The Role of Sukuk in Islamic Capital Markets
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The MTN programme was established in 2005, with an initial size of USD1.5 billion; it has since
been upsized several times to USD10.0 billion. The MTN programme carries AAA ratings by
international rating agencies. The IDB’s MTN programme is denominated in various
currencies, with maturities of more than 1 year and take the form of both public issuances and
private placements.
In addition to its USD-denominated MTN programme, the IDB has also issued a LCY RM1.0
billion MTN programme in Malaysia, to finance projects in ringgit. To date, 3 tranches of RM
sukuk have been issued, amounting to RM700 million. The 10-year MTN programme was
established in August 2008 and will expire in August 2018. The programme is registered with
the SC and is listed and tradable on Bursa Malaysia under the issuer/SPV name of Tadamun
Services Berhad.
Meanwhile, the World Bank is considered a new entrant in the sukuk market. Yet, given its
mandate of alleviating extreme poverty and promoting shared prosperity, this institution will
issue more sukuk in the future, particularly social and green sukuk.
2.3.2 EXISTING STANDARD-SETTING BODIES AND THEIR ROLES
Conventional standard-setting bodies such as the Organisation for Economic Co-operation and
Development (OECD), the International Organisation of Securities Commissions (IOSCO) and
the Basel Committee on Banking Supervision (BCBS) have issued different guidelines on
economic development, governance, securities regulation, prudential regulation, risk
management, and other topics. However, some of these guidelines do not cater to the unique
nature, specificities and business propositions of the Islamic financial services industry. This
has therefore led to the establishment of various international standard-setting bodies to
support the growth and development of the global industry, as illustrated in Figure 2.5. These
institutions have played pivotal roles in the development of the sukuk market.
For example, the IFSB via its IFSB-15 (as indicated in Figure 2.5) provides guidance on the
maintenance of high-quality regulatory capital components by IBIs that comply with Shariah
rules and principles. It defines the relevant criteria for tier-1 (comprising common-equity tier-
1 (CET1) and additional tier-1 (AT1)) and tier-2 (T2) capital to adapt to the regulatory changes
under Basel III, and identifies the type of Shariah-compliant instruments that institutions
offering Islamic financial services (IIFS) may issue to qualify for inclusion in AT1 and T2. These
instruments include equity-based sukuk such as musharakah, mudarabah and wakalah sukuk.
Following the implementation of Basel III and IFSB-15, the global sukuk market has seen the
issuance of AT1 and T2 sukuk by Islamic banks to satisfy their regulatory capital requirements.
While perpetual AT1 sukuk issues are mainly dominated by GCC-based Islamic banks (e.g. Abu
Dhabi Islamic Bank (ADIB), Dubai Islamic Bank (DIB), Al-Hilal Bank, Qatar Islamic Bank and
Boubyan Bank), other Islamic banks in various jurisdictions including Malaysia, Turkey,
Pakistan and Saudi Arabia have issued T2 sukuk.