The first sukuk announcement from a company in Oman is on the table with Al Madina Real Estate formally announcing it will issue a 5-year, $130 million in the first quarter of 2013. I offer no opinion about the quality of the sukuk, but the timing of the announcement seems quiet savvy. As I wrote about earlier this week, the new Islamic banks and Islamic windows of conventional banks will likely see an inflow of deposits once they are able to launch.
While loan growth has slowed recently at conventional banks, there will likely still be demand for loans from Islamic banks, as people convert their conventional loans into financing from Islamic banks (not everyone, but some percentage of the population). Yet even this shift will be slower to develop than the shift of deposits from conventional to Islamic banks (it's easier to move a checking or savings account than it is to refinance a loan).
Meanwhile, Islamic banks will have inflows of funds which will sit idle, earning nothing (since there are no plans currently for the government to issue sukuk), while the new depositors will expect to receive a similar return on their savings (not to mention the banks' equity investors). There is also no sign yet that the government will waive the limitation on the foreign assets, thus requiring banks to keep most of their funds within the country, where there are few investment opportunities in the short-term.
And that is the savvy timing from Al Madina with the announced sukuk for its Tilal Development Company. It will sell the sukuk into a market with a vast surplus of investable funds (that can only be invested in Shari'ah-compliant assets) chasing after very limited investment opportunities, desperate for a Shari'ah-compliant asset that generates yield.
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