While Asia and the Gulf remain the two main hubs for sukuk bonds issuance, international players recovering from the global financial crisis and on the prowl for investment have begun experimenting with the financing tool.
Istanbul heads new global hunger for Islamic bond
While Asia and the Gulf remain the two main hubs for sukuk bonds issuance, international players recovering from the global financial crisis and on the prowl for investment have begun experimenting with the financing tool. The most recent entrant to the sukuk market is Turkey, long seen as a prime candidate for the development of Islamic financial products. Its foray into sukuk (a sharia compliant investment tool) was well received, though a sovereign placement could still be a ways off as the Turkish government cautiously adopts Islamic finance legislation.
Sucking up the sukuk
Istanbul-based bank Kuveyt Turk sold $100 million of three-year sukuk in August, the first issuance of an Islamic bond by a Europe-based bank. The sale was oversubscribed 45 percent by investors from the Middle East, Europe and Asia.
"Everyone was expecting a sovereign sukuk from the treasury, but we wanted to pave the way as a bank," Chief Executive Officer Ufuk Uyan said at the launch. Based on this success, Kuveyt Turk is already planning a second placement of $100 million in five-year bonds in 2012.
Secular Turkey has proceeded slowly into the global Islamic finance arena. Its four sharia-compliant banks, including Kuveyt Turk account for just 4 percent of the nation's assets. However, they are growing at more than twice the speed of regular banks in Turkey, expected to total $19.5 billion in funds at the end of 2010.