First issued by the Malaysian government in 2000, sukuk – or Islamic bonds – are financing tools that do not breach sharia law. These bonds have since become an important part of corporate and infrastructure financing in the Gulf Cooperation Council (GCC) and Malaysia, with issuance totalling US $6.5 million by 2014 in these regions.
For The Financial, S&P Global’s regional expert and associate director, Karim Nassif, explains that although sustained low oil prices, and in turn decreased regional revenues, has caused a stall in infrastructure and corporate sukuk issuance in the short-term, the financing tool is likely to make a comeback as bank liquidity dries up and GCC sovereigns find alternative sources of funding.
Although many infrastructure projects have been suspended in the GCC region, US$50 billion of infrastructure projects will still require financing from 2016 -2019. And given an increased level of market standardisation, sukuk issuance is likely to be relied upon as a method of relieving exposure to GCC banks in the medium- to long-term.
The article can be viewed in full here.