13 Jan 2018 - 0:00
Qatar’s QR25bn worth sukuk to mature soon
By Satish Kanady / The Peninsula
DOHA: Almost half of Qatar’s outstanding sukuk, worth of over QR25bn, will mature in 2018. This accounts for 44 percent of the value of sukuk outstanding at the end of 2016.
With the ongoing growth of Shariah-compliant institutions, new issuances are vital in helping them invest excess funds in a way that generates income. If no sukuk are issued in the country to replace the maturing ones, Shariah-compliant investors might look to other sukuk investments outside Qatar, a joint market study by the Qatar Financial Centre (QFC), Thomson Reuters and Islamic Research and Training Institute (IRTI) has revealed.
There are also chances of new investors from Europe and Asia, who are likely to indifferent to Shariah-compliance of their investment holdings of shifting their investments to bonds or other asset classes in Qatar once their sukuk investments mature, to retain exposure to the Qatari market.
According to the research note, retail sukuk remains an untapped segment in most of the countries in GCC. Qatar can capitalise on selling sukuk to the retail market to promote both the primary and secondary capital market. Issuers can find favourable conditions when issuing sukuk to the retail market, as they are able to find slightly cheaper pricing, with interest rates offered to the retail segment potentially lower than what institutional investors demand. Competitive pricing for retail sukuk is the result of limited investment options available to retail in Islamic financial markets, other than savings accounts and fixed deposits.
On the corporate Sukuk issuance, the document noted, financial institutions have been leading corporate issuance in the GCCIn Qatar, Ezdan Holding Group is the only corporation outside financial institutions to issue sukuk. Ezdan’s Sukuk is considered a key development in the industry, and it is expected to lead the way for other corporations in the country to use Sukuk to finance their operations. The Ezdan Sukuk was oversubscribed by 1.76 times, indicating high demand for Qatari corporate issuances. Notably, 21 percent of new investors came from Europe, 11 percent from Asia, and the remaining from the Middle East.
Ijarah continues to be the most popular sukuk structure in Qatar. An estimated 87 percent of Qatar sukuk are issued using this structure. Investors prefer this structure because they are highly tradable, compared to other structures like murabahah.
However, Qatari corporate sukuk have all been issued based on wakalah structure, which is favoured by Islamic financial institutions for issuing Tier-1 sukuk. Wakalah has been gaining popularity in the recent years.