High levels of liquidity in Indonesia, Turkey’s current willingness to borrow from all available sources, and the return of Saudi Arabian and Qatari issuers to the capital markets is likely to bolster the growth of the Islamic finance market. Notable tailwinds also include the Central Bank of Indonesia’s decision to issue sukuk as a liquidity management tool, and Turkish borrowers – who are under pressure to rollover external debt – tapping into all available liquidity pools.
Standardisation – the process of streamlining legal documentation and Shari interpretation needed to issue sukuk – will bolster the industry.
“For issuers, inclusive standardization would mean less complexity and time needed to put together their sukuk and tap the market. Ideally, an issuer would be able to take a set of standard legal documents, plug-in its underlying asset, and go to the market. The process should be equivalent from a time, effort, and price perspective to issuing a conventional bond.”