GCC sukuk issuance surges in 2011

Sukuk issues in Gulf hydrocarbon producers nearly tripled in the first nine months of 2011 as their economies continued to recover and the private sector is gaining pace, according to an economist in Saudi Arabia.

From around $7.6 billion in 2009 and $6.1 billion in 2010, funds raised through sukuk in the six-nation Gulf Cooperation Council (GCC) soared to nearly 17bn in the first nine months of 2011, said Jarmo Kotilaine, chief economist at National Commercial Bank (NCB), Saudi Arabia’s largest bank.

In 2011, they accounted for nearly 38 per cent of the total global sukuk issues compared with 22 per cent in 2010 and 28 per cent in 2009, he told a recent conference in Bahrain, according to Saudi newspapers.

His figures showed funds raised through sukuk worldwide leaped from only around $2.8bn in 2001 to $53.2bn in 2010. Even during the tumultuous period of 2008-2009 funds raised from sukuk increased significantly, he added.

“Sukuk are also emerging as a new asset class for investors, since asset-backed/based instruments provide relative capital protection and predictable returns to investors, while In addition, a near-absence of long term financing tools and a growing importance of long term capital projects launched in the region have also increased the attractiveness of sukuk,” he said.

“After a brief setback in 2010, increasing private sector activity is driving the revival in the GCC sukuk market.

According to Kotilaine, corporate issuance of sukuk in the first nine months of 2011 accounted for around 87 per cent ($14.6bn) of total issuance compared to 77 per cent ($4.6bn) of total issue in 2010.

Kotilaine said “strong growth in Islamic banking continues apace,” noting that global Islamic banks’ assets have increased considerably from $145bn in 2002 to $1,033bn in 2010.
 

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