No two people can disagree over the importance of the step taken by the [Saudi Arabian] Capital Market Authority [CMA] to launch a secondary Sukuk market which will stimulate the public and private financial sector in the issuance of Sukuk bonds. The establishment of this secondary market will transform Saudi Arabia into a major player in this promising market that studies expect will witness unprecedented growth in the near future. The International Monetary Fund [IMF] expects that that by 2010 Sukuk revenue will amount to US $200 billion. The public and private sector will be able to benefit from this revenue rather than seeking investment opportunities outside of Saudi Arabia. According to the McKinsey Competitive Report [issued by the World Islamic Banking Conference], Saudi Arabia is ranked second behind Iran with regards to assets from the Islamic banking industry.
The existence of a secondary Sukuk market is one of the important steps that will enable Riyadh to become one of the most important financial centres of the Islamic banking industry. This is a status that is long overdue and one that Riyadh fully deserves but has failed to achieve due to the previous lack of conviction in the Islamic banking industry on the part of some involved in the Saudi financial sector. This opened the door to some of the capital cities of the neighbouring countries, and even Western and Asian cities, to take over this role. The competition between Riyadh and these capital cities has become more complex, especially since these capital cities have preceded Riyadh in gaining a foothold in this sector. However despite this, Saudi Arabia’s task is not impossible so long as efforts are combined and strategies are developed and plans are implemented to help achieve this objective.
Therefore I believe that the step taken by the CMA to launch a secondary Sukuk market must be supported by all parties interested in putting Riyadh on the map of the Islamic banking industry. If anybody has objections to or observations on this decision – whether these are juristic or technical – they should be brought to the attention of the CMA in a calm and rational manner. There should not be any loss of control or media incitement, as this will only result in the severance of dialogue and the CMA maintaining its decision, something which was proven in previous experiences with governmental bodies. These emotional methods [of objecting to a decision] have not led to any changes, and in fact the opposite has occurred with the governmental upholding its position and refusing to make any of the proposed changes.
For this reason, I urge the religious figures who are concerned with this decision [with regards to a secondary Sukuk market] to sit down with the CMA and discuss the details surrounding this, and whether it would be possible to modify or neutralize this. However only Sharia-compliant Sukuk bonds will be traded in this secondary market, and these Sukuk bonds could not have been issued except without the blessing of God and the CMA efforts that facilitated their issuance. The CMA is also the first Saudi Arabian financial regulatory body that specifically mentions Islamic banking in its charter, specifically in the chapters dealing with Islamic investment.
I believe that the timing of the launch of the secondary Sukuk market will encourage public and private institutes to issue Sukuk bonds which will help push this market forward, especially since trading in this market is limited to initial public offering [IPO], which we well know is within the provision of Islamic Sharia law. We know this because the majority of Saudi Arabian investors refuse to utilize any investment tool that is not compatible with Islamic Sharia law.
My words should not be misunderstood as a call to not distinguish between what is Halal [religiously permissible] and Haram [religiously forbidden] with regards to what is taking place in this market. Rather, I am requesting that the discussions that occur on this issue take place in a calm and rational manner away from slander and rebuke, which is something that has been advocated in the Holy Quran. ‘Invite [all] to the way of thy Lord with wisdom and beautiful preaching; and argue with them in ways that are best and most gracious: for thy Lord knoweth best, who have strayed from His Path, and who receive guidance,’ [Surat an-Nahl: 125]. This was also advocated by the Prophet Mohammed (PBUH) in the Sahih Muslim collection of Hadith [Prophetic traditions]. On the authority of Abu Massoud al-Ansari “A person came to the Messenger of Allah (PBUH) and said ‘I keep away from the morning prayers on account of such and such [a man] because he keeps us so long.’ I never saw the Messenger of God [PBUH] more angry when giving an exhortation than he was that day. He said ‘When any one of you leads the people in prayer, he should be brief for among them are the young and the aged, the weak and the sick.’ It was Prophet Mohammed’s nature to act in this manner [i.e. to speak in a calm, generous, and rational way], and this is something that we should emulate.