Islamic Bonds Issues: The Malaysian Experience

Abstract

The paper is a review of the Malaysian experience in managing the issuance and development of Islamic bonds market. It was observed that Malaysia has begun with the issuance of loan-based Islamic bonds by the Malaysian government followed by the vast and extensive issuance of sale-based Islamic bonds by both government and private corporations. However, most of the Malaysian Islamic bonds issued to date have been based on the principles of Murabahah and Al-Bai’ Bithaman Ajil (BBA) that can hardly obtain the acceptance and confidence of global investors especially from the Middle-East countries. Hence, the issuance of Ijarah-based global sovereign and corporate Islamic bonds (Sukuk) took place in 2002. In general, five key factors have been recognized to develop a more comprehensive Malaysian Islamic bonds market and accelerate the progress of Malaysia’s venture into the international Islamic financial arena.