The Gulf Cooperation Council (GCC) will realize faster growth in the Islamic bonds (sukuk) market and “tap into the massive potential that the segment hold” by adopting regulations and measures such as credit ratings, say analysts. “Sukuk is important when it comes to overall financial market. The region, with its huge capital needs, but [only] a small debt market needs to look into opportunities,” said Kamal Mian, Head of Islamic Finance, Saudi Hollandi Bank. While the GCC holds a significant share of global sukuk market (estimated at $130 billion, Dh477bn) when it comes to volume, regulations and policy guidelines are relatively sparse, especially when compared to Malaysia, according to Moinuddin Malim, Head of Corporate and Investment Banking, Badr-Al-Islami, Mashreq. Malaysia, with its proper regulatory measures and incentives, has managed to create a success story of its sukuk market and “investors from various countries such as Korea and Japan too are going there to issue sukuks”.

“Rating for sukuks in Malaysia is mandatory. Besides, they have created a platform to quote sukuks on a daily basis so people would know the fair value of the instrument,” said Dr. Mohd Daud Bakar, Managing Director, Amanie Islamic Finance Learning Centre. “The government in Malaysia has also incentivised issuances when it comes to the taxation aspect of it,” he added. “From the day of issuance to redemption, everything is clear.” Analysts also point out that credit enhancement structures in bond market can be used for sukuks as well and should be studied.

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