Aft er proposing its first-ever Sukuk offering in January, Al Rayan successfully closed the largest corporate Sukuk issuance in the UK’s history last month with the Tolkien Funding Sukuk No 1 raising GBP250 million (US$349.18 million) in capital. The Sukuk facility was rated ‘A’ and priced at 0.8% above the LIBOR rate. The bank did have to pay a relatively larger premium in comparison to conventional residential mortgage-back securities (RMBSs).
As an example, the Nationwide Building Society issued an RMBS on the same day for a premium of only 0.37% above the LIBOR. Nevertheless, the successful sale of Al Rayan’s Sukuk is a welcome development for the industry which has been recently overshadowed by the legal dispute between energy company Dana Gas and its Sukukholders since last year, a dispute which is still being contested in the courts.
On the 5th March, the London Stock Exchange hosted a timely Sukuk Summit to discuss ways to facilitate and support the issuance of Sukuk in the UK. With a keynote address from Dr Bandar Hajjar, the president of the IDB, the event brought together thought leaders from across the country.
“We have a real opportunity to recognize the potential of Islamic finance here in the UK,” Dr Bandar said in his address. “Both the UK government and the IDB are actively promoting this objective.” Considering the Jeddah-based IDB has capital of US$33 billion, with an initial funding plan of US$2.5 billion for the first half of 2018, it could definitely help accelerate the growth and development of Islamic finance projects and funding in the UK.
At the same event, the Bank of England also proposed to off er Shariah compliant liquidity tools to a wider range of financial institutions beyond Islamic banks to boost the growth of Islamic financial institutions such as mortgage companies, insurance and leasing firms.
According to Arshadur Rahman, a manager in the Bank of England’s Sterling Markets Division, the central bank is working on a fund-based deposit model. It would be able to help Islamic financial firms meet regulatory requirements for liquid asset buffers.
This article was first published in Islamic Finance news Volume 15 Issue 12 dated the 21st March 2018.