The document discusses the global Sukuk market, outlining advantages of Sukuk issuance for both issuers and investors. It notes that Sukuk allow diversification of funding sources and investment portfolios. The document also examines requirements for developing the Sukuk market, such as the need for sovereign and corporate issuers and secondary market liquidity. Finally, it explores future prospects, predicting growth in various types of Sukuk like project finance and mortgage-backed Sukuk as Islamic banks issue more debt. The challenges ahead are developing trading capabilities, selling Sukuk to retail investors, and international repo markets.

1. Global Sukuk Market:
Advantages, Requirements & Future
Prospects
IIFM Islamic Financial Markets Conference
Manama – 16 May 2005

2. Advantages of Sukuk issuance
♦ Diversify funding source
♦ Create and enhance profile in international market
♦ Pricing benchmark
♦ Secondary liquidity
♦ Sizeable financing – yet small enough denominations
♦ Ease of clearing and settlement

3. Advantages for a Sukuk Investor
♦ Diversify Investment
♦ Provides Leveraging Capabilities
♦ Secondary Market Liquidity
♦ Ease of clearing and Settlement
♦ Investment available to Institutional and Retail investors
♦ Allows for many computation of Risk – Credit / Mkt / duration etc

4. Requirements for developing the Sukuk market
♦ Sovereign issuers
♦ Corporates
♦ Rating --- Credit profile -
♦ Maturity profile
♦ Return profiles
♦ Secondary liquidity
♦ Repo market
— Fixed
— Floating
— Lead managers’ commitment
and responsibility
— Issue size
— Finance position
— Yield curve play
— Credit play
— Management of Liquidity

5. Future prospects for Sukuk
We have only begun to tap the surface of the global Sukuk market.
The potential that exists are enormous as along as we maintain
international standards
♦ Islamic banks will become prominent borrowers like their conventional
counterparts
♦ Project finance sukuk
♦ Asset-backed sukuk
♦ Mortgage-backed sukuk
♦ Convertible/exchangeable sukuk
♦ EMTS program
♦ Development of hedging products

6. Future prospects: final remarks
♦ It is clear that the supply side will be quite robust. The challenge for
Islamic financial institutions is to develop the following three
strategic areas:
— Trading capabilities
— Sell-down to private and retail clients
— International repo capabilities

7. Ismail Dadabhoy
Head of Institutional Banking
Noriba Bank (BSC) (c)
Thank you