Participation banks shy away from Treasury’s revenue-linked bonds (By IFN)

See: http://redmoney.newsweaver.co.uk/fyd8k1e46veh38rwoni3wx?email=true&a=6&p=22857505&t=20986755

TURKEY: The country’s Islamic, or participation, banks have reportedly shied away from the Treasury’s auction of revenue index bonds on concerns that the papers are not Shariah compliant.
The banks’ decision is said to have been fuelled by comments from local Shariah scholar, Professor Hayrettin Karaman, who noted that the structure of revenue-linked bonds does not comply to Shariah as the revenue is based on interest.

Turkey’s Treasury last issued revenue index bonds on the 19th February this year, with a total issuance amount of TRY109.2 million (US$61.3 million). Coupon payments for the instruments are linked to revenue from state-owned enterprises, the Turkish Petroleum Corporation, the State Supply Office, the State Airport Authority; and the Coastal Safety Administration.

As a result of the doubt cast over the revenue-linked bonds, the country’s participation banks, comprising Kuveyt Türk, Albaraka Turk, Türkiye Finans and Bank Asya now reportedly await to invest in Sukuk instead. Turkey, which issued legislative changes in 2011 to allow for tax neutrality measures for Sukuk Ijarah, has yet to issue a sovereign Islamic bond. Kuveyt Türk was the first Turkish issuer to offer a Sukuk in 2010; and was also the first to sell papers under the new Sukuk Ijarah law last year.

Osman Akyüz, the secretary general of the Participation Banks Association of Turkey, is also quoted as saying that the banks are looking to invest in Sukuk by this August. According to the data from the association, as of March this year, three of the country’s participation banks invested in TRY984 million (US$553 million)-worth of revenue index bonds.