Prominent Islamic bankers, along with members of a top-level ministerial committee mandated with drafting the sukuk law, said the legislation removes legal uncertainties and would be submitted to the cabinet in as little as two weeks.
"The main prerequisites for the issuance of sukuk have been drafted. (The draft law) provides the regulatory framework ... and I expect in two weeks' time the draft law will be submitted to the cabinet," committee leader and Minister of Religious Affairs Abdul Salam Abbadi told the Reuters Middle East Investment Summit.
The draft law overcomes an impediment facing the government if it was to issue sukuk to finance major projects under Islamic-compliant Sharia terms, which require Islamic banks to first buy an asset which they then sell to the borrower.
By allowing the setting up of a special purpose vehicle (SPV) into which state assets are transferred, the law overcomes legislation preventing the government from forgoing title to assets or property when it borrows.
Sources within the committee said the draft law also offers guarantees that protect investors, approves the listing of sukuk on the local bourse, and allows for a secondary market in Islamic-compliant debt.
Finance Minister Mohammad Abu Hammour said it was a government priority to enact the law as soon as possible.
"Islamic banks have been less affected by the global crisis and Islamic financing tools have lower risk," he said. "The law will allow us to benefit from the financial sources available in Islamic financial institutions .. spread across the region."
Bankers say long-term maturity Islamic debt was also an innovative way of financing major infrastructure projects that the government is offering through private-public partnerships under lucrative terms to attract foreign investors.
"It helps us find the necessary funding for crucial projects that cannot be financed through the state budget," Abu Hammour told Reuters.
The government has slashed capital spending on such projects as part of major cuts to curb its budget deficit.
Islamic bankers say Jordan's plans to tap the sukuk market were a long-awaited move offering them opportunities to utilise excess funds.
"We would love to utilise our idle money. It's a win-win situation. I am keen to develop this market because it has a good return and low risk and the government is keen to diversify its funding," said Sami Al-Afghani, chief executive of Jordan Dubai Islamic Bank.
Bankers say the sale of sukuk would also allow Jordan to tap potential funds from international Islamic financial institutions.
"You open up all Islamic funds for your paper debt without excluding conventional banks. Islamic money is going into the regional market where opportunities are," Tareq Aqel, CEO of Rajihi Bank Jordan, said.
Jordan has not had special laws relating to Islamic finance, but as Islamic financing expands pressure is mounting on the monetary authorities to apply sharia compliant legislation.
Assets of the three existing Islamic banks in Jordan alone amount to around 12 percent of the total banking system and their financing accounts for over 16 percent of total credit.
source : Reuters