The Role of Sukuk in Islamic Capital Markets
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2.7.2 PROPOSAL FOR A COMMON GLOBAL SUKUK AND TRADABILITY OF SUKUK
CERTIFICATES
Taking the African Domestic Bond Fund (ADBF) project as an example, the African
Development Bank recently approved USD25 million for the ADBF to develop its domestic debt
markets. The fund is structured as an enhanced exchange-traded fund (ETF) listed on
Mauritius and other stock exchanges to enlarge its investor base. The project has 3
components: the ADBF, the African Domestic Bond Index and Regional Multi-Disciplinary
Working Groups. The OIC can take this project as a guidance in creating a Shariah-compliant
project that can ensure common global sukuk issuance and tradability.
Meanwhile, existing organizations that are highly rated and with innovative sukuk structures
can assist with such sukuk projects. Examples of such organizations are:
 The Islamic Development Bank (IDB). The IDB Sukuk is offered in the Reg S format and
is open for subscription by investors in many countries. The current IDB Sukuk is based on
the wakalah structure, under which the IDB plays 3 different roles:
(i) The Seller. On each sukuk issuance date, the IDB will sell assets to the SPV. The SPV acts
as the Issuer and Agent for the sukuk holders. The assets sold to the SPV will become
the underlying sukuk assets, to be jointly owned by the sukuk holders.
(ii) The Wakeel and Guarantor. The IDB will be appointed as the wakeel to manage and
administer the sukuk assets, as per the agreed terms and condition. On each periodic
distribution date, the wakeel will collect and distribute the income generated by the
sukuk assets for distribution to the sukuk investors. Any excess income will be
retained by the wakeel as an incentive bonus.
(iii) The Obligor. On the maturity date, the IDB will buy back the sukuk certificates/assets
from the SPV and redeem the sukuk certificates. The SPV will then distribute the cash
proceeds to the sukuk holders.
 The International Islamic Liquidity Management Corporation (IILM) . The IILM has
adapted the asset-backed commercial paper (ABCP) model for its short-term sukuk. The
programme includes 2 SPVs based on the wakalah contract, one for sukuk issuance and the
other to hold assets. The programme has 3 main components:
(i) The Asset that is sold to a local SPV, which securitizes the assets and sells the resultant
sukuk to an asset-holding SPV set up by the IILM.
(ii) The Time Reserve amounting to 2% of the size of the issuance, to manage timing
mismatches in cash flows.
(iii) The Primary Dealers Network that bids in an auction to set the price and quantity at
which each primary dealer wishes to purchase the sukuk.