Oman - A sukuk shortage and housing shortage

As Islamic banks and windows enter Oman's housing finance market, they have the opportunity to use the shortage of Omani sukuk to benefit the entire market without creating too much risk for the government.  For example, with a government guarantee, the risk should be covered by the originators through fees in exchange and limits on the eligible mortgages to ensure it can be targeted specifically at the segments of the market where supply is the most lagging of demand.

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Work begins as IILM announces August debut sukuk

With the IILM releasing for the first time the issue size and tenor of its debut sukuk, it becomes more likely that the sukuk will be issued on schedule than with previous deadlines.  However,  once the first issuance is completed, the work will continue for the IILM in order to provide enough supply for primary dealers to effectively support secondary market liquidity.  

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Opposition to Suez development plan circles on potential sukuk structures

Egypt’s government faces new opposition to its plan to develop the lands surrounding the Suez Canal, in part because the projects could use the land to issue sukuk.  Critics say that this would put the lands at risk of being taken by foreign investors in case of a default and the government has not provided sufficient clarity to refute these fears.  What is needed is a simple acknowledgement that any sukuk would be asset-based, which is likely not the message President Mursi wishes to communicate prior to an election.

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Egypt sukuk likely to be asset-based, not asset-backed

Egypt announced plans for sukuk in early 2014 in a recent bond offering document.  The description of how the sukuk would interact with standard clauses limiting secured bond issuance suggests that Egypt will eventually use an asset-based structure in contrast to talk earlier of the Egyptian government leading with an asset-backed issuance.  

Sukuk would provide a long-term source of financing in contrast to the shorter tenor offerings the government has used to finance the growing budget deficit since the revolution.  With an election near, it is unlikely this will change soon, but after the election the government will face pressure from investors to finalize an agreement with the IMF if it hopes to tap the longer-term markets with a sukuk.

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