 5

2012

Golden Agri-Resources

Ltd

1

Indonesia

Internaonal

Sukuk

Al

Murabahah

Sukuk

Al

Murabahah

481

5

2012

Abu

Dhabi

Islamic

Bank

1

United Arab

Emirates

Internaonal

1,000

Perpetual

2012

Qatar Internaonal

Islamic Bank

1

Qatar

Internaonal

Hybrid

Sukuk

700

5

2012 Qatar Islamic Bank 1 Qatar Internaonal Sukuk Al Wakalah 750 5

2012 HSBC Amanah 1 Malaysia Domesc Sukuk Al Wakalah 162 52012

Kuala Lumpur Kepong

Berhad

1

Malaysia

Domesc

Sukuk

Al

Ijarah

320

10

2012

MalakoffCorporaon

Berhad

1

Malaysia

Domesc

Sukuk

Al

Musharakah

576

30

2012 Celcom Transmission 5 Malaysia Domesc Sukuk Al Murabahah 1,442 8

2012 Tanjung Bin Power 9 Malaysia Domesc Sukuk Al Ijarah 1,101 12

2012

DanaInfra Nasional

Berhad

3

Malaysia

Domesc

Sukuk

Al

Murabahah

665

12

2012

Emaar

Properes

1

United Arab

Emirates

Internaonal

Sukuk

Al Ijarah

500

7

2012 Cagamas Berhad 1 Malaysia Domesc Sukuk Al Ijarah 132 5

2012

EmiratesIslamic

Bank

2

United ArabEmirates

Internaonal

SukukAl

Musharakah

1,000

6

2012 Olayan Group 1 Saudi Arabia Domesc Hybrid Sukuk 173 5

2012

Jebel

Ali

Free

Zone

1

United Arab

Emirates

Internaonal

Sukuk

Al Wakalah

650

7

2012 Johor Corporaon 3 Malaysia Domesc Sukuk Al Wakalah 941 7

16

Connue in next page


29/86

2012

Dubai

Islamic

Bank

1

United Arab

Emirates

Internaonal

Sukuk

Al

Ijarah

500

5

2012 Banque Saudi Fransi 1 Saudi Arabia Internaonal Sukuk Al Wakalah 750 5

2012

Saudi Arabia Naonal

Industrialisaon

Company

1 Saudi Arabia

Domesc

Hybrid

Sukuk

533

7

2012 Aman Sukuk Berhad 1 Malaysia Domesc Sukuk Al Musharakah 116 10

2012 Saudi Brish Bank 1 Saudi Arabia Domesc Hybrid Sukuk 400 5

2012 Al Marai Company 1 Saudi Arabia Domesc Hybrid Sukuk 267 7

2012

Abu Dhabi Naonal

Energy Company

1

United Arab

Emirates

Internaonal

Sukuk

Al

Murabahah

212

10

2012 Maxis Berhad 1 Malaysia Domesc Sukuk Al Musharakah 811 10

2012 DRB-HICOM Bhd 1 Malaysia Domesc Sukuk Al Murabahah 132 9

2012

Majid Al Fuaim

Properes 1

United Arab

Emirates

Internaonal

Sukuk

Al

Wakalah

400

5

2012 Sarawak Energy Bhd 2 Malaysia Domesc Sukuk Al Musharakah 801 13

2012

First

Gulf

Bank

1

United Arab

Emirates

Internaonal

Hybrid

Sukuk

500

5

2012

Tamweel

Funding

1

United Arab

Emirates

Internaonal

Hybrid

Sukuk

300

5

2011

Abu Dhabi Commercial

Bank

1

United Arab

Emirates

Internaonal

Hybrid

Sukuk

500

5

2011

Manjung Island Energy

Berhad 7

Malaysia

Domesc

Sukuk

Al

Ijarah

1,242

9

2011

Kuveyt Trk Kat l m

Bankas

1

Turkey

Internaonal

Hybrid

Sukuk

350

5

2011

Saudi Arabian Aramco

Total Services Company

1

Saudi

Arabia

Domesc

Sukuk

Al

Musharakah

1,000

14

2011 AmIslamic Bank Berhad 1 Malaysia Domesc Sukuk Al Musharakah 192 10

2011

Nakheel

Group

1

United Arab

Emirates

Domesc

Sukuk

Al

Ijarah

1,034

5

2011

SapuraKencana

Petroleum

1

Malaysia

Domesc

Sukuk Al

Mudharabah

158

5

2011

KencanaPetroleum

Bhd

1

Malaysia

Domesc

Sukuk AlMudharabah

167

5

2011

Gulf Investment

Corporaon

2

Kuwait

Internaonal

Sukuk

Al

Wakalah

451

5

2011

First

Gulf

Bank

1

United Arab

Emirates

Internaonal

Hybrid

Sukuk

650

5

2011 Almana Group W.L.L 1 Qatar Internaonal Sukuk Al Wakalah 215 5

2011 Sarawak Energy Bhd 4 Malaysia Domesc Sukuk Al Musharakah 990 9

2011

Saudi Internaonal

Petrochemical Company

1

Saudi

Arabia

Domesc

Sukuk Al

Mudharabah

480

5

2011

Bank Muamalat

Malaysia Berhad

1

Malaysia

Domesc

Sukuk

Al

Musharakah

132

10

2011

HSBC Bank Middle East

Limited

1

United Arab

Emirates

Internaonal

Hybrid

Sukuk

500

5

2011

Sharjah

Islamic

Bank

1

United Arab

Emirates

Internaonal

Sukuk

Al

Wakalah

400

5

2011 Al Rajhi Cement 1 Jordan Domesc Sukuk Al Ijarah 119 7

2011 Maybank Islamic 1 Malaysia Domesc Sukuk Al Musharakah 330 10

2011 Bank Al Jazira 1 Saudi Arabia Domesc Hybrid Sukuk 267 10

2011 Cagamas Berhad 1 Malaysia Domesc Hybrid Sukuk 131 5

2011

First Investment

Company

1

Kuwait

Domesc

Sukuk

Al

Wakalah

332

5

2011

Emaar

Properes

1

United Arab

Emirates

Internaonal

Sukuk

Al

Ijarah

500

6

17


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Table: 7 - Global Quasi-Sovereign SukukIssues -Selected Value Leaders 2011-2012

Year wise latest first US $ 100 Millions or greater (International & Domestic)

Following are chart on Domestic and International Sukuk market:

Chart 2: Total Global SukukIssuance (All Currencies) Breakdown by Issuer Status

It is no surprise that the domestic market is very much Sovereign lead, as the domestic market needs local currencyinstruments to manage their Liquidity while the domestic investors prefer to invest in their home currency so asnot to be exposed to currency risk.

Sovereign will certainly keep a bigger share of the local market as Islamic finance activities grows around theglobe, more countries will issue Sukukin their home currency as part of the Government own funding needs andto develop bench mark curve to facilitate growth of their domestic market.

Issue

Year

Issuer

Number

of

Issues

Issuer

Country

Internaonal

or

Domesc

Structure

Amount in

Millions

USD or USD

Equivalent

Average

Tenor

(Years)

2012

Malaysia Airports Capital

Berhad

1

Malaysia

Domesc

Sukuk

Al Ijarah

196

12

2012

Islamic

Development

Bank

2

Saudi

Arabia

Internaonal

Sukuk Al

Wakalah

1,300

5

2012

Khazanah

Nasional

Bhd

4

Malaysia

Domesc

Sukuk Al

Musharakah

1,450

15

2012

NaonalHigher Educaon

Fund Corporaon Malaysia

2

Malaysia

Domesc

Sukuk Al

Murabahah

1,118

10

2012

Malaysian Airline System

Berhad

2

Malaysia

Domesc

Sukuk Al

Musharakah

479

10

2012

Syarikat Prasarana Negara

Berhad

2

Malaysia

Domesc

Sukuk Al

Murabahah

642

13

2012 Saudi Electricity Company 2 Saudi Arabia Internaonal Sukuk Al Ijarah 1,750 8

2012

Khazanah

Nasional

Bhd

1

Malaysia

Internaonal

Sukuk Al

Musharakah

358

7

2012

General Authority Of Civil

Aviaon

1

Saudi

Arabia

Domesc

Sukuk Al

Murabahah

4,000

1

2012

PLUS

Berhad

23

Malaysia

Domesc

Sukuk Al

Musharakah

9,728

16

2011

Pengurusan Aset Air

Berhad

9

Malaysia

Domesc

Sukuk Al

Murabahah

2,576

7

2011

Syarikat Prasarana Negara

Berhad

2

Malaysia

Domesc

Sukuk

Al

Ijarah

673

13

2011

Islamic

Development

Bank

1

Saudi

Arabia

Internaonal

Sukuk Al

Wakalah

750

5

2011

Khazanah

Nasional

Bhd

1

Malaysia

Domesc

Sukuk Al

Musharakah

334

20

Domestc Sukuk Issuances 2001-2010

Sovereign,

(86,498)

47%

Corporate,

(93,022)

51%

Quasi-

Sovereign,

(4,104)2%

Quasi-

Sovereign,

(22,392)1

1%

Sovereign,

(148,132)

70%

Corporate

(40,210)

19%

Domestc Sukuk Issuances 2011-Jan 2013

18


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As the market is now recovering from the shock of the Global Financial crisis, Corporate sector will undoubtly willincrease their share, attracted by lower yield and investors demand for Sukuk.

In the international cross border market, Corporate were the earlier years dominant issuers but only afterSovereign or Quasi Sovereign laid the foundation that provided confidence in the Sukukas an acceptable andviable instrument. (Eg; Bahrain, Dubai, Malaysia, Qatar, and IDB)

The fallout from the Financial crisis lead investors to move towards safe haven investment strategy and theSovereign and Quasi Sovereign stepped up to provide confidence and stability.

In addition many new Sovereign / Quasi Sovereign issuer lent support to the Sukuk market, (Eg; Saudi CivilAuthourity, Turkey,). Not only these chunk size Sukukissuance from high credit quality issuer helped absorbedsome of the liquidity but in doing so, is paving the way for more Sovereign Debutant Sukuk.

Moreover, when putting the Global issues together from 2001 to Jan 2013, then the Sovereign and Quasi Sovereigntakes almost 62% of all issuance to date. Between 2011 and Jan 2013, surprisingly Qatar Sovereign came in asthe top issuer of combined Domestic and International with US $ 13 Billion, Indonesia with US $7.7 Billion andMalaysia with US $ 5.5 Billions. The standing changes considerably with Malaysia taking a handsome lead with US$ 36 Billions, followed by Qatar US $ 15 Billion, Saudi US $ 13 Billions and UAE with US $ 11 Billions when includingQuasi Sovereign and Corporate.

A healthy development in the SukukMutual Funds space is taking shape with number of banks having set uptheir own SukukFund to offer to their private clients, this is a positive sign, that the Sukukmarket is coming of age.Development of the SukukFund is timely, as the current split between Sovereign and Corporate risk is very muchdesirable, since it offers investors and fund managers with a good mix of Sovereign and Corporate risk to consider.The choice offers the fund manager to not only diversify credit risk but also take into account their risk returnprofile in allocating to their portfolio.

2.4 International SukukMarket

The year 2012 was record year in terms of International Sukukissuances and the year closed at US$ 20 billion Sukukissuances as compare to previous 2007 pre-crisis record of US$13.80 billion. Currently outstanding InternationalSukukfigure is approximately US$ 45 bio and it is expected that Q1 of 2013 will close with US$ 50 billion outstandingSukukmarket.

There were several landmark Sukukissuances from Malaysia, Qatar, Turkey, UAE, Saudi Arabia, Indonesia, Bahrainetc., this indicates that Sukukmarket has fully emerged from the declining trend witnessed in 2008 & 2009 andfurther double digit growth prospects are intact for next coming years and existing Sukukissuance pipeline is theconfirmation of this prediction.

International SukukIssuances 2001-2010 International SukukIssuances 2011-Jan 2013

Sovereign

(8,529)

18%

Quasi-

Sovereign

(6,953)

14%

Corporate,

(32,681)

68%

Corporate,

(13,502)

45%

Sovereign,

(12,347)

41%

Quasi-

Sovereign,

(4,313)14%

19


32/86

The following table illustrates the regional break-up of the total international Sukukissuance during the

period of Jan 2001 Jan 2013:

Table: 8 - Regional Break-Up of the Total International SukukIssuance 2001-Jan 2013

ASIA & FAR EAST Number of Issues Amount USD Millions % of Total

Value

Malaysia

19 9,677 12.4%Indonesia

4 3,131 4%

Pakistan1 600 0.77%

Singapore2 319 0.41%

Hong Kong2 196 0.25%

Japan3 190 0.24%

Total31 14,113 18%

GCC & MIDDLE EAST Number of Issues Amount USD Millions % of Total

Value

Bahrain93 6,780 8.7%

Qatar 9 7,685 9.8%

Saudi Arabia15 9,990 12.8%

United Arab Emirates50 34,536 44.1%

Kuwait13 2,127 2.7%

Total180 61,119 78%

AFRICA Number of Issues Amount USD Millions % of Total

Value

Sudan1 130 0.17%

Total 1 1300.17%

EUROPE & OTHERS Number of Issues Amount USD Millions % of TotalValue

Turkey3 1,950 2.5%

Germany1 55 0.07%

UK3 282 0.36%

France1 1 0.00%

USA2 600 0.77%

Kazakhstan1 77 0.10%

Total11 2,965 4%

Grand Total 223

78,326

100%

20


33/86

Table : 9 - Selected Value Leaders in International SukukMarket for Jan 2011- Jan 2013

(US $ 50 million or greater)

Issue

Year

Issuer

Number

of

Issues

Issuer

Country

Type of

Issued

Sukuk

Structure

Millions

USD

Average

Tenor

(Years)

2013 Sime Darby Berhad 2 Malaysia Corporate Sukuk Al Ijarah 800 8

2013 Government of Dubai 1 United Arab Emirates Sovereign Sukuk Al Ijarah 750 10

2012 FWU AG Group 1 Germany Corporate Sukuk Al Ijarah 55 7

2012

Abu Dhabi Islamic

Bank

1

United

Arab

Emirates

Corporate

Hybrid

Sukuk

1,000

Perpetual

2012

Qatar Internatonal

Islamic Bank

1

Qatar

Corporate

Hybrid

Sukuk

700

5

2012 Qatar Islamic Bank 1 Qatar Corporate Sukuk Al Wakalah 750 5

2012 Emaar Propertes 1 United Arab Emirates Corporate Sukuk Al Ijarah 500 7

2012

Emirates

Islamic

Bank

2

United

Arab

Emirates

Corporate

Sukuk Al

Musharakah

1,000

6

2012 Jebel Ali Free Zone 1 United Arab Emirates Corporate Sukuk Al Wakalah 650 7

2012 Dubai Islamic Bank 1 United Arab Emirates Corporate Sukuk Al Ijarah 500 5

2012 Banque Saudi Fransi 1 Saudi Arabia Corporate Sukuk Al Wakalah 750 52012

Majid Al Fuaim

Propertes

1

United

Arab Emirates

Corporate

Sukuk

Al

Wakalah

400

5

2012 First Gulf Bank 1 United Arab Emirates Corporate Hybrid Sukuk 500 5

2012 Tamweel Funding 1 United Arab Emirates Corporate Hybrid Sukuk 300 5

2012

Islamic Development

Bank

2

Saudi

Arabia

Quasi-

Sovereign

Sukuk

Al

Wakalah

1,300

5

2012 Saudi Electricity 2 Saudi Arabia Quasi- Sukuk Al Ijarah 1,750 8

Company Sovereign

2012

Khazanah Nasional

Bhd

1

Malaysia

Quasi-

Sovereign

Sukuk Al

Musharakah

358

7

2012

Government of

Indonesia

1

Indonesia

Sovereign

Sukuk

Al

Ijarah

1,000

10

2012 Government of Turkey 1 Turkey Sovereign Sukuk Al Ijarah 1,500 6

2012 Government of Qatar 2 Qatar Sovereign Sukuk Al Ijarah 4,000 16

2012 Government of Dubai 2 United Arab Emirates Sovereign Sukuk Al Ijarah 1,250 8

2011

Abu Dhabi

Commercial Bank

1

United

Arab Emirates

Corporate

Hybrid

Sukuk

500

5

2011

Kuveyt Trk Kat l m

Bankas

1

Turkey

Corporate

Hybrid

Sukuk

350

5

2011 First Gulf Bank 1 United Arab Emirates Corporate Hybrid Sukuk 650 5

2011 Almana Group W.L.L 1 Qatar Corporate Sukuk Al Wakalah 215 5

2011

HSBC Bank Middle

East Limited

1

United

Arab

Emirates

Corporate

Hybrid

Sukuk

500

5

2011 Sharjah Islamic Bank 1 United Arab Emirates Corporate Sukuk Al Wakalah 400 5

2011 Emaar Propertes 1 United Arab Emirates Corporate Sukuk Al Ijarah 500 6

2011

Islamic Development

Bank

1

Saudi

Arabia

Quasi-

Sovereign

Sukuk

Al

Wakalah

750

5

2011

Central Bank of

Bahrain

1

Bahrain

Sovereign

Sukuk

Al

Ijarah

750

7

2011

Government of

Indonesia

1

Indonesia

Sovereign

Sukuk

Al

Ijarah

1,000

7

2011

Government of

Malaysia

2

Malaysia

Sovereign

Sukuk

Al

Wakalah

2,000

8

21


34/86

2.5 DomesticSukukMarket

As far as the domestic Sukukmarket is concern, Malaysia has the lions share in terms of both volume and value.Malaysia remains as the largest domestic Sukukissuer with 79.8% though the countries like Indonesia, Pakistan,Qatar and Saudi Arabia while Turkey has entered the market as new potential leader plus Yemen has also enteredthe Sukukmarket at domestic level. Bahrain has also kept its presence felt in Sukukissuances and has seen severallandmark issuances and issuance volume has increased by almost 50%. Qatar has also issued landmark Sukukissuances and its domestic Sukukmarket is growing quite rapidly.

The domestic Sukukmarket in a number of jurisdictions (as shown in table below) is becoming active particularlyIndonesia & Pakistan and central banks are providing avenues to Islamic banks and other investors to invest theirsurplus liquidity in government Sukukprograms designed to provide level playing field to the Islamic institutions.

The total outstanding Domestic Sukukat Dec 2012 stood at US$ 191 billion and it is expected that 2013 will closewith even higher figure as sovereigns, quasi sovereign & corporates in jurisdictions like Malaysia, Indonesia, Turkeyand several other countries including GCC are getting more active in Sukukissuances

Table: 10 - Regional break-up of the Total Domestic Sukuk Issuance 2001-Jan 2013

ASIA & FAR EAST Number of Issues Amount USD Millions % of TotalValue

Malaysia3026 314,820 79.8%

Indonesia146 12,029 3.1%

Pakistan43 6,045 1.5%

Brunei Darussalam84 3,929 1.0%

Singapore5 192 0.05%

Total3,304 337,015 85.5%

GCC & MIDDLE EAST Number of Issues Amount USD Millions % of Total

Value

Bahrain173 5,675 1.4%

Qatar3 9,548 2.4%

Saudi Arabia26 18,712 4.7%

United Arab Emirates13 8,218 2.1%

Kuwait1 332 0.08%

Jordan1 119 0.03%

Yemen2 253 0.06%

Total219 42,856 10.9%

AFRICA Number of Issues Amount USD Millions % of Total

Value

Sudan22 13,214 3.4%

Gambia104 78 0.02%

Total 126 13,2923.37%

EUOROPE & OTHERS Number of Issues Amount USDMillions %ofTotal Value

Turkey1 905 0.23%

Germany1 123 0.03%

USA1 167 0.04%

Total3 1,195 0.30%

GrandTotal 3,652

394

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IIFM Sukuk Report (3rd Edition) a Comprehensive Study of the Global Sukuk Market

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