When the first sukuk in Turkey was issued by KuveytTürkKatilimBankasi A.Ş. in 2010 through a Cayman Islands special purpose vehicle, the legal and tax infrastructure in Turkey was almost non-existent. Over the last four years, laws and regulations pre-approving certain Islamic structures and providing for the incorporation of asset leasing companies (Turkish special purpose vehicles) (ALC) have come into force and the tax treatment of certain Islamic structures has been addressed favourably.
This year's rush by top-rated non-Muslim countries to tap the burgeoning Islamic finance market may not be repeated next year but a new crop of sovereign entrants, mostly from emerging markets, is waiting around the corner.
The United Kingdom, Hong Kong and Luxembourg - all ranked at least AA by rating agencies - issued sharia-compliant financial instruments, or sukuk, for the first time in 2014. They gave a huge boost to a market which was once just seen as a funding tool for borrowers from the Gulf and Muslim countries in southeast Asia.
Turkey’s government has moved to expand Islamic banking by inviting public banks into the sector. Earlier this month, the largest state-run bank, Ziraat, received approval to establish an Islamic unit, a landmark move in a country where public lenders have so far stayed out of the Islamic finance realm.
There are currently four private Islamic banks operating in Turkey: Albaraka Turk, Bank Asya, Kuveyt Turk and Turkiye Finans.
The Malaysia-based International Islamic Liquidity Management Corp (IILM) has added Qatar's Barwa Bank IPO-BABK.QA as the tenth primary dealer handling its Islamic bond programme, the organisation said on Monday.
The IILM, a consortium of central banks from Asia, the Middle East and Africa, launched the programme last year to meet a shortage of investment-grade financial instruments which Islamic banks can use for their short-term funding needs.
Expansion of the takaful (Islamic insurance) industry is slowing as firms struggle for scale and face growing competition, but the sector is still poised to sustain double-digit growth, according to a report by Ernst & Young.
Takaful, an industry which attracted $10.9 billion in gross contributions worldwide last year, has its core markets in the Gulf and southeast Asia and serves as a bellwether of consumer appetite for Islamic finance products.
With the fall of the Muslim Brotherhood, Islamic finance has lost strong political support in the most populous Arab nation. But economic pressures mean the industry remains likely to grow and the country will eventually start issuing Islamic bonds.
Islamic finance, which obeys religious principles such as a ban on interest payments, was neglected and even discouraged by authorities for ideological reasons in the three decades before the revolution which ousted President Hosni Mubarak in 2011.
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.
Management of the International Islamic Liquidity Management Corp (IILM) is meeting this week to try to minimise delays to the issue of its first sukuk, a source close to the programme said on Tuesday.
The official, who cannot be named as he is not authorised to speak publicly to media, said the meeting would discuss regulatory treatment of the sukuk, the last remaining hurdle before issuance.
Turkey is working on new regulations to allow wider use of Islamic bonds, a closely watched move which could see sukuk issues employed by the government and corporations for project finance and infrastructure development.
Turkish institutions and the Treasury currently only issue the ijara type of sukuk, which is among the most widely used internationally; the new regulations would approve the use of istisna, murabaha, mudaraba, musharaka and wakala bonds.
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.
- Islamic Banking Operations
- Regulation and Supervision
- Capital Market Operations
- Securisation and Sukuk
- Takaful - Islamic Insurance
- Video Zone
- Events Agenda 2016
- Education and Training