The International Islamic Financial Market’s new Sukuk Report highlights the importance of hedging documentation (By IFN)

The International Islamic Financial Market’s new Sukuk Report highlights the importance of hedging documentation

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GLOBAL: An increasing affinity by issuers to issue in non-local currency could heighten the risks associated with currency or rate of return mismatches, said a newly-published report by the International Islamic Financial Market (IIFM). Ijlal Alvi, CEO of the IIFM commented: “An interesting trend or innovation in Sukuk issuances also highlighted by this report is Sukuk issuance in non-local currency such as an issuer based in UAE issuing a Sukuk in Malaysian Ringgit and an issuer based in Malaysia issuing a Sukuk in Chinese Yuan, etc. The risk arising from currency or rate of return mismatches can be managed by Islamic hedging documentation and product standards being published by IIFM and ISDA (International Swaps and Derivatives Association) and will provide further confidence to investors in Sukuk.” In the third edition of its Sukuk Report, the standard setting body also provided a detailed study of the international Sukuk market from 2001 to January 2013. According to the report, over US$11 billion worth of Sukuk was issued in January this year, while 2011 and 2012 saw US$92.4 billion and US$137 billion-worth of Sukuk issuances respectively. The growth trend is expected to continue in the coming years, said Ijlal. The report also highlighted the types of Sukuk al Istithmar, or investment Sukuk available in the market, and provided insight into the different Sukuk used across various jurisdictions, as well as published Sukuk case studies for the industry’s reference. The IIFM is a collective effort between the Central Bank of Bahrain, the IDB, the Monetary Authority of Brunei Darussalam, Bank Indonesia, Bank Negara Malaysia and the Central Bank of Sudan. It was incorporated as a neutral and non-profit organization.