IFC lists $100 mln Islamic financing instrument in Dubai and Bahrain

This is not strictly an African story, but Islamic finance is a very important for much of Africa..

The International Finance Corporation (IFC – www.ifc.org), a member of the World Bank Group, on 4 November listed its first Islamic long-term financing instrument, a Sukuk. The IFC became the first non-Islamic financial organization to issue a Sukuk in the Gulf Cooperation Council for term funding.

The $100 million Hilal Sukuk was listed on NASDAQ Dubai (www.nasdaqdubai.com), an international exchange serving the Middle East, and on the Bahrain Stock Exchange (BSE – www.bahrainstock.com). The money will be used to fund health and education investments in the region. The Sukuk has a Moody’s Aaa rating. Duration is five years, starting from 3 November 2009. It pays a fixed return of 3.037% every six months (on 3 May and 3 November).

NASDAQ Dubai is the world’s largest exchange for Sukuk by listed value, with 21 listed Sukuk valued at $16.7 billion. The BSE lists 14 issues of Islamic Sukuk and conventional bonds with an approximate total value of $3.3 bln.

Sukuk, from the plural of the Arabic for a legal certificate or cheque, is a financial instrument which is equivalent to a bond but managed according to Shari’ah by not paying interest and meeting other moral and ethical criteria. Often it is linked to partial ownership of a project or asset and can reflect returns or rents on this. The issuer of a sukuk sells an investor group the certificate, who then rents it back to the issuer for a predetermined rental fee. The issuer also makes a contractual promise to buy back the bonds at a future date at par value (http://www.investopedia.com). According to Wikipedia (http://en.wikipedia.org/wiki/Sukuk), more than $700 billion of assets are managed according to Islamic investment principles.

Jeff Singer, Chief Executive of NASDAQ Dubai, says: “The launch of the IFC’s and the World Bank’s first Sukuk and its listing on NASDAQ Dubai are a significant step in the continuing integration of Islamic finance into the global financial system. We are delighted to support the Sukuk as its primary listing venue, providing a regulatory structure that promotes transparency for investors and visibility for the issuer.”

HE Dr. Omar Bin Sulaiman, Governor of the Dubai International Financial Centre (DIFC) and Vice Chairman of the UAE Central Bank, said: “As the first non-Islamic financial institution to issue a sukuk for term funding in the GCC, this truly is a ground-breaking transaction and clearly demonstrates the growing importance of the region within the global financial system.

“NASDAQ Dubai and DIFC remain instrumental in building the regulatory and legal infrastructure to develop a Islamic finance securities market and facilitate the creation of new financing opportunities for global issuers. This listing further enhances DIFC’s stature as a leading global hub for Islamic finance transactions.”

The securities of IFC’s Sukuk are the first to be held on NASDAQ Dubai’s central securities depositary, which reportedly provides securities holders with an efficient and streamlined service.

NASDAQ Dubai serves the region between Western Europe and East Asia, welcoming regional as well as global issuers that seek regional and international investment. It lists shares, derivatives, exchange-traded commodities, structured products, Sukuk (Islamic bonds) and conventional bonds. Majority shareholder is Borse Dubai (two-thirds) and NASDAQ OMX Group owns one third. Dubai Financial Services Authority (DFSA) is the regulator and the exchange is located in the Dubai International Financial Centre (DIFC). For more information, visit www.nasdaqdubai.com. Sukuk are also listed on the London Stock Exchange (www.londonstockexchange.com), Luxembourg (www.bourse.lu) and other stock exchanges. See also www.sukuksummit.com.


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