| April 22
April 22 The Bahrain-based International Islamic
Financial Market (IIFM) will develop its first standard contract
template for sukuk (Islamic bonds), and aims to double the
number of its standards as early as next year, its chief
executive told Reuters.
A standard for leasing-based sukuk will be developed first
by the IIFM, a non-profit industry body which creates
specifications for Islamic finance contracts, to help harmonise
industry practices, said chief executive Ijlal Ahmed Alvi.
"Our aim is to come up with more standards - that is the
focus we are trying to push for. We have five standards now and
we hope to double that for next year."
The move comes after a consultation meeting in Dubai this
week which identified a need for guidelines covering the ijara
sukuk structure, a sharia-compliant sale and lease-back
contract, as a priority.
Alvi said a working group would be established after the
IIFM's board meeting in May, and it would also study other
common sukuk structures such as mudaraba, wakala and musharaka,
as well as convertible and exchangeable sukuk.
Sukuk issuance globally reached $117 billion last year from
a total of 811 issues, of which 175 where based on the ijara
structure, according to data from Zawya, a Thomson Reuters
The ijara sukuk standard could be ready by the end of this
year at the earliest, although this would depend on the working
group's schedule, Alvi added.
The working group would include representatives from a wide
range of Islamic banking institutions including the Jeddah-based
Islamic Development Bank (IDB), as well as the
International Monetary Fund, he added.
While ijara sukuk are popular among corporate issuers, the
absence of standard documentation has spawned different versions
which can limit their acceptability among Islamic investors. A
general lack of uniformly accepted standards in Islamic finance
has slowed global growth of the industry.
The new sukuk standard will seek to address a variety of
issues including primary market issuance and the use of special
purpose vehicles, Alvi said.
In the past two years, the IIFM has launched standard
contract templates for Islamic interbank transactions and profit
It is currently working on standards for cross-currency
swaps, foreign exchange forwards and collateralised murabaha,
while also consulting on credit support arrangements in Islamic
finance contracts, said Alvi.
The IIFM started operations in 2002, founded by the IDB and
the central banks and monetary authorities of Bahrain, Brunei,
Indonesia, Malaysia and Sudan. Additional members include the
State Bank of Pakistan and the Dubai International Financial
(Editing by Andrew Torchia)