It is normal when conventional debt capital bankers interact with Sukuk issuers, but we might end up, unintentionally, introducing new practices that may pose a POTENTIAL Shariah risk. We all know what we call a practice of borrowing at US$95 and repaying at US$100 (after one year). What if an issuer decides to issue Sukuk at a discount (say the price at issue is US$98.77)? Note this is not a Tap.The question is, what would the principal amount be at maturity? There will be no Shariah issue if the principal amount is US$98.77 (at maturity), right? But what if it is not? Say US$100 instead. H...

The International Islamic Trade Finance Corporation (ITFC) and the Islamic Solidarity Fund for Development (ISFD), which are both part of the Islamic Development Bank (IsDB) Group, have signed a USD 150 million agreement for the Trade Finance Support Program using the Mudaraba financial structure, as announced on the 18th of January 2023.  Why it Matters?  The programme is designed to help least developed member countries (LDMCs) that have been impacted by both the COVID-19 pandemic and food security crisis. Additionally, the partnership looks to promote small and medium-si...

Qatar Islamic Bank (QIB) reported a 12.7% increase in net profit for the fiscal year 2022, reaching QAR 4.01 billion (USD 1.1 billion) compared to QAR 3.56 billion (USD 978 million) in 2021, as announced by the entity 16th of January 2023.  Why it Matters?  The State of Qatar had a significant year as it hosted the FIFA World Cup 2022. Despite economic challenges, QIB accomplished several accomplishments during the year such as introducing new and unique offerings for customers and companies, as well as expanding its banking operations. The bank maintained its position as the cou...

Global Sukuk issuance is predicted to increase at a moderate rate in 2023 despite market instability and continue to be an important source of funding in key Islamic finance markets, according to Fitch Ratings on the 11th of January 2023. Why it Matters? Sukuk issuance in key markets decreased by 7.9% in 2022 to USD 244.3 billion due to high oil prices, increasing interest rates, and geopolitical issues. Despite this decrease, Sukuk issuance still surpassed bond issuance in these key markets. Medium-to-long term outlook is positive due to strong demand, refinancing needs and gove...

Indonesia-based PT CIMB Niaga Auto Finance (CNAF) has announced the issuance of Sukuk Wakalah Bi Al-Istitsmar I Year 2023 with a total value of IDR 1 trillion (USD 64 million), as per a prospectus published on the 9th of January 2023.  Why it Matters?  The Sukuk will be offered in two series yet the value and yields that each series offers have not been specified. After deducting the costs associated with emissions, all of the funds raised through this Sukuk sale will be put to use as working capital for Shariah financing business activities for automobiles. Details &...

Prospective new sovereign/corporate issuers (in the emerging and frontier markets) often tumble into unchartered territory with debut Sukuk issuances, especially if that jurisdiction of an issuer has never issued an Islamic debt instrument before. There is no easy crash course that can summarise what these prospective issuers can expect as each jurisdiction has its own unique challenges.Here is a summary of the main common challenges and what prospective new issuers should expect with debut issuances:1) RegulationOn the regulation side, issuers need to be mindful of local and internation...

Saudi Arabia-based ACWA Power has announced plans to raise up to SAR 1.8 billion (USD 480 million) under its SAR 5 billion (USD 1.3 billion) unlisted sukuk issuance programme, according to a bourse filing made on the 10th of January 2023. Why it Matters? The Sukuk was offered via private placement and is meant for institutional and qualified clients, with a minimum investment of SAR 1 million (USD 266,331). The last date for the offering is 21st of February 2023 and the issuance period will be 7 years with a possibility to end it on the fifth year if market conditions allow....

First Abu Dhabi Bank (FAB), the largest lender in the United Arab Emirates (UAE), announced the launch of a five-year, USD 500 million Sukuk. The issue was met with robust demand, leading to it being priced tighter than initially expected on the 9th of January 2023.Why it Matters? The spread on the Sukuk was initially set at 90 basis points (bps) over U.S. Treasuries (UST) at the time of the offering's launch. However, due to the receipt of orders totaling over USD 1.35 billion, the spread was tightened from the final guidance of approximately 95 bps.Details  The joint...

FinTechs, like other financial sector institutions, have to consider and respond to environmental, social and governance (ESG) issues. Although this will reduce their susceptibility to ESG-related losses, it can also provide something for FinTechs to capitalise on. ESG is rising in prominence in the venture capital sector, with Principles for Responsible Investment (PRI) recently releasing a due diligence questionnaire for venture capital limited partnersAsset owners’ focus on how their venture capital investments account for ESG risks is increasingly flowing down to their Fin...