Later that month, the Saudi government raised $9 billion in Sukuk. Half was five-year sukuk with a swap spread of 100 basis points and the other half had a ten-year maturity with a spread of 140 basis points. [101] In September 2017, the government sold an additional 7 billion riyals ($1.9 billion) of domestic sukuk[102] and an additional 4.77 billion riyals ($1.27 billion) were sold in December. [103] These five-year sukuks cost 2.75%, seven-year sukuks 3.25% and a decadal slice 3.45%. [102] According to the State of the World Islamic Economy Report 2016/17, of the $2 trillion in assets under Sharia law in 2014, $342 billion were sukuk, or 2,354 billion sukuk expenditures. [6] While European countries are lagging behind the UK, a report by Malaysian bank RHB suggests that Germany is planning a $1 billion sukuk issue in the near future. Al Rayan Bank, the first UK-based Islamic bank to receive a credit rating from Moody`s, estimates that a third of its customers do not belong to the Muslim faith. The entire industry is expected to reach $3.5 trillion by 2021, and Western countries will play an important role as the industry reaches this level. Other critics include unorthodox economist Mahmoud El-Gamal, who has complained that suppliers of sukuk (and other Islamic financial instruments) often refer to their „distinctive feature“ as a „ban on interest,“ but the Gambian will replace Sudan in 2007 as one of ten countries issuing sukuk. It has one of the lowest amounts of sukuk issuance at $12.6 million in 2008. Although the secondary market continues to evolve, it remains a niche segment where virtually all transactions are processed at the institutional level. The size of the secondary market remains unknown, although LMC Bahrain claims to have traded $55.5 million in sukuk in 2007. [30] In July 2014, fifteen sukuk sukuk.com listed on the Gulf sukuk secondary market.
[31] Last year, Dubai-based real estate developer Nakheel delayed many of its projects and was unable to repay its sukuk obligations after its holding company Dubai World restructured $26 billion in debt. Bondholders feared the company would potentially default, but declared themselves debt-free in 2016 and repaid the sukuk in full when it matured. Much of this has yet to be legally tested in the UK, but over time, legal precedents are expected to become commonplace. Dana Gas, an Abu Dhabi-based energy company, recently said Sukuk`s $700 million was not sharia compliant, concluding that it was not required to repay its debts. A trial was adjourned on December 25, but the industry is curious to see if the Mudarabah contracts associated with sukuk will be deemed valid. The IFLR believes that a solution in favour of creditors is near. Another observer, Salman Ali, noted that many sukuk structures „do not comply with Sharia law.“ [78] [21] According to Ali, while most sukuk strive to remain „within the limits of Sharia law,“ they „reproduce conventional debt.“ They often combine more than one treaty, „which may individually conform to Sharia law,“ but when combined, „it may defeat the purpose of Sharia law.“ In addition, the return on sukuk is often „linked“ to the Libor (London Interbank Offered Rate) or Euribor (Euro Interbank Offered Rate) interest rate and not to the underlying activity that the sukuk finance. This makes sukuk „so similar to conventional debt that it is difficult to distinguish one from the other.“ Ali believes this could be the reason why rating agencies such as Standard & Poors and Moody`s use the same methodology to rate Sukuk as for traditional debt securities.
[81] A common misconception is that Islamic finance only does banking without charging interest. However, Islamic finance deals with the nature of money and how it is used. Since U.S. President Nixon`s decision to cut the link between gold and money in 1972, it has become common for money to be made from silver. Since the abrogation of the Bretton Woods Agreement of 1945 under Nixon, countries` budget deficits have reached unimaginable levels. In the context of Islamic finance, Islamic transactions, similar to the pre-1972 convention, must be backed by an asset. In the Islamic model, money is only a medium of exchange and a measure of the value of real goods and services. Originally developed exclusively in Muslim-majority jurisdictions, the global sukuk market has grown significantly over the past 10 years, with a number of high-profile business issues and a number of states exploiting the market. Sukuk are structured in different ways. (AAOIFI has established 14 different types of sukuk.) [46] While a traditional bond is a promise to repay a loan, sukuk represents partial ownership of a debt, asset, project, business or investment. The above trust certificate structure requires that the concept of trust be recognized in the particular jurisdiction in which the debtor is located. In many jurisdictions, especially in civil law traditions, this is very rarely the case.
Therefore, alternative structures began to develop to be able to carry out sukuk transactions in accordance with local laws. For a company or state, the main benefits of operating the sukuk market include: Step-by-step process of issuing an asset-based sukuk: September 25. In June 2014, the British Treasury became the first country outside the Islamic world to issue a sukuk. .