Regulators in Jordan have introduced a set of long-awaited rules for the issuance of sukuk, or Islamic bonds, paving the way for both the public and private sectors to tap into growing demand for sharia-compliant investments.
Jordan is one of several Muslim-majority countries keen to develop their domestic Islamic finance sector and the government is studying a proposal to issue a sovereign sukuk, mirroring efforts by Egypt and Tunisia.
In June, both Senegal and Britain issued sukuk, while Luxembourg and Hong Kong have issuance plans.
Jordan’s new rules cover the structuring, issuance and trading of sukuk, according to a statement from its Securities Commission late on Thursday.
The regulator held a seminar last month with banks and underwriters to help them identify potential issuers.
The Kingdom has an established Islamic banking sector but sukuk have been slow to appear. Local company Al-Rajhi Cement has thus far been the only one to issue a sukuk, an 85 million dinar deal in 2011.
Lawmakers passed legislation in 2012 allowing the government to issue sukuk but the sector has been held back by, among other things, legal limitations on the transfer of assets required to underpin such transactions.
In April this year lawmakers cleared away those obstacles by enacting two by-laws that allow sukuk to be issued without a transfer of assets to special purpose vehicles, and specifying the structures that can be used. These include ijara, mudaraba and musharaka, all common Islamic finance formats.
Sukuk would be a welcome investment tool for Jordan’s four Islamic banks: Jordan Islamic Bank, Jordan Dubai Islamic Bank, Islamic International Arab Bank and the local unit of Saudi Arabia’s Al Rajhi Bank.-Reuters
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