MY WORD IS MY BOND
In 2017, Kuwait saw its first sukuk issuance in two decades following regulatory changes back in 2015 aimed at stimulating the sector.
In February of 2017, Kuwaiti petrochemical company EQUATE issued a USD750 million seven-year sukuk as part of a larger USD2 billion program. This deal marked the first sukuk issuance in Kuwait in more than two decades. In 2015, the Capital Market Authority (CMA) provided a regulatory framework that governs bonds and sukuk, which is now set to cater to more bonds in tune with sharia principles.
To date, Malaysia is still the pioneer in the Islamic finance industry, being the first to issue sovereign sukuk in 2002 and still accounting for around two-thirds of global sukuk issuances. As Kuala Lumpur advanced as a center for Islamic finance, sukuk issuances by the government and multinational firms were increasingly denominated in foreign currency, contributing to the internationalization of Islamic finance and creating liquidity in the global Islamic finance market. Kuwait is seeing a similar practice, whereby sukuk in USD has now been issued.
One of Kuwait's primary drivers of Islamic finance, the Kuwait Finance House (KFH), has, unsurprisingly, a reputable presence in Malaysia. The volume of sukuk traded via the bank nearly doubled in 2016, exceeding USD11.4 billion. According to group CEO Mazin Saad Al-Nahedh, the change in oil prices have played a major role in the sudden interest in sukuk. “Most GCC governments are hydrocarbon based and have been affected by oil prices and have had to fill gaps in their fiscal budgets. They have tapped international bond markets for a long time, but they have not been able to attract Islamic funds due to the form of the financing. We are now seeing more diversity in the financing pools and more appetite for Islamic financing. In essence, it is a complementary liquidity product that suits Islamic banks because it has liquidity features and tradability, and because it also suits the investor in the sense that it comes at the right price in relative terms, and accesses a larger audience of participants rather than limiting to purely commercial banks.” He furthermore commented that relative to conventional issuances, the amount of sukuk is still small, and he is currently researching how KFH can diversify the funding sources between Islamic and conventional.
Another global leader in Islamic finance is the Saudi-based Al-Rajhi Bank, the world's largest Islamic bank with assets exceeding USD90 billion. In February of 2017, the Central Bank of Kuwait granted permission for the bank to open a second branch in the country, the second foreign bank to open in the country, and the first sharia-compliant bank to do so. Its Country Manager, Walid Abdelkarim, sees both consumers and investors moving toward a principled model of financing and becoming increasingly attracted to sharia financing services. “It is a sector with assets expected to grow to USD1.8 trillion globally by 2020, partly attributed to the fact that both consumer and investor risk profiles are changing in response to market situations.”
Islamic finance involves ethical banking solutions that interest and attract many customers from around the world today, both Muslim or non-Muslim. Most customers seem attracted to sharia-compliant banking because it is line with their beliefs, but many others value its ethical dimension and the safety that these products guarantee. There is no interest rate, just a profit rate, and at maturity the amount remains the same without accruing any additional charges. It is also asset-based, easing the process of recovery when needed, and there is a limit on over-leveraging of the same asset. Once it is moneyed, there is no way it can be leveraged again.
With the large-scale infrastructural and mega projects on the ambitious development agenda of the government, further sukuk issuances are likely to happen.
In 2016, KNPC's deal for the Clean Fuels Project included an Islamic tranche for the first time, opening the door for potential future deals in Islamic finance, be it in local or foreign currency. The fact that EQUATE's sukuk was oversubscribed by more than seven times shows that there is investor appetite, and it was priced lower than conventional bonds. The fact that sukuk can compete both in terms of form and price has created a valid value proposition for both Muslim and non-Muslim investors, in some instances significantly outweighing conventional bank issuances.
MY WORD IS MY BOND
TABLE OF CONTENTS
Guest Speaker
Dato’ Sri Haji Mohammad Najib bin Tun Haji Abdul Razak, Prime Minister , Malaysia
TBY talks to Dato' Sri Haji Mohammad Najib bin Tun Haji Abdul Razak, Prime Minister of Malaysia, on the growing contribution that Islamic countries are making to the global economy and how Islamic financing can offer new opportunities to industry and academia.
read articleInterview
HE Khaled Nasser Abdullah Al-Roudan, Minister, Commerce and Industry (MoCI)
TBY talks to HE Khaled Nasser Abdullah Al-Roudan, Minister of Commerce and Industry (MoCI), on tools and strategies for diversifying the economy, the role of international players in supporting a wider range of sectors, and the rapidly developing food industry.
read articleInterview
HE Yousef Al-Ebraheem, Advisor , Al-Diwan Al-Amiri
TBY talks to HE Yousef Al-Ebraheem, Economic Advisor to the Al-Diwan Al-Amiri, on the need for a rejuvenation of Kuwait's infrastructure to support an economy that has come a long way and the role education will play in delivering the expertise required by the society.
read articleInterview
Dr. Khaled A. Mahdi, Secretary-General , Supreme Council for Planning & Development (GSSCPD)
TBY talks to Dr. Khaled A. Mahdi, Secretary General of the Supreme Council for Planning & Development (GSSCPD), on the breakdown of Kuwait's long-term economic plan, the KPIs that will benchmark its success, and what Vision 2035 means for the nature of the economy.
read articleInterview
Sheikh Dr. Meshaal Jaber Al Ahmed Al Sabah, Director General, Kuwait Direct Investment Promotion Authority (KDIPA)
TBY talks to Sheikh Dr. Meshaal Jaber Al Ahmed Al Sabah, Director General of the Kuwait Direct Investment Promotion Authority (KDIPA), on launching an investment promotion conference, attracting the right partners for PPP, and expectations for the year ahead.
read articleInterview
HE Dr. Mohammad M. Al-Zuhair, Executive Chairman, Kuwait National Fund for Small and Medium Enterprise Development
TBY talks to HE Dr. Mohammad M. Al-Zuhair, Executive Chairman of the Kuwait National Fund for Small and Medium Enterprise Development, on empowering young Kuwaitis, IT and entrepreneurialism, and the growth of fintech.
read articleFocus: Still all in the family?
Merchant families in Kuwait
Family-owned businesses play a major role in the Kuwaiti economy. However, with many approaching the third generation of management, they are starting to come across unique problems that may pose issues for the greater economy.
read articleInterview
HE Sheikh Abdullah Ahmad Al-Humoud Al-Sabah, Director, Environmental Public Authority (EPA)
TBY talks to HE Sheikh Abdullah Ahmad Al-Humoud Al-Sabah, Director of Environmental Public Authority (EPA), on how oil companies can contribute to Kuwait's vision on sustainability and the various projects that are coming to fruition.
read articleInterview
Dr. Samira S. Omar Asem, Director General, Kuwait Institute for Scientific Research (KISR)
TBY talks to Dr. Samira S. Omar Asem, Director General of the Kuwait Institute for Scientific Research (KISR), on commercializing the green innovations coming from R&D initiatives, the role of collaboration across multiple sectors, and projects that we should expect to see more of in the future.
read articleInterview
Khaled Abdulrazzaq Al Khaled, Vice-Chairman and CEO, Boursa Kuwait Company
TBY talks to Khaled Abdulrazzaq Al Khaled, Vice-Chairman and CEO of Boursa Kuwait Company, on the takeover of the Kuwait Stock Exchange and the role the bourse plays in both the privatization of government entities and as a source of capital for family businesses.
read articleInterview
HE Essam Abdul Mohsen Al-Marzouq, Minister, Oil & Minister of Electricity and Water
TBY talks to HE Essam Abdul Mohsen Al-Marzouq, Minister of Oil & Minister of Electricity and Water, on cooperation with other ministries, the private sector's role in energy, and upcoming regulations.
read articleInterview
Ghalib Shlash Safouq, Assistant Undersecretary for the Construction Projects Sector, Ministry of Public Works
TBY talks to Ghalib Shlash Safouq, Assistant Undersecretary for the Construction Projects Sector at the Ministry of Public Works, on Kuwaiti companies, the country's healthcare facilities, and the role of international companies.
read articleInterview
Khaled K. Al Mashaan, Vice-Chairman & CEO, ALARGAN International Real Estate Company
TBY talks to Khaled K. Al Mashaan, Vice-Chairman & CEO of ALARGAN International Real Estate Company, on drivers of growth, operating throughout the region, and real estate prices in Kuwait.
read articleInterview
Tawfiq Ahmed Bin Sultan, Chairman, Middle East Telecommunications Company (METCO)
TBY talks to Tawfiq Ahmed Bin Sultan, Chairman of the Middle East Telecommunications Company (METCO), on e-government potential, the future of the economy, and the state of technology uptake in Kuwait.
read articleInterview
Sheikh Yousef Abdullah Sabah Al-Nasser Al-Sabah, Director General, Kuwait Ports Authority (KPA)
TBY talks to Sheikh Yousef Abdullah Sabah Al-Nasser Al-Sabah, Director General of Kuwait Ports Authority (KPA), on his operational plans for the near future and turning Kuwait into a regional logistics hub.
read articleInterview
HE Khaled Nasser Abdullah Al-Roudan, Acting Minister, State for Youth Affairs
TBY talks to HE Khaled Nasser Abdullah Al-Roudan, Acting Minister of State for Youth Affairs, on e-platforms and blended learning programs, developing ICT skills, and preparing young people for tomorrow.
read articleInterview
Eng. Ali Hussein Al Youha, Secretary-General, National Council for Culture, Arts and Letters
TBY talks to Eng. Ali Hussein Al Youha, Secretary-General of the National Council for Culture, Arts and Letters, on the activities of the Council and works to preserve and enhance Kuwait's cultural heritage.
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