Has sukuk missed the boat?

February 18, 2010

Boat leaving jettyThe Islamic finance industry waited in vain for a sukuk issue from a Western sovereign in 2009. Will 2010 be any different?

Gilles Saint Marc, a member of the Islamic Committee at trade body Paris Europlace, said on Wednesday at the Reuters Islamic Banking and Finance Summit that there had to be some sukuk issuance in France in 2010 if it was to retain its reputation as being at the forefront of Islamic finance.

However, David Testa, former CEO of Gatehouse Bank, a sharia wholesale bank in the City of London, was sceptical any Western sovereign issuance would be forthcoming.

“I do see some UK corporate sukuk issuance this year – there are deals ongoing, and some of those names would be sellable in the Gulf,” he said at the Summit on Thursday.

But with the UK facing a general election this year, he expected the government to fight shy of anything that could allow certain right-wing tabloids to whip themselves into a frenzy.

And although corporates have been actively seeking funding in the bond markets for the past 18 months, he pointed out that the Islamic finance industry was not exactly ready to support them.

Banks still provide a large portion of the underwriting of any bond issue, and the local banks in the Gulf have been told to look to their own. “International deals are off the agenda,” he said. “It is not so much a case of them missing the boat as the jetty not even being finished.”

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