DIFC template for sukuk, Islamic banks in Africa

I am disappointed that it has taken this long, but the DIFC seems poised to provide a standardized template for sukuk based on the recent IFC sukuk. The work has been labeled the "Dubai docs" in reference to the role that the DIFC is playing in providing a standardized set of sukuk documents. Until now, each sukuk has been structured individually and there is no set of documents that creates a standardized offering document so the costs, estimated at $250,000, is borne by each issuer having to build an offering document without a standard reference contract. In other countries like Pakistan, the Central Bank offers standardized contracts for basic products like murabaha and the IIFM has issued a standardized murabaha contract, as well as one for derivatives (tahawwut) with the International Swaps and Derivatives Association (ISDA). I think this will be something that spurs similar documents elsewhere in the world that will reduce the cost of sukuk issuance and encourage new issuers who would have otherwise been deterred by the cost to enter the market. This will, in particular, bring smaller issuers into the market to provide a source for a sukuk yield curve that does not just include sovereign issuers nad high-grade corporate issuers. The more the sukuk market can develop and provide a separate yield curve for sukuk issuers, the more ti will open the market up to other new issuers. The more sukuk that are issued (and especially the diversity in issuer characteristics) will provide alternative investment opportunities to holders of sukuk, which will help the secondary market develop further.

Islamic banks starting in Sub-Saharan Africa face an image problem that they are only catering to Muslims. The Central Bank of Kenya is working on a framework to issue sukuk to attract capital from the Gulf states. The Central Bank governor gave a speech recently at a conference in Nairobi, Kenya along with other representatives of Islamic banks in Kenya and other parts of Africa. The Standard Bank Group is starting to provide Islamic banking products in Tanzania. In addition, recently National Bank of Commerce launched an Islamic banking service.

Other News

• Sukuk is still a niche market and the Nakheel sukuk resolution will not revive the market. Nakheel's 2010 sukuk maturing next week will not revive the market on its own. This is expected to occur even without a restructuring agreement for Dubai World's debts, which HSBC describes as "very fair".
  
• Standard & Poor's rated an Islamic fund, its first such rating. The fund is offered by European Finance House.
  
• Lebanon is not planning to offer a sovereign sukuk. Luxembourg, however, is considering offering a sovereign sukuk.
  
• Another article presents comments on the need for a systemic stability regulator for the Islamic financial industry.
  
• Al Baraka expects to complete the purchase of a stake in Bank Muamalat by the end of the year.
  
• Hawkamah and the American Bar Association organized a conference in Dubai on Islamic finance at the DIFC.
  
• Indonesia's ministry of finance plans to raise 1 trillion rupiah ($110.8 million) in sukuk on May 11. Several recent sukuk auctions have failed recently with investors demanding a higher yield than the ministry of finance is willing to pay.
  
• Several sukuk, including two Nakheel sukuk, have been suspended from NASDAQ Dubai for failure to file financial statements and annual reports.
  
• Cagamas and Al-Rajhi bank are cooperating to issue a sukuk recognized as being in compliance with Shari'ah globally.
  
• Malaysian firm MTD InfraPerdana issued a MYR100 million ($31.2 million sukuk).