1. Sukuk Market Growth &
Diversification
London Sukuk Summit
June 2012

2. Exponential Growth…
 2007 was the best year
on record until 2011
took over
 The industry was
negatively affected by
the global financial
crisis in 2008/2009
Source: Zawya Sukuk Monitor

3. Key Growth Factors
 Large pools of Muslim wealth and abundant liquidity
 Demand still exceeds supply
 Thriving Islamic funds industry
 Alternative source of funding
 Diverge from risky equity
 Safe haven, asset-backed/based
 Huge financing and refinancing requirements
 Drying up of syndicated loans market
 Adoption of Islamic finance and banking by post Arab Spring regimes
 Eurozone debt crisis pushing investors and borrowers to other regions
 Islamic banks are less connected to problems in Europe
 Islamic banks are relatively liquid compared to their conventional
counterparts

4. Bearish outlook…
 Zawya expects
2012 to be at least
as good as 2011
 Best-case scenario
implies USD126
billion worth of
sukuk could be
sold in 2012
Source: Zawya Sukuk Monitor

5. Despite obstacles…
 Disputes and debates across different Shariah schools (Ex:
GCC versus Malaysia)
 Lack of standardization & harmonization
 High issuance/structuring costs
 Lack of suitable regulatory framework
 Double taxation in some jurisdictions
 Underdeveloped secondary market
 Opposition from political parties in certain jurisdictions
 Supply remains limited

6. Outstanding Sukuk Market
 The current outstanding
global sukuk market is
estimated at USD 214
billion as of May 2012
 South-East Asia
accounts for 70% of the
total with Malaysia alone
USD132 billion (62%)
followed by Indonesia
 Saudi Arabia and UAE
top GCC, followed by
Qatar and Bahrain
Source: Zawya Sukuk Monitor

7. International vs. Domestic
 19% of the current
outstanding sukuk
market is international
 81% of the market is
domestic
 In 2006, sukuk were
almost equally
distributed between
domestic and
international
 International issuance
retreated after the
global financial crisis
 2007 was the best for
internationally sold
sukuk
Source: Zawya Sukuk Monitor

8. Breakdown by Exchange Listing
 London SE is currently
home for the largest
amount of listed sukuk
globally, followed by
Bursa Malaysia,
Nasdaq Dubai,
Labuan, and Saudi’s
Tadawul
 We expect other
exchanges to join the
club such as Qatar
Stock Exchange
 Bursa Malaysia’s efforts
& incentives paid off
Source: Zawya Sukuk Monitor

9. Geographical Expansion
 Number of countries
issuing sukuk almost
doubled from 10 to 19
between 2006 and 2012
 The trend is expected
to continue as more
countries join the club
 Countries from all
continents could
witness sukuk sales
including African,
Australian, Russian
and European states
Source: Zawya Sukuk Monitor

10. Currency Diversification
 It follows naturally that
currencies used to sell
sukuk more than
doubled between 2006
and 2011 from 7 to 17
 As more countries
witness sukuk and
other witness domestic
issuance for the first
time
 Malaysian Ringgit and
US Dollar remain the
most frequent
 First British Pound in
2010, first Jordanian
Dinar and Dim Sum in
2011
Source: Zawya Sukuk Monitor

11. Significant Developments 2011-2012
 Conventional issuers stepping in (South Africa, Goldman
Sachs, Taqa, HSBC ME, Majid Al Futtaim)
 Innovation continues in terms of structures including first
perpetual out of Malaysia by MAS soon, ALIM structure
introduced in 2010, more use of Wakala
 Increased cross-border issuance (GIB, Taqa, NBAD, GIC,
Khazanah)
 Rise of project-finance sukuk
 New countries adjusting their tax and regulation to
facilitate issuance (Egypt, South Africa)

12. Significant Developments 2011-2012
• Saudi Arabia’s GACA USD 4 billion sukuk acts as catalyst
for more issuance out of the Kingdom which sold USD7.8
billion in first 5 months of 2012
• Short term sukuk gains popularity (Indonesia introduces
short-term bills, Saudi Bin Laden, Pakistan’s 6-month
corporate sukuk, IILM plans similar initiative, among
others)
• New sectors, currencies, and markets (Turkey)
• Launching Islamic Interbank Benchmark Rate (IIBR) in
November 2011

13. Conventional retreat in favor of Islamic (MENA)
 Gap reduced between
conventional bonds
and sukuk in the
MENA region partly
due to increased sale
of the latter in the GCC
 Trend could persist
should North African
countries start selling
sukuk
 Egypt, Tunisia, and
Libya showed interest
 Jordan and Palestine
from the Levant as well
 Yemen started in 2011 Source: Zawya Sukuk Monitor,
and resumed in 2012 Zawya Bonds Monitor
after unrest

14. Prepared by:
Adnan Halawi – Team Leader, Fixed Income
Abir Atamech – Sukuk Analyst
Email: sukuk@zawya.com
Website: www.zawya.com/sukuk