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The Dubai International Financial Centre and The Graduate School of Management (GSM) at the University Putra Malaysia today hosted a Symposium to discuss various approaches for establishing industry consensus on the key characteristics of Sukuk. This is an inaugural meet that starts a long-term effort to deliberate the practical issues in application of Islamic finance instruments.
Titled ‘Sukuk: Theory, Practice and Issues’, the Symposium forms part of DIFC’s and University Putra Malaysia’s joint efforts to promote standardization and the development of academic literature on Islamic Finance issues.
Dr. Nasser Al Saidi, Chief Economist of DIFC Authority said: “Over the last few years, Sukuk has gained wider interest beyond the Islamic world as a tool for raising finance and securitisation. With the global financial crisis reducing the appetite for risk and volatile asset classes, investors are increasingly looking at Sukuk as a safe investment option. Issuers, including governments, find Sukuk attractive for financing infrastructure and public works. However, one of the key concerns investors have with Sukuk is the lack of industry consensus on what constitutes a Shari’a-compliant product. Today’s Symposium provided us an opportunity to bring together leading academics, industry professionals and regulators to explore how the industry can establish consensus on the Shari’a principles that underpin Sukuk. Consensus & standardisation is vital to developing a liquid Islamic Securities Market and mainstreaming Islamic financial instruments.”
Peter Casey - Director, Policy and Head of Islamic finance at the Dubai Financial Services Authority said: “At present, most issues in the Sukuk market, whatever their form, are structured to have a similar economic effect to conventional bonds. In this situation the regulatory issues are relatively straightforward. For the future, there may well be challenges posed by novel structures, especially if these involve real elements of asset or business risk. These would arguably be more in line with the underlying principles of Islamic finance, and there may be pressure in this direction from Shari’a Boards. However, such Sukuk will probably not be simply equity-like, and regulators will need to consider carefully what disclosures need to be made to the market both initially and on a continuing basis.”
“This is a symbiotic effort between an important financial centre for Islamic Instruments and a top Malaysian business school to address issues in understanding and the application of these instruments that have plagued this discipline in recent times. For this inaugural meeting, what we hope to achieve is to speed up discussion on an important instrument issued as Islamic financial instrument (sukuk), to be defined, assessed, practices standardized, and importantly valued with reference to the payoff to investors in this instrument”, said Prof. Datuk Dr. Nik Mustapha R. Abdullah, Vice Chancellor of University Putra Malaysia.
Apart from Dr. Saidi, speakers at the event included Dr. Nik Mustapha Raja Abdullah, Vice Chancellor of the University Putra Malaysia; Mervyn Lewis, Professor of Banking at the University of South Australia; Mr. Peter Casey, Director, Policy and Head of Islamic Finance, Dubai Financial Services Authority; Professor Murat Çizakça, eminent scholar and economic historian; Dr. Mohd Daud Bakar, eminent Shari’ascholar; Badlisyah Abdul Ghani, CEO, CIMB Islamic Bank, Malaysia, Mohamad Ariff and Shamsher Mohamad, Professors of Finance at the Bond University (Australia) and the Graduate School of Management, in UPM (Malaysia).
Discussions at the Symposium covered the origination and markets for Sukuk; market pricing of the Sukuk instrument; and legal, regulatory and valuation issues in Sukuk. The papers presented at the Symposium will be compiled into a book and published soon by an international publishing house.
