Africa Finance Corp (AFC), a pan-African multilateral institution based in Nigeria, is likely to make a debut U.S. dollar sukuk issue by early February. If AFC makes a final decision to go ahead with the proposed debt sale over coming days, the sukuk will be issued in two or three weeks through a private sale. The sukuk would be structured with a murabaha format and use Nasdaq Dubai's platform for murabaha transactions. Mohamed Damak, global head of Islamic finance at S&P Global Ratings, said more sukuk issuance will come from Africa-based issuers over the next few years as borrowers seek to expand their investor bases. Another reason for issuers in Africa is that sometimes sukuk can be cheaper than conventional bonds, especially when it attracts significant interest from the market.
Sukuk issuance growth in the Arabian Gulf is likely to remain subdued this year even as countries in the region need to raise more debt to plug budget deficits. According to the latest research from S&P Global Ratings, the reason lies in the complexity of selling Sharia-compliant bonds. S&P's analyst Mohamed Damak said sales of Islamic bonds fell in 2015 and 2016 in the GCC as the issuance of conventional bonds soared. Globally, the market for sukuk is also expected to remain stable this year at between US$60 billion and $65bn. Despite the recent rebound in oil prices, the GCC will need about $275bn of financing between this year and 2019, of which half is expected to come from bonds and sukuk. Complexity of sukuk issuance is not the only headwind facing Islamic financing. According to S&P, rising interest rates in the US will also dampen appetite for sukuk this year.
According to S&P's latest report, the global sukuk market is expected to remain fairly quiet in 2017, with total issuance reaching around $60bn -$65bn. The relatively subdued sukuk market anticipated for this year is mainly due to reasons related to complexity of sukuk issuance. S&P Global Ratings’ Global Head of Islamic Finance Dr Mohamed Damak said returning issuers, new entrants, and regulatory developments can stimulate issuance activity, but more likely in the medium term. S&P anticipates some GCC countries might take the Islamic finance route alongside a conventional one. Bahrain will most likely remain a prominent player after issuing $3.2bn of sukuk in 2016. Other GCC members will probably tap the market in 2017. The buyers of sukuk are not only in the GCC or Malaysia, but come from a broad range of investors, including conventional financiers in developed markets. More importantly, there is reportedly a large gap between sukuk issuance and demand.
According to Standard & Poor’s (S&P), global sukuk issuance fell short of market expectations last year, although it was higher than in 2015. The sukuk market will remain subdued in 2017, since the issuance process is still quite complex. S&P Global Ratings' Global Head of Islamic Finance Dr. Mohamed Damak said the sukuk market did not play a countercyclical role in core Islamic finance markets in 2016 and a stabilisation of total issuance in 2017 is forecasted at around $60 billion-$65 billion. Standard & Poor’s do not foresee a substantial increase in sukuk issuance in the GCC this year. The rating agency thinks that some member countries might take the Islamic finance route alongside a conventional one. Bahrain will most likely remain a prominent player after issuing $3.2 billion of sukuk in 2016. Other GCC members will probably tap the market in 2017.
S&P Global Ratings believes that the drop in Islamic finance growth is likely to continue in 2017. Nevertheless, it estimates the industry’s total assets will reach $2.1 trillion at year-end 2016. S&P Global Head of Islamic Finance Mohamed Damak said Islamic finance will maintain growth of around 5% in 2017. The oil price environment will weigh negatively on economic growth in the GCC for the next two years. A broader consensus around the need to standardize legal structures and Sharia interpretation could help the industry to progress. Another great help could be the industry’s potential contribution to the United Nation’s sustainable development financing goals.
According to Standard & Poor’s the global sukuk market is expected to undergo correction for the next 6 to 18 months. The total issuance of sukuk fell in the first half of the year by 12.5% in contrast with the booming conventional debt as the oil exporting countries tapped the market to raise funding. The correction in the sukuk space started with Bank Negara Malaysia’s decision last year to stop the issue of short-term sukuk and switch to other instruments for liquidity management for Islamic financial institutions. S&P global head of Islamic finance Mohamed Damak said the positive news for sukuk is that the European Central Bank is opening its liquidity tap and with yields low, that could push investors to look at the sukuk market. He added that the sukuk industry needs more standardisation otherwise volumes will likely remain low.
S&P Global Ratings expects Sukuk issuance will remain muted over the next 6 to 18 months, with total issuance of US$50 bil to US$55 bil in 2016. The ratings agency explained that plummeting oil prices have not boosted sukuk issuance despite some commentators' expectations. Instead, total issuance actually dropped in 2015 compared with the previous year. S&P Global Ratings Global head of Islamic finance Mohamed Damak said while governments affected by the price drop are looking to spending cuts, their financing needs remain significant. At the same time, he believes the European Central Bank's quantitative easing programme and the entrance of a few new issuers to the Sukuk market will continue to support issuance volumes.
According to Standard & Poors recent government initiatives will spur momentum for Turkey’s fast-growing Islamic banking market. Islamic banks in the country have doubled their share of overall banking assets over the past decade to roughly 5% or $42.2 billion at year-end 2015. The annual volume of sukuk issuance in the country increased nearly 20-fold over the same period, growing from $100 million in 2010 to almost $2bn by year-end 2015. Credit analyst Mohamed Damak said Turkish Islamic banks’ market share is expected to double to more than 10% by year-end 2025.
Standard & Poor’s (S&P) a annoncé la nomination de Dr. Mohamed Damak comme responsable mondial de la finance islamique. Il dirigera le secteur de Finance Islamique de S&P mis en place depuis 2007 pour renforcer l’offre de finance islamique. Dans ses nouvelles fonctions, il sera responsable de la croissance du secteur et de la notation en finance islamique chez S&P et de la recherche sur le secteur dans le monde entier. Ses nouvelles fonctions s’ajouteront à ses responsabilités actuelles au sein de l’équipe des services financiers pour la région CEEMEA chez S&P. L’agence de notation a récemment été nommée "meilleure agence de notation islamique" en 2014 par l’Islamic Finance News Awards Service Providers Poll.
Kuveyt Turk Katilim Bankasi AS is planning a second sale of Shariah-compliant debt for 2012. Kuveyt Turk, the Istanbul-based bank owned by Kuwait Finance House KSC, may sell more than $100 million of five-year sukuk. Islamic bond offerings may accelerate in the next 18 months, led by countries new to the market, Mohamed Damak, a Paris-based credit analyst at Standard & Poor’s. Policies to promote assets that follow Islamic law are spreading to Europe from Asia.
Some investment companies in the Gulf will likely find it difficult to pursue their operations without dramatic changes in the wake of the global financial downturn, Standard & Poor's has said in a new report. "The main reasons behind this deterioration, in our opinion, are Gulf investment companies' generally high maturity mismatches they carry in their funding profiles and the ensuing weakened liquidity, weak business profiles, high leverage, and high exposure to real estate for some of them," said Standard & Poor's credit analyst Mohamed Damak. Damak said: "But in the short term, we see some major hurdles for Gulf investment companies to overcome on the potential road to recovery."
PARIS April 6, 2009--Standard & Poor's Ratings Services said today that it lowered its long-term counterparty credit rating on Bahrain-based Arcapita Bank to 'BB' from 'BB+' and kept the rating on CreditWatch with negative implications where it was initially placed on Jan. 28, 2009. At the same time, Standard & Poor's affirmed its 'B' short-term rating on Arcapita.
"The rating action reflects the very weak investment climate, which has challenged Arcapita's business model and has decreased the value of its assets in our view," said Standard & Poor's credit analyst Mohamed Damak. "In this light, we believe Arcapita's leverage indicators have weakened, which has put pressure on its credit profile."
Arcapita has reported that it is implementing a set of measures to reduce its leverage and improve its liquidity position. It has already:
--Raised $300 million through two-year facilities from strategic investors;
--Raised $100 million of capital from a strategic shareholder in the Gulf; and
--Sold and leased-back its head office and a related piece of land in a $400 million transaction.
PARIS, January 14, 2009--Despite a dramatic decline in volumes in 2008, the long-term perspectives for global sukuk issuance are still good, said Standard & Poor's Ratings Services in a report published today "Sukuk Market Declined Sharply In 2008, But Long-Term Prospects Remain Strong."
"The decline in sukuk issuance in 2008 was as a result of global market turmoil, drying up of liquidity, widening of credit spreads, and investors' wait-and-see attitude," said Standard & Poor's credit analyst Mohamed Damak. "Although difficult to measure, part of this decline could also have been due to comments about the Sharia compliance of some sukuk by the Accounting and Auditing Organization for Islamic Financial Institutions.
More than 45% of sukuk issued in 2008 were "ijara" (lease financing), most probably as a direct consequence of the debate about Sharia compliance among some scholars. The value of sukuk issued in 2008 dropped by more than 56% compared with 2007, to $14.9 billion. "We do not expect the market to start reviving before the second half of 2009 or early 2010," added Mr. Damak.