Sovereign Sukuk Research Articles

Sovereign sukuk issues: opportunities for Europe

In the course of the 2013 Islamic World Forum held in London, the former British Prime Minister David Cameron announced, before an audience of 1800 politicians and businessmen from 115 countries around the world, his government's plans for structuring the first European large sovereign sukuk [Arabic الصكوك]. This announcement was followed, in July 2014, by the first major issuance of sovereign sukuk by a European country. This study analyses the traits of sukuk - Islamic equity certificates - and contains reflections on the state of the European market and on the opportunities that sukuk issues may offer for financing large infrastructure projects or public debt and for multiplying the number of investors desirous of holding public debt issued by European countries in hard currencies.

Konsep dan Aplikasi Sukuk Negara dalam Pembiayaan Defisit APBNdi Indonesia

Increasing government expenditure which is not accompanied by increasing country Income can cause an enhancement State Budget deficit, so far, the government still fond to cover up budget deficit with foreign debt, where foreign debt is never apart from the interest as of the loan. Therefore, alternative way accordance with the principles of shari’ah which can become a source of financing of the state budget deficit need to issued. This research aims to know more in the concept of the sovereign sukuk issuance in state budget financing and to discover position of sovereign sukuk in state budget deficit in Indonesia. this research use literature study. To discuss more in and achieve the goal, attempting to collect data both primary and secondary. The processing of collecting data method of observation which is the first step to see and get the necessary data with how to observethe intensively books and other data source. Then analyzed using the way of thinking of the induction-deductions method to draw a conclusion. In order to analyze which conveyed more depth, continued analysis using descriptive analysis techniques analysis. This research results that sovereign sukuk potential to be developed as an alternativein accordance withthe principles of shari’ah which can become a source of financing the deficit with 3 publishing mechanism, namely Private placement, book building and auction. Position of sovereign sukuk in state budget deficit in 2010- 2014 is not clear because the deficitincrease from IDR 46.8 Trillion to IDR 241.5 Trillion, but in 2014- 2015 budget deficit decrease from IDR 241.5 Trillion to IDR 222.5 Trillion, while the financing of thestate budget deficit sourcefrom the issuance of the sovereign sukuk on2014-2015 experiencing an increase of IDR 265 Trillion to IDR 298 Trillion, that the allocationslook more detailed, transparent and orderly manner . And willreducethe budget deficit.

Does sectorial cause the level of impact of risk on sukuk return? Empirical evidence from Nasdaq Dubai sukuk index

This study attempted to determine the impact of risks on returns of sukuk in different sectorial structures. The different types of risks (market risk, credit risk, operational risk and liquidity risk) are independant variables and the return of sukuk is dependant variable. Data were collected from Nasdaq Dubai HSBC sukuk index of sukuk market period from 2005 to 2015 on a monthly basis and analyzed using descriptive, correlation analysis and multi-regressions analysis. The four regression models explain 70% to 89 % of the variation.While risk exposure on global sukuk return is 88%, risk exposure on sovereign sukuk return is 70%. While risk exposure to corporate sukuk return is 89% risk exposure to financial sukuk return is 73%. The results indicate that a sovereign sukuk return is very less exposed to risk compared with other sectors corporate sukuk and financial sukuk. Therefore, it is possible to conclude that sovereign sukuk return is minimally exposed to risk. It is also found that when compared with finance sector risk is high in the corporate sector. This study recommend to maintain inflation rate at an optimal level and promote secondary markets for sukuk.

Financing government budget deficit as a liquidity risk mitigation tool for Islamic Banks

Purpose– The purpose of the paper is to construct a framework constituting a link between Islamic banks’ excess liquidity and states’ financing needs, in an Islamic way.evel0.Design/methodology/approach– The framework, constituting a linkage between Islamic banks’ funding capacity and governments’ financing needs, is constructed using a money market approach. Later on, the volatility of existing sovereignSukukis compared to corporateSukuk, using generalized autoregressive conditional heteroskedasticity (GARCH) (1, 1) model, to assess the stability of the secondary market for Islamic government securities.Findings– The volatility is weak for theSukukstudied; this means that there is stability of the secondary market forSukuk(sovereign and corporate).Originality/value– This is the first paper that presents a framework dealing directly with Muslim states’ budget deficit and debt. The framework includes Islamic banks, public companies, the central bank, Ministry of Finance and the government.

Sukuk as an Attractive Alternative of Funding and Investment in Tunisia

During the past decade, the Islamic finance industry has witnessed significant developments, particularly in the field of Sukuk (Islamic bonds). Sukuk represent one of the most successful products in Islamic finance. They have attracted the attention of several investors and become increasingly popular in various markets worldwide. They have gained prominence as financial instruments serving both government funding through the issuance of sovereign sukuk and private sector funding through corporate sukuk. This paper starts by providing a brief overview on the sukuk structuring and on the major developments in the flourishing world Islamic capital market. It then investigates the Malaysian sukuk market, with special focus on the key factors contributing to its successful experience. The paper concludes by explaining the ways through which sukuk represent an attractive alternative of funding and investment for Tunisia, taking into account that Tunisia is preparing for its first issuance of sovereign sukuk in the second term of 2013. The promising potential sukuk is also demonstrated through comparing measures taken by the Tunisian and Malaysian governments.

STUDI KEPATUHAN SYARIAH DAN MANFAAT EKONOMI TERHADAP MINAT INVESTOR DALAM PEMBELIAN SUKUK NEGARA

This study aims to: Determine the influence of sharia compliances and economic benefits variables to the investors in the purchase of sovereign sukuk and Determine kind of variables between sharia compliances and economic benefits of the most dominant influence to investor interests in purchasing of sovereign sukuk. This study used a quantitative approach with descriptive methods. Estimates of data using time series regression with OLS models. The findings show that, sharia compliances and economic benefits variables significantly to the investor interest in purchasing sovereign sukuk, but the most influential variable is a variable interest rate. These findings describe the high rate of purchase of sovereign sukuk were more affected speculative variables. Therefore sovereign sukuk should be revised and refined, so the sovereign sukuk issuance in accordance with the purposes and functions which drive the growth and development of the Islamic financial market.

APLIKASI JUAL BELI SBSN (SUKUK NEGARA) SECARA LELANG DI INDONESIA

In financial empowerment, the government needs to improve efficiency in the management of state assets through efforts to diversify sources of financing the national budget. Conventional financing instruments issued by governments are ever Government Securities (SUN). Such instruments are operated based on usury system (riba) that becomes its own expense for the state budget from year to year. Not to mention it is evaluated in terms of the transcendental, SUN based on usury means has violated religious teachings. Therefore, as an alternative effort, the government has elicits other financing instruments, such as through an auction sale (penjualan lelang) of the SBSN (Sovereign Sukuk) which has been published.

Financing Government Budget Deficit as a Liquidity Risk Mitigation Tool for Islamic Banks: A Dynamic Approach

The article deals with the issue of liquidity management for Islamic banks. Based on data extracted form Bankscope, it is shown that Islamic banks suffer from excess liquidity. This liquidity can not be invested using conventional means because of Shari’ah considerations. In the other hand, almost all OIC member countries run with budget deficit and huge amounts of debt. The main contribution of this paper is to introduce a framework constituting a linkage between Islamic banks funding capacity and Governments financing needs; using money market approach. Later on, the volatility of existing sovereign Sukuk is compared to corporate Sukuk, using GARCH (1, 1) model, to assess the stability of the secondary market for Islamic government securities.

Feasibility of the interest-free economic system

Today's advancement of research in the field of contract theory along with debt vs. equity financing have set a new framework for treating the issue of interest charges. Most recently, Islamic financial institutions are increasing rapidly across countries of the Middle-East and North Africa. The Gulf States have created a new platform for sharia-compliant hedge funds that attracted names such as BlackRock and other key global mutual funds. Major US and European law firms and financial institutions have been reacting positively and promptly to take advantage of the liquidity and other investment opportunities in the region. The British government is also edging towards issuing a short-term sovereign sukuk (sharia-compliance bond). France along with other European countries have begun its own strategy aimed at Islamic investors. This paper presents a historical overview of the controversial issue of charging a fixed interest and discusses the feasibility of the new free-interest economic system.

Innovation in the structuring of Islamic sukuk securities

PurposeThe purpose of this paper is to provide an analysis of different sukuk structures from a financial perspective. This examination includes murabahah and ijara‐based sukuk, the former offering a fixed return, and the latter, the most popular form of sukuk, a variable return. The potential for other more novel sukuk structures based on musharakah partnership contracts is also examined, and sukuk pricing issues are explored using alternative benchmarks to London Inter‐bank Offer Rate.Design/methodology/approachFlow charts are used to illustrate the financial transfers and the rights and obligations of sukuk investors as well as the beneficiaries of the funding. Historical data have used to assess whether the payments flows are more stable in the case of sovereign sukuk where the returns are based on gross domestic product (GDP) growth rather than interest.FindingsThe paper finds that special purpose vehicles are a prerequisite for the successful issuance and management of sukuk. The use of GDP‐based pricing benchmarks would have resulted in greater payments stability for sovereign debt in Saudi Arabia, but not for Malaysia.Research limitations/implicationsThe data analysis was restricted to two countries, but this could be extended. Alternative pricing benchmarks were suggested for sovereign sukuk but not for corporate sukuk.Practical implicationsMinistries of Finance and Central Banks of Muslim countries should review their debt financing policies and explore the potential of sovereign sukuk.Originality/valueLittle has been written previously on the use of musharakah partnership contracts for sukuk, and pricing issues have not hitherto been systematically investigated.