Indonesia, France need regulatory/tax changes to see growth in the next couple years in Islamic finance

Badlisyah Abdul Ghani, the CEO of Malaysian bank CIMB Islamic, writes in an opinion piece in the Jakarta Times, "The government's proposed issuing of rupiah and U.S. dollar sukuk are anticipated to provide a good benchmark for the Islamic debt capital market. With this benchmark in place, more corporations will be enticed to issue their own sukuk. To facilitate this, the government needs to develop a corporate sukuk law and the relevant Islamic securities guidelines." In addition he highlights the need to change tax laws to ensure "tax neutrality and transaction cost neutrality vis-a-vis conventional bonds".

Anouar Hassoune of Moody's writes about the future of Islamic finance at CPIfinancial. He discusses Islamic financial institutions and internationalization and consolidation, sukuk and the possibility to see an Islamic bank and a sovereign sukuk issue in France in the next two or three years if developments on the legal and regulatory side continue to progress.

A recent sukuk was issued in Abu Dhabi that securitized the receivables in an installment sale of property. It sounds like this creates a securitized murabaha transaction which appears to me to be difficult since the cash flow from a murabaha transaction does not represent a transfer in ownership of the underlying asset. The transfer of ownership in an asset (i.e. trade) is often the fundamental requirement for a transaction to be Shari'ah-compliant. Instead, from what is being reported, the sukuk will be a mudaraba where the sukuk holders are the rabb ul-mal (provider of capital) and the issuing company is the mudarib responsible for executing the business, in this case by collecting payments on land sales and selling any repossessed land. The profits from this will be shared between the issuer and sukuk holders. A Zawya story describes the methodology of the ratings agencies of the sukuk. IFLR describes the structure as well as why it is preferable to many other types of sukuk.

The continuing financial and economic problems in the West are leading to the growth in interest in Asia including through Shari'ah-compliant funds.

Brunei issued its 18th ijara sukuk of B$45 ($32.25 million) million bringing the total it has issued to B$1.2 billion ($862 million). The oil-rich sultanate does not need to issue any debt, but wants to encourage the growth of Islamic finance.