Indonesia is meeting with investors in London and the Middle East ahead of a possible sukuk, or Islamic bond, issue as it grapples with a weakening currency, dwindling foreign currency reserves and a gaping current account deficit.
The country set the timetable for the investor meetings even as its rupiah currency hits fresh four-year lows, with Citigroup, Deutsche Bank and Standard Chartered Bank arranging roadshows, or investor presentations, in London, Jeddah, Abu Dhabi and Dubai, a person close to the transaction told Reuters.
The Malaysia-based International Islamic Liquidity Management Corp (IILM) has reshuffled its sharia board, losing four of its original six members including senior Saudi and Qatari scholars, according to the body's website.
The IILM, backed by the central banks of nine countries as well as the Jeddah-based Islamic Development Bank, was founded in October 2010 to help develop cross-border markets in Islamic financial instruments.
A report issued by KFH-Research states that the global sukuk market has shown resilience this year given the volatility in global bond markets as market players react to positive economic growth prospects as well as concerns over monetary policy in the US, the world’s largest bond market.
The report mentions that despite rising yields across the board, sukuk issuances have kept up momentum with over US$26.6 billion placed during the second quarter, which adds to the US$34.5 billion placed during the 1Q13 to bring the first half total to US$61.2 billion.
Standard Chartered Plc will start offering Islamic banking in Kenya as a springboard into the rest of Africa and it may expand services in Indonesia, its global head of Islamic consumer banking said on Wednesday.
Shariah-compliant banking makes up two percent of Kenya's banking industry, split between two Islamic lenders and conventional banks with Shariah-compliant products, like Barclays Kenya.
The Islamic Development Bank (IDB), a Jeddah-based multilateral institution, has called for the creation of a global sharia advisory board that can offer greater uniformity for the Islamic finance industry, its president said on Thursday.
A centralised format to the supervision of sharia-compliant banking products is gaining favour across the globe, as regulators seek to standardise industry practices and improve consumer perceptions.
Nigeria has issued new guidelines to oversee the operation of its takaful (Islamic insurance) industry, favoring a centralised format that is gaining favour across the Islamic finance world.
Africa's top oil producer and second biggest economy is trying to establish itself as the African hub for Islamic finance, having approved rules for issuing sukuk in March.
Indonesian corporate sukuk sales are off to their best ever start and the top underwriter predicts a full-year record as $92 billion of state-backed development projects buoy issuance.
Bank Muamalat Indonesia and Adira Dinamika Multi Finance were among issuers of Rp 1.5 trillion ($154 million) of securities, Financial Services Authority data show. That compares with Rp 1.9 trillion for the whole of 2012 and a record Rp 2.3 trillion in 2008. The market is still just a fraction of Malaysia’s, where companies sold 95.8 billion ringgit ($32 billion) of sukuk last year.
Saudi Arabia has left the International Islamic Liquidity Management Corp (IILM), which is preparing to launch its first long-delayed sukuk or Islamic bonds since its inception in 2010, the IILM said late on Wednesday.
IILM did not give a reason for Saudi Arabia's exit. The central banks of Qatar and Malaysia bought out Saudi Arabia's share.
Regulatory reforms are underway to help Malaysia's Islamic banking industry expand further, but for government plans to succeed, they will need to be matched by action from some reluctant banks.
The government originally aimed for 20 percent market share for Islamic banks by 2010, but despite double-digit growth in both lending and assets, the sector has fallen shy of this mark.
A week ago, Indonesia said it would reduce its use of foreign currency bonds to finance its budget deficit. However, it said recently that it would not reduce--nor likely expand--its use of sukuk and may shift from an ijara structure to a wakala structure. A top official speaking to Reuters said the country would issue as much as Rp 57 trillion ($5.9 billion) in sukuk.
The director of Islamic financing policy at the finance ministry, Dahlan Siamat, told Reuters: "There is no reason to stop issuing sukuk, it has become part of our strategy.