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6.2 SUKUK ISSUANCES (SUPPLY – SELL SIDE)
Due to persistently weak global oil prices, Arab countries―particularly the GCC nations―have
been actively issuing both LCY and FCY sovereign sukuk to finance their budget deficits. While
Bahrain, Qatar and the UAE (emirate governments) have been sourcing their government
funding via sukuk for quite some time, the sovereigns of Oman and Saudi Arabia only started
tapping the sukuk market in 2017. Kuwait followed its Gulf neighbours in raising debt in April
2017 but chose an international conventional bond to build its first yield benchmark.
In the GCC, the decision on whether sovereigns issue bonds or sukuk is driven by the targeted
investor base and the ease of the sukuk structure as well as Islamic finance strategy, given that
the structuring of sukuk is more complex and time-consuming than for conventional bonds. In
the GCC, corporate issuers are mainly Islamic financial institutions and GREs, except in Saudi
Arabia, which provides some diversification into other corporate sectors (i.e. aerospace,
chemical, food processing, industrial, and oil and gas).
In Asia, Malaysia and Indonesia dominate the sukuk market. While Malaysia’s strong foothold
is underpinned by the corporate issuance, Indonesia’s sovereign sukuk anchor its historical
volume and number of sukuk issues. Notably, Hong Kong became the first non-OIC Asian
country to issue sovereign sukuk in 2014, followed by 2 more issuances in 2015 and 2017.
Other countries that have issued only government sukuk are Brunei and Bangladesh. Sectoral
diversification can be observed in quasi-government and corporate sukuk originated in
Indonesia and Malaysia. However, Malaysia stands above its peers in terms of the number of
issues and issuance amount. Malaysia remains the world’s largest market for sukuk issuance,
commanding 48.0% (USD15.4 billion) of total global sukuk issuance as at end-June 2017.
In Africa, The Gambia, Sudan, Nigeria, Senegal, South Africa, Togo and Ivory Coast have issued
sukuk, mostly to finance infrastructure projects. Notably, The Gambia’s issuances serve as
liquidity-management instruments. All said, Africa’s sukuk market is still in its nascent stage
and dominated by the sovereign and central bank issuances. With the establishment of
sovereign benchmarks, the regulators are optimistic that corporate players will be attracted to
tap the domestic ICMs. However, it is still early days yet and building the necessary value
position for corporates to issue sukuk needs to be progressively developed.
Based on case studies and field visits to the selected countries, the sukuk markets still face
some key issues and challenges in terms of supply, as elaborated in Table 6.3.
Table 6.3: Key Issues and Challenges of Sukuk Markets – Supply Side
Issues Affected countries Recommendations
Limited/unavailability of
LCY sukuk, particularly
sovereign issuances
 UAE
 Indonesia
 Turkey
 Hong Kong
 Nigeria
 To create more awareness on the need for
LCY issuance to deepen the domestic
sukuk market.
Dearth of Islamic money-
market activities and
instruments
 UAE
 Indonesia
 Turkey
 Hong Kong
 Nigeria
 To increase the issuance of short-term
sukuk and other Islamic money-market
instruments.
 To subscribe to IILM short-term sukuk.