Role of Sukuk in Development: Policy& Regulatory Perspectives

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Role of Sukuk in DevelopmentPolicy Regulatory
Perspectives

• Wong Sau Ngan
• Senior Counsel
• Finance, Private Sector Infrastructure
• The World Bank
• saunganwong_at_worldbank.org

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The World Bank Groups history as an issuer of
Sukuk is limited

• 2005 RM760 million (US200 million) Sukuk
  arising from debt-based principle of BBA
• 2005 IFC issued RM500 million Sukuk
• 2009 IFC issued US100 million Sukuk for
  listing on Nasdaq Dubai and Bahrain Stock
  Exchange

3
Cost estimate of achieving Millennium
Development Goals by 2015 would require

• Additional US40 to US60 billion a year, in
  addition
• to current resources already committed

4
Sukuk can be a promising alternative for issuers

• Access to additional capital absorb under
  utilized Islamic capital
• May fit national Islamic finance agenda
• Requires minimal regulatory reform

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and can be attractive for investors

• Access to unique markets (e.g OIC-based
  investors)
• Consistent with investment mandate for
  Shariah-compliant investments
• Support South-to-South capital flows

6
Sukuk can be an effective financing instrument
for development

• Promotes risk sharing among users providers of
  capital thereby ensures wider distribution of
  risks
• Allows for close monitoring by intermediaries
  investors to ensure success of underlying
  projects

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Challenge lies in developing the Sukuk market
into a liquid robust market
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Challenge lies in developing the Sukuk market
into a liquid robust market contd.
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Islamic finance need to explore more innovative
ways of mobilizing development resources

• An example is the Intl Financing Facility
  for Immunization (IFFNm) established in 2006 as
  supranational entity that
• Receives long term pledges from sovereign donors
• Issue bonds to investors
• Proceeds used to fund immunization
• Repayment by drawing down on long term pledges

10
Second generation of Islamic financial products
with reimagining restructuring?
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Thank you