The Role of Sukuk in Islamic Capital Markets
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Further details on the development-stage matrix are provided in Table 4.2 below.
Table 4.2: Description of the Development-Stage Matrix
Country
Stage of Sukuk
Market
Development
Rationale
Malaysia
Matured
Malaysia’s sukuk market has grown by leaps and bounds, and remains
the world leader in terms of market share. As at end-2016, Malaysia
accounted for 41.1% (USD29.9 billion) of total global sukuk issuance. Its
classification as ”matured” is predicated by a healthy sukuk issuance
pipeline for the public (34.6%) and private (65.4%) sectors, a vibrant
ecosystem (e.g. tax incentives, intermediation by NBFIs) and a strong
value proposition that puts sukuk at an advantage compared to
conventional bonds.
UAE
Developing
(advanced)
By market share, the UAE made up 10.7% (USD8.05 billion) of total
global sukuk issuance as at end-2016, mainly from the private sector. On
average, the UAE ranks second after Saudi Arabia in contributions to the
supply of GCC corporate sukuk issuance. Even though its ecosystem has
room for further improvement, its healthy pipeline of corporate sukuk
supports the market’s level of competitiveness.
Indonesia
Developing
(intermediate)
The Indonesian government’s keenness to expand its ICM has been a
boon to its sukuk market. As at end-2016, the country recorded a 16.3%
(USD11.9 billion) market share, supported by issuances from the public
(97.2%) and private (2.8%) sectors. By comparison, the sukuk
ecosystem favours the public sector, with no real value proposition
created for corporate issuers. Nevertheless, Indonesia is placed under
”developing” due to its growing influence and potential in capturing a
slice of the global sukuk market.
Turkey
Developing
(beginner)
The growth of Turkey’s sukuk market is driven by the development of
its participation banks and sovereign issuances. Since the release of the
regulator’s Communique on sukuk, the number of issues has rapidly
increased, capturing 4.0% (USD3.0 billion) of the entire global sukuk
market as at end-2016. The country’s ”developing” status is
underpinned by its key stakeholders’ supportive role in propelling the
sukuk industry to its next phase of growth.
Hong
Kong
Developing
Hong Kong is reputed as an established international financial centre. Its
endeavour to incorporate Islamic finance into its financial system is to
support a complementary role vis-a-vis the Islamic finance community
which it currently serves. As a non-OIC nation that has returned to tap
the sukuk market 3 times, it underscores the government’s interest in
expanding its financing sources and investor base. Its categorisation
under ”developing” relates to this initiative by the government
compared to other global financial centres such as London, New York
and Singapore.
Nigeria
Infancy
Nigeria has proactively included Islamic finance in its masterplan to
facilitate its ICM progression. However, its underdeveloped financial
system and currency fluctuations, among others, pose certain challenges
against the development of its domestic bond market. Hence its
placement under ”infancy” to depict the need to strengthen its market
infrastructure and attain macroeconomic stability, to facilitate the
growth of its domestic bond market.
Sources: RAM, ISRA