WASHINGTON, (AFP) — The International Finance Corp., a wing of the World Bank, said Wednesday it would list its first Islamic bond in the Middle East.
The IFC Hilal Sukuk, a greenback-denominated 100 million dollar issue with a five-year maturity, will be listed with the Nasdaq Dubai and Bahrain stock exchanges, the Washington-based corporation said.
Sukuk is similar to a bond in Western finance but complies with Islamic Shariah law, which forbids charging interest.
“The Sukuk is an innovative way for IFC to create opportunities for Islamic investors who want to make a positive social impact,” said IFC chief executive Lars Thunell.
“It also supports the World Bank Group?s goals to integrate the Arab world into the global economy and offer greater opportunities for its people,” Thunell said.
The IFC is the first non-Islamic financial institution to issue a Sukuk for term funding in the six-nation Gulf Cooperation Council, which comprises Kuwait, Saudi Arabia, United Arab Emirates, Qatar, Oman and Bahrain.
It is also the first Sukuk to be listed and cleared in the Gulf Cooperation Council market only, a statement from the corporation said.
The IFC Sukuk, which has been rated Aaa by global credit rating agency Moody?s, could be listed on both the exchanges next week, a financial source told AFP.
The bond issue will help develop the region?s nascent Sukuk market and encourage other sovereign and corporate issuers to engage with member countries of the Gulf Cooperation Council, the IFC said.
The IFC Sukuk is aimed at supporting a pipeline of Islamic finance projects in key sectors such as health, education and infrastructure.
A separate body will issue the IFC Sukuk and “warehouse” the underlying assets, the IFC said, adding that the syndicate includes HSBC Amanah, Dubai Islamic Bank, Kuwait Finance House Bahrain, and Liquidity Management House.
“We are grateful to the Shariah scholars, our partners at the Dubai and Bahrain exchanges, and the syndicate for guiding us through this complex process, and hope that the model will facilitate the process for other issuers to enter the Sukuk market,” IFC Treasurer Nina Shapiro said.
The Sukuk global asset class has a market value of over 200 billion dollars.
IFC issued its first Islamic bond in 2004. That bond, denominated in the Malaysian Ringgit currency, was a 132 million dollars equivalent three-year “bullet” bond.
The IFC formed an Islamic finance working group last year to develop a more strategic approach to Islamic finance activities.
The working group and expansion of IFC field offices in the Middle East and North Africa region have contributed to a committed portfolio of over 190 million dollars in loans and equity in the region, the IFC said.
The global Islamic finance industry has grown rapidly to an almost one trillion dollar industry, reports have said.
But it makes up less than one per cent of world capital, giving it a huge scope for growth.