Secondary Markets in Islamic Finance 123
arrangements) to be amended by regulation, and work with the UK
banking regulator (the Financial Services Authority) and stakeholders to
clarify the regulatory treatment ofsukuk; and
- Continue to examine the feasibility of a sovereignsukukissue, and in the
Finance Bill, 2008, take legal powers to facilitate any future sovereign
issuance, and provide a full response to the recently closed public
consultation onsukukissuance in the summer of 2008.
Conclusion
Shari’a finance is based primarily on equity, whereas conventional finance
is based on debt. The following comments have been made regarding the
growing Islamic finance sector:
Rami Falah, senior relationship manager at BNP Paribas in Bahrain:
"Many banks are flush with liquidity and are desperate for
assets, so they would rather keep them in their portfolio instead
of trading them".
Steve McMillan, chief executive officer at GFI Group in London:
"These banks have committees that decide to invest in those
kinds of bonds and they buy them, put them away, end of story.
So if you actually want to go and buy a bond from that bank, it
has to go back to the committee process and those committees
meet once a month".
Luma Saqqaf, head of Islamic finance at law firm Linklaters in Dubai:
"Tabreed went into the international markets with the hope
that it would see more trading and it hopes there will be. Actually,
it was oversubscribed and Tabreed didn’t want to put out an extra
amount because it wanted to encourage a secondary market.
Maybe in a year or two, there will be enoughsukukout there for
a secondary market".
Recently, post thesukukissues raised by some scholars, there have been
somedeferredissuesandsomeoversubscriptions.TheSaudiBasicIndustries
Corporation $5 billion issue was oversubscribed, and 90 per cent of it was
allocated to Saudi investors, while the 10 per cent balance was allocated to
other Gulf Cooperation Council (GCC) nationals. This means that the
appetite for products is strong and therefore we can expect to see more
issues and hopefully a robust secondary market. The huge infrastructure
and property development projects that require funding andsukukoffer
exceptional Shari’a-compliant means to do just that. Ernst & Young have
