Tag Archives: Islamic finance

Shariah financings in Indonesia up by 40%

Shariah financings in Indonesia up by 40%

Record car sales in Indonesia helped fuel 50 percent growth in Shariah-compliant banking assets last year and Islamic lenders are setting up booths at automobile shows to further develop the market.

Bank Muamalat Indonesia, the country’s oldest Shariah-compliant lender, said consumer loans jumped 40 percent in 2010 after taking part in exhibitions last year.

BCA Syariah, the Islamic unit of Indonesia’s biggest financial services company by market value, is offering a rate of 11 percent on a five-year car loan. Bank Syariah Mandiri is also attending the shows.

Tapping Indonesia’s burgeoning consumer loan demand will help the country’s Islamic finance industry catch up to neighboring Malaysia, the world’s largest sukuk issuer. Shariah banking assets in Indonesia make up 3.2 percent of the total, compared with about 20 percent in Malaysia.

“The retail market is where banks are focusing as the margins are good and it is profitable,” Adrian Gunadi, the head of retail banking at Bank Muamalat in Jakarta, said on Saturday.

“The sukuk market will take time to pick up because of regulatory challenges.”

Islamic banking assets in Indonesia, Southeast Asia’s biggest economy, grew to Rp 100.2 trillion ($11 billion) as of Nov. 30 from Rp 67 trillion at the end of 2009, Mulya Siregar, the head of Shariah banking at Bank Indonesia, said on Thursday.

The central bank aims to increase the amount to Rp 130 trillion this year, he said.

Car Sales Jump

Consumer financing made up 32.4 percent of the total of Rp 65.9 trillion of Shariah-compliant loans disbursed in the first 11 months of last year, according to central bank data.

Automotive sales surged 57 percent last year and Indonesia may overtake Thailand as Southeast Asia’s biggest car market by 2014, said Jody Jodjana, chief executive officer at Toyota distributor Auto 2000, Indonesia’s largest car dealer.

Indonesia passed a law in July 2008 to allow financial institutions to offer services that comply with Shariah principles, 25 years after Malaysia. Indonesia now has 11 Islamic banks.

Sales of sukuk, which pay asset returns to comply with Islam’s ban on interest, rose 56 percent in Indonesia to Rp 26.2 trillion in 2010, according to Bloomberg.

Sale Next Month

Indonesia will sell three-year Islamic bonds to individual investors next month, Rahmat Waluyanto, head of debt management at the Finance ministry, said.

The government failed to raise the targeted amount in 12 consecutive local-currency sukuk auctions in 2010 as investors demanded higher yields, saying the debt was riskier because of a lack of secondary-market trading volume.

Global Shariah-compliant bonds returned 12.8 percent last year, the HSBC/NASDAQ Dubai US Dollar Sukuk Index shows. Debt in emerging markets gained 12.2 percent, according to a JPMorgan Chase index.

Growing Economy

Bank Indonesia forecasts the economy will expand as much as 6.5 percent this year from an estimated 6 percent in 2010.

“The Indonesian economy is expanding and gross domestic product per capita has surpassed $3,000,” said Winang Budoyo, an economist at Bank CIMB Niaga. “Demand for non-food items, including cars, will be trending up.”

Shariah-compliant auto financing in Indonesia is offered using a murabahah contract where the bank buys the car from the dealer and sells it at a mark-up, roughly equivalent to current interest rates, to the customer.

Financing Rates

Car financing currently makes up 35 percent of Bank Muamalat’s total consumer loans, up from only 20 percent in 2009, Gunadi said. BCA Syariah, which started operations nine months ago, set up its first motor show booth in November, said Soegiarto Pribadi, head of business.

The company offers five-year car loans, compared with three-year non-Shariah-compliant loans offered by parent, Bank Central Asia.

“Before the road show we had no customers applying for our car loans,” Pribadi said. “Now, 15 percent of BCA Syariah’s consumer loans are for cars.”

Source: http://www.thejakartaglobe.com/business/shariah-loans-up-40-percent-on-surging-car-sales/419014

Islamic micro lenders set up global network

Islamic micro lenders set up global network

Islamic Microfinance Network (IMFN) has been set up to assemble the international Islamic Microfinance organisations on one platform, a statement said. 

The IMFN head office is in Lahore and its regional offices will be in Ghana, Mauritius and Middle East. 

According to IMFN official the board members of IMFN are Farida Tariq, Chairperson, Amjad Saqib, Vice Chairman, and Muhammad Zubair Mughal, Chief Executive Officer. 

Kawako Yasuma, CEO, Ghana Islamic Microfinance Bank, Mohammad Raffick Nabi Mohamod, Founder, AlBaraka Multi-purpose Cooperative Society, Mauritius and Khaleeq-uz-Zaman, Head of Shariah Islamic Banking, International Islamic University, Islamabad are working as directors Islamic Microfinance Network.

The core objective of this network is to provide best methodologies of Islamic microfinance, Shariah guidelines, and human resource to the industry.

Third working group meeting of Islamic Microfinance Network was held on Thursday at Lahore University of Management Sciences (LUMS) where national and international microfinance organisations took part. 

Zubair Mughal said that the trend of Islamic microfinance is rapidly increasing in Pakistan and all over the world. He said that there are 14 Islamic microfinance organisations working in Pakistan and more than 200 are playing active all over the world. One of the major reasons of this rapid popularity of Islamic microfinance is the failure of the typical microfinance and India is the open precedent of its failure. 

He said that the initial member countries of Islamic Microfinance Network are Iraq, Jordan, Yemen, Ghana, Mauritius and Kazakhstan.

Farida Tariq said that this network could prove to be an excellent source of poverty alleviation and institutional building.

Amjad Saqib added that the objective of this network is to assemble Islamic microfinance organisations at one platform.

Khaleeq-uz-Zaman and Syed Mohsin praised the effort of giving synergy to Islamic microfinance organisations.

Source: http://www.thenews.com.pk/TodaysPrintDetail.aspx?ID=27170&Cat=3&dt=1/23/2011

India’s first Shariah compliant stock index could boost Islamic mutual fund industry

India’s first Shariah compliant stock index could boost Islamic mutual fund industry

The Bombay Stock Exchange (BSE), Asia’s oldest bourse, launched its first Sharia-compliant stock index in December in a move that could boost offerings of exchange traded funds (ETFs) and mutual funds to tap into India’s fast-expanding economy.

Islamic finance in India, home to the world’s second-largest Muslim population after Indonesia, is still in its infancy and the new benchmark should help channel socially-conscious investor savings of more than $1 trillion in the coming years, including from the cash-rich Gulf.

The BSE TASIS Sharia 50 Index includes blue chips like energy conglomerate Reliance Industries, top software services exporter Tata Consultancy Services, leading mobile phone operator Bharti Airtel, carmaker Maruti Suzuki and engineering and construction giant Larsen & Toubro.

There has been a Sharia-based ETF in operation since 2007 in India, and also many Islamic-compliant brokerage houses like Parsoli and Idafa, but this is yet to pick up in a big way.

“The BSE has the largest number of Sharia-compliant companies in the world, more than the whole of the Middle East and Pakistan,” said Sharique Nisar, director of Taqwaa Advisory and Sharia Investment Solutions or TASIS which corroborated with the BSE on the index.

Missed opportunity

If the Sharia 50 had been launched in early 2008, it would have given better returns than the top-30 Sensex and the wider BSE-500 index, according to the BSE.

“The Sharia 50 has outperformed the Sensex by nearly 25 per cent and the BSE 500 by over 30 per cent over our back-test horizon (beginning 1-1-2008),” the exchange said. “Over this period, annualised volatility for the Sharia 50 was also less than both Sensex and the BSE 500 by nearly five per centage points.”

The 30-share Sensex, India’s mostly widely tracked index, was one of the world’s best performers in 2010, rising 17.4 per cent. India’s $1.3 trillion economy, Asia’s third-largest after China and Japan, is expanding at around 9 per cent annually and the government aims to push growth to double digits in the years ahead.

With about three-quarters of India’s 1.2 billion people below the age of 25 years, the country is destined to reap a demographic dividend as the productive younger population boosts consumer spending and pays for massive investment in large infrastructure projects such as highways, power, airports, flyovers and townships.

“The long-term outlook for the Indian economy is very bullish and the Sharia-compliant index will be a huge booster to attract a new class of investors,” said Biju Dominic, who advises retail clients in Mumbai.

He said pension funds from Saudi Arabia to the UAE, and from Malaysia to Indonesia, that have strict religious rules for investment could use the index to pour funds into socially responsible sectors in a region which is growing rapidly.

The BSE’s Sharia 50 comes four years after the Standard & Poor’s launched similar indices elsewhere, spawning a series of ETFs and mutual funds.

S&P had also partnered the National Stock Exchange, India’s biggest bourse and the main market for derivatives, to launch S&P CNX Nifty Sharia and S&P CNX 500 Sharia index. However, only one ETF — the Sharia BeES by Benchmark Mutual Fund — based on the CNX Nifty Sharia has been launched so far.

New investor class

Still, with India’s pace of economic expansion expected to overtake China’s growth rate in the coming years global investors would increasingly look to grab a slice of the market With more Sharia-compliant benchmarks and greater awareness, the prospect for attracting a new class of investors is upbeat.

Madhu Kannan, managing director and chief executive of the BSE, said the Sharia 50 index could give Islamic and other socially responsible investors from the Gulf, Europe and South-east Asia another means to access the Indian market.

Foreign portfolio investment in Indian companies has exceeded $1 trillion since the market was opened up in 1993, and there is another $18 billion in debt instruments.

Domestic investors, especially from the Muslim community, will also find the index handy.

“The creation of the index will help promote financial inclusion of the Muslim population in India and attract investment flows from international funds that must adhere to Sharia norms,” the BSE said.

Oil and gas companies account for almost 30 per cent of the market capitalization stocks in the Sharia 50, followed by capital goods at 19.4 per cent and information technologies at nearly 12 per cent.

The BSE, which started operations in 1875, says the Sharia 50 is the first Indian index to cap the weighting of stocks at eight per cent, which increases diversification and makes related products more attractive to global investors.

Some Sharia-compliant schemes in India

Ambit QInvest
Ambit Capital in collaboration with QInvest, Qatar’s leading investment bank, launched a $150 million open-ended Ambit QInvest India Fund in 2010, which has been touted as the largest Sharia-compliant India fund.

“The fund’s performance in the last three months since inception is 10.4 per cent,” QInvest’s Chief Executive Shahzad Shahbaz said in December. “The Indian equity market provides investors with a highly attractive opportunity to invest in a diversified range of Sharia-compliant equities. The market capitalisation of Sharia-compliant companies within the Nifty stock market index is nearly 60 per cent.”

QInvest had acquired a 25 per cent holding in Ambit Corporate Finance last February for Rs2.5 billion, and recently bought 28 per cent stake in Asian Business Exhibition and Conferences, India’s leading exhibitions and conferences organiser.

Sharia BeES
Sharia BeES, an exchange traded fund, was launched by Benchmark Mutual Fund more than two years ago and mimics the S&P CNX Nifty Sharia Index, which comprises companies in energy, software services, automobiles, engineering, metals, health care, construction, telecom and consumer goods. The passively-managed fund has assets under management of Rs9 million, with annual returns of 10.4 per cent. Minimum investment is Rs10,000.

Taurus Ethical
Taurus Mutual Fund collected about Rs50 million for its Sharia-compliant Taurus Ethical Fund when it was launched in February 2009. It invests in the companies that are part of the S&P CNX 500, with a preference to more mid-cap firms. Being an actively managed diversified fund, it has outperformed the benchmark with annual returns of 23.8 per cent. It has assets worth Rs254 million.

Brokerages
Parsoli Corporation is one of the few Islamic finance firms in India to be involved in equity brokerage and Sharia compliant investment activities. Others include Hidaaya Consultancy Services, Bearys Amanah and Idafa Investments.

Source: http://gulfnews.com/business/markets/india-woos-islamic-funds-1.746388

Malaysian Shariah Governance Framework can be blueprint for industry: Arabnews interview with Dr. M. Elgari

Malaysian Shariah Governance Framework can be blueprint for industry: Arabnews interview with Dr. M. Elgari
by Mushtak Parker| Arab News

At a time when the global Islamic finance industry is debating whether Shariah advisory should be regulated and scholars restricted to advising only a small number of institutions, Malaysia almost in passing adopted on Jan. 1 a new Shariah Governance Framework (SGF) for Islamic financial institutions (IFIs) that supersedes the Guidelines on the Governance of Shariah Committees of IFIs introduced by Bank Negara Malaysia (BNM), the central bank, in 2004.

According to the Malaysian central bank, the primary objective of the SGF is to enhance “the role of the board, the Shariah committee and the management in relation to Shariah matters, including enhancing the relevant key organs having the responsibility to execute the Shariah compliance and research functions aimed at the attainment of a Shariah-based operating environment.”

One prominent international Shariah advisory to the Islamic finance industry, Muhammed Elgari of Saudi Arabia, who sits on several Shariah committees of such organizations as the Bahrain-based Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), the Dow Jones Islamic Market Indexes, and a number of banks, agrees that Malaysia’s Shariah Governance Framework for IFIs could become a blueprint for other countries to follow.

In an exclusive interview with the author, Elgari stressed that he can see the need for such a framework, which “most certainly” can be developed into a blueprint, even though he has yet to study the full details of the SGF.

Shariah advisory has been in the news in recent weeks following reports that the AAOIFI is in the process of drafting rules to regulate the shareholdings and the number of supervisory boards individual Shariah advisories can sit on. Market players have long been concerned by the small pool of experienced Shariah advisers serving the Islamic finance industry and that an elite few sit on multiple Shariah advisory boards, a practice which they claim could lead to conflicts of interest and is not consistent with best practice in terms of advisory.

Research by entities such as Funds@Work have added fuel to the fire, although the methodology of the research is not very detailed and transparent. According to Funds@Work, there are 1,141 overall Shariah advisory board positions available in 28 countries. The average board size is 3.33 scholars per board, across the entire universe. Perhaps more importantly, the Top 10 scholars hold 450 out of 1,141 board positions that are available and represent 39.44 percent of the universe. Two Shariah advisories sit on a staggering 85 boards while another on 79 boards.

Some of the top Shariah advisers, not surprisingly, have reportedly spoken out against any efforts to restrict their trade by restricting the number of boards on which they can sit.

“There is no justification in my mind to single out a profession to set rules that are not applied to any other. There is no dispute about the fact that a human being does have a limited capacity or let us say a finite one. But this can’t be measured by the number of boards. The real test is quality of work and ability to meet the expectations of the other party. It should be self evident that if one lacks both, it will not help him to have a limited number of boards,” said Elgari.

Elgari, who also has a doctorate in economics from the prestigious University of California in Berkeley, dismisses any suggestions that Shariah advisories “make too much money” and “they are monopolizing the trade” which he maintains are both lies and naive.

In his experience, none of the banks and organizations he serves as an advisory have expressed any concerns to him about the above issues. In fact, his relationship with his clients remains cordial and commands the utmost professionalism. As such, these supposed concerns are a smokescreen and are really serving the agenda of certain groups who are keen to get a slice of the Shariah advisory business in Islamic finance.

“What is being observed lately is that certain groups want to intermediate between banks and Shariah scholars. In other words they would like to ‘broker’ the Shariah advisory and they believe, correctly, that their negotiating power with the banks is much stronger than individual scholars. Hence they can extract much more from banks. They tell us why should you be concerned, you will not suffer any reduced income (negating the very argument that we make too much). But in principle we do not see it fitting to create an exchange where we sell our services to someone to sell them to a third party at a higher price,” he said.

Elgari, who is one of a very few number of foreign Shariah advisories registered with the Securities Commission Malaysia to give Shariah advisory to the Islamic finance industry in the south east Asian country, maintains that nobody is more concerned about bringing up the second generation of Shariah scholars in the global Islamic finance industry than the current scholars. As such, it is wrong to think that they are threatened by the thought of restrictions and regulation.

“On the contrary our nightmare is for Shariah boards to disappear when we cease to exist. We always request institutions to include in their Shariah board a younger scholar so that the next generation is brought up by the current generation. Recently, we met with the officials from the Waqf Fund (set up by Central Bank of Bahrain) to try to design a program that can be adopted by an academic institution for this purpose,” he said.

Some observers, including regulators, invoke the “conflict of interest” argument to support their desire to restrict the number of boards Shariah scholars can sit on. Elgari in fact believes this is a fair concern and in several instances he has emphasized that Shariah board members should be conscious of it and try to avoid it. He confirms that in several instances he was offered shares in companies he was giving Shariah advisory but he has always declined because he was always aware of a potential conflict of interest. He suggests greater transparency by fellow Shariah advisories, especially in showing their awareness of the issue of potential conflict of interest.

For Elgari, who has also been an economics don at King Abdul Aziz University in Jeddah for many years, the contemporary Islamic finance industry has witnessed over the last three decades the emergence the birth of a new discipline, which combines Shariah, economics and law. “Unless universities recognize this as a new discipline, not much will be done by them. If these professors themselves can’t do it, how can they teach it? The most effective way is apprenticeship, or a program for study designed by the current Shariah scholars,” he said.

The fact remains that the Shariah governance process in Islamic finance has been steadily evolving and gaining maturity. Last year, for instance, Elgari was the first prominent scholar to emphatically call for a scientific approach to Shariah compliance. This follows a similar call by another prominent Shariah scholar, Sheikh Esam Ishaq of Bahrain, that Shariah advisories serving the Islamic finance industry should be regulated.

Elgari then called on fellow Shariah advisories to adopt a scientific methodology in reaching their deliberations on Islamic finance. “To be respected,” said Elgari, “Shariah scholars should follow scientific methods to reach their conclusions. We have seen many mistakes where declarations have been issued. Only the correct resolutions will prevail. Shariah is not a group of infallible people. It is a science. It requires methodology, and resolutions require peer review and market consultation.”

He is also a big supporter of the codification of Fiqh Al-Muamalat, which could contribute immensely to clarifying the rubrics and the contentious issues relating to products and services in the nascent Islamic finance industry. Similarly, he believes that greater transparency in the Shariah governance process; more professional articulation of the resolutions and statements; and prior debate and consultation between scholars and other stakeholders in the industry, could go a long way in mitigating the misconceptions and confusion that has arisen as a result of some recent Shariah rulings.

Source: http://arabnews.com/economy/islamicfinance/article236465.ece

Japan eyes sukuk tax breaks to draw Islamic investors

Japan eyes sukuk tax breaks to draw Islamic investors

 

 

 

 

 

 

Japan will alter regulations to give foreign investors tax breaks on sharia bond dividends, the latest country to pursue Islamic finance to woo investors demanding sharia-compliant assets. Islamic bond dividends received by foreign investors may be declared tax-free as early as end-2011. As neighboring countries had already changed or been changing tax systems to exclude Islamic bonds from taxation, “Japan also has understood the necessity of enhancing the attractiveness as an investment destination,” a Japanese FSA official said. Japanese regulations do not forbid the issuance of Islamic bonds but these funding instruments are often not commercially viable without tax breaks on dividends received.

The transfer of assets tends to attract tax, which can make Islamic finance transactions more costly than conventional deals.

Japanese brokerage Nomura Holdings sold $100 million of Islamic leasing bonds in Malaysia in July and Sumitomo Corp is said to be arranging the first Islamic funding deal in Japan.

Islamic finance practitioners expect the regulatory change to encourage more interest and drive sukuk issuance.

“The range of investors’ portfolio variation can be expanded and the underlying demand may be stimulated,” said Etsuaki Yoshida, a deputy chief of Africa office at Japan Bank of International Cooperation.

The $1 trillion Islamic finance sector saw a burst of interest about two years ago after the global financial crisis prompted a search for alternative sources of funding but interest has since cooled slightly as conventional debt markets reopened. Non-Muslim countries such as Singapore, Australia, France and Hong Kong have either amended or are working on changes to their regulatory framework to accommodate Islamic finance, which avoids interest payments in favour of asset sales or rentals to underpin financial transactions.

But efforts to develop Islamic financial markets have met resistance in South Korea and India.

Source: http://www.reuters.com/article/idUSL3E7CD0OZ20110114

Push for asset-backed Sukuk framework lifting demand

Push for asset-backed Sukuk framework lifting demand

 

 

 

 

 

It’s good to see a move towards asset-backed Sukuk rather than asset-based Sukuk, which are obviously more close to the spirit of the Shariah. In asset-backed Sukuk, investors become owners of the underlying assets in case of default, whereas asset-based Sukuk give no such recourse.

DUBAI, Jan 10 – Investor worries over the impact of defaults in Islamic bonds is driving a push for a better structure for asset-backed instruments that should help alleviate concerns, bankers and lawyers said.

Islamic finance industry body IIFM is looking to develop a template in 12 to 18 months that will help reduce some of the legal and operational complexities surrounding asset-backed Islamic bonds, or sukuk, said its chief executive Ijlal Alvi.

The Nakheel property arm of Dubai’s state-owned conglomerate Dubai World [DBWLD.UL] staved off default on a $4.1 billion Islamic bond after a last-minute bailout from Abu Dhabi in 2009, after Dubai World announced plans for repayment on $26 billion in debt, spooking global markets.

Also still ongoing is Kuwait Investment Dar’s <TIDK.KW> discussions with creditors over a $100 million sukuk it defaulted on in 2009.

Asset-backed sukuk are seen closer to the spirit of Islamic law as they involve a transfer of tangible assets — investors become the legal owners of these in the case of default.

Investors were taken aback as they realised the majority of sukuk were asset-based and that these could not be accessed directly by sukuk holders following a default.

“People didn’t really talk about asset-backed sukuk until the stress tests were applied,” said Tim Ross, partner at Latham & Watkins in Dubai. “Some investors were caught off guard — they had an unsecured payment claim.”

As investors cried foul, market watchers hoped the industry would shift toward a securitised model, but that has yet to happen, as more than 90 percent of transactions are still structured as asset-based sukuk.

“While asset-backed transactions, both conventional and Islamic, have been done in the Gulf, they are more difficult and costly for companies to undertake,” said Gregory Man, senior associate at Clifford Chance in Dubai.

He added that such transactions also face tougher legal and analytical requirements imposed by rating agencies and many companies in the region lack sufficiently robust internal systems to service and report on the assets to investors and agencies.

A master agreement would aim to provide a standardised base from which issuers could structure the sukuk in line with their own jurisdictions and increase awareness about the product.

“In this credit environment, creditors would prefer direct recourse to the assets,” Alvi said. “Although asset-based is a valid structure as well, I think it is preferable to encourage increase in asset-backed sukuk over the medium to long-term.”

Despite the challenges, companies would look to issue more asset-backed sukuk if investors demanded it, bankers said.

“Among investors, there is still no real drive to do it,” said one Gulf-based Islamic banker. “Much of the corporate world comes from a conventional background so asset-based sukuk is closer to the debt model they are used to working with.

“Most investors simply don’t care enough, despite all the frenzy following defaults.”

Source: http://sg.news.yahoo.com/rtrs/20110110/tbs-assetbacked-sukuk-7318940.html

Sukuk issuance to reach pre-crisis level by end 2011: Daud Vicary Abdullah

Sukuk issuance to reach pre-crisis level by end 2011: Daud Vicary Abdullah

Global issuance of Islamic bonds will take another year to reach pre-crisis levels as new markets in Europe and Asia have yet to make up for the slump in the Gulf, said Deloitte’s head of Islamic Finance on Tuesday.

Underwritten issuance of Islamic bonds, or sukuk, reached $14.3 billion last year, according to Thomson Reuters estimates, well below the $20-30 billion in annual issuance before the global financial crisis.

Malaysia, the industry’s biggest market, held up well in 2010 but issuance in the Gulf Arab region has been hurt by some sukuk defaults and investor confidence has yet to return.

“I think it’s going to be another year or so before (sukuk issuance) gets back to pre-crisis levels,” said Daud Vicary Abdullah, head of Islamic finance at advisory firm Deloitte.

He said that new markets will help a come back in sukuk issuance, as governments in Brazil, Australia, Western Europe and Central Asia are considering issuing sukuk to tap the Muslim wealth pool and nurture their own Islamic financial industries.

He said that American re-insurers are considering entering Islamic re-insurance business, or re-takaful, which would also increase demand for Islamic bonds.

The global financial crisis popped a Gulf real estate bubble in 2008, severely hitting regional investors and pushing the region’s business hub Dubai to the brink of default.

Investors are still holding back their funds as the full extent of the damage took long to surface due to a lack of strong and transparent regulations in the region.

“This market is always much more sensitive to economic ups and downs…there is still some ground to make up and people are sort of nervous about what they have seen in Dubai,” said Abdullah.

The Gulf saw a modest revival in sukuk issuances in the last quarter of 2010 but market experts fear it could be a fragile recovery with investors fearful of any more bad news. [ID:nLDE69618P]

Sukuk issuance has also been hurt by a debate about the compliance of some of its structures with Islamic law. Sukuk are structured around underlying assets, from which returns to bondholders are derived.

Estimates of sukuk issuance can vary significantly depending on the methodology applied.

Experts polled by Reuters in October estimated that sukuk issuance will likely be less than $25 billion as Gulf debt restructurings and state deficit constraints dampen borrowing.

Source: http://sg.news.yahoo.com/rtrs/20110111/tbs-sp-islamicfinance-sukuk-7318940.html