Guide to Issuing Sukuk from the DIFC is PublishedPress Release21 Dec 2009 08:02 am
Prepared by Clifford Chance, Amanie Consulting, the DFSA and the DIFC Authority, the guide provides a summary of sukuk structures and information on issuing sukuk in DIFC
The Dubai International Financial Centre Authority today announced the release of the “DIFC Sukuk Guide” - a comprehensive introduction to various sukuk structures, as well as legal and regulatory information on issuing sukuk from the DIFC and listing sukuk on NASDAQ Dubai.
The guide reflects the leading role that DIFC plays in global Islamic finance. Not only is it home to the largest exchange for sukuk by listed value, worth more than US$16 billion, it provides an operating, listing and incorporating environment that is world class, and ideally suited to structured Islamic, and non-Islamic, products.
“Promoting continued growth and development in the dynamic field of Islamic finance is a key priority for DIFC and is the reason behind our continued efforts to enhance the legal, regulatory, operating, listing and human capital infrastructure within DIFC to nurture this sector,” said Abdullah Mohammed Al Awar, CEO of the DIFC Authority.
The guide provides detailed descriptions of more than 10 sukuk structures, information on the history and current status of sukuk globally, an overview regarding the issuing and listing of sukuk in or from DIFC, and regulatory licensing in the district.
Farhan Al Bastaki, Executive Director of Islamic Finance for the DIFC Authority, said that in addition to the supportive infrastructure offered by DIFC, macro-level structural changes will reinforce a regional and global role for DIFC in the field of Islamic finance and other sectors.
“The changing global economic landscape and shift eastward of the economic centre of gravity means DIFC is ideally situated to capture an even larger share of the global sukuk market,” Al Bastaki said. “With this guide, we are providing market participants with a clear understanding of this important sector and the supportive environment for sukuk at DIFC.”
In large part due to DIFC, the United Arab Emirates is the GCC leader in terms of sukuk issuance by value, with a total of US$26.8 billion from 34 issuances between 2000 and 2008 compared with US$4.5 billion from 89 issuances in Bahrain over the same period, according to the guide. The guide notes that although sukuk issuances globally have been affected by the worldwide economic crisis, prospects are positive, citing a Standard & Poor’s analysis indicating that the total amount of sukuk issued or being talked about in the market is estimated to be about US$50 billion.
The leading role of DIFC and NASDAQ Dubai - the international-calibre exchange within DIFC - recently was reflected when the International Finance Corporation issued a landmark US$100 million sukuk on NASDAQ Dubai and the Bahrain Stock Exchange, becoming the first non-Islamic financial institution to issue a sukuk for term funding in the GCC.
Some features of DIFC’s supportive infrastructure include the ability to establish special purpose companies (SPCs) in the district, enabling market participants to act as both the issuer and trustee in sukuk transactions within DIFC.
Qudeer Latif, Partner and Global Head of Islamic Finance at Clifford Chance, said, “Our global perspective and diverse international experience particularly in Islamic Finance makes it clear that the DIFC is emerging as one of the most important global centres of Islamic finance, not only because of the attractive legal and regulatory environment, and the flexibility it offers issuers, but also the unrivalled access to the tremendous liquidity in the wider region, funnelled through its robust and rigorous operating environment.”
Alongside Amanie Consulting and the Dubai Financial Services Authority (DFSA), Clifford Chance, as a pre-eminent law firm in the field of Islamic Finance, played a leading role in developing the guide, drawing on its extensive global experience and its unrivalled scale and depth of legal resources across the Americas, Asia, Europe and the Middle East, and focus on the core areas of capital markets; corporate and M&A; finance and banking; real estate; tax; pensions and employment; litigation and dispute resolution.
The guide explains that sukuk are Shari’ah-compliant alternatives to interest-bearing investment certificates or fixed-income securities that offer Islamic investors a means of subscribing to certificates that represent a right to receive a share of profits generated by an underlying asset base, with added benefit of being tradable on the secondary market.