News & Events

Turning the Tide as Governments Seek Alternative Fundraising

The sovereign Sukuk space has seen strong and sustained momentum by some of the largest issuers as well as a number of debut issuers over the past year. Fitch’s recent data, for instance, showed that Sukuk issuance in key markets reached an eight-year high in the first quarter of 2016, with new issuance in the GCC, Malaysia, Indonesia, Turkey, Singapore and Pakistan up 21% year-on-year to reach US$11.1 billion. Danial Idraki recaps some of the notable sovereign issuances over the last 12 months, and plans by a number of governments for further issuance.

Key issuances

Jordan became the latest country to issue sovereign Sukuk when the Central Bank of Jordan successfully auctioned a five-year JOD75 million (US$105.68 million) issuance with a profit rate of 3.5% recently. The Central Bank said that it will use the proceeds to cover the purchases of the National Electricity Power Company. The issuance received bids totalling JOD205 million (US$288.85 million), with a coverage ratio of 2.73 times.

The government of Iran sold the first batch of its Sukuk Ijarah on the Iran Fara Bourse (IFB) in April this year. It was the first time that the Iranian government used the Ijarah structure for its financing needs, having previously used a Sukuk Musharakah structure for fundraising. About IRR5 trillion (US$165.6 million) - worth of the Sukuk were sold in less than a second on the IFB’s system due to high demand. Furthermore, the Ministry of Economic Affairs and Finance of Iran said that it is planning to issue Manfaat Sukuk utilising governmental and nongovernmental financial resources and revenues.

Indonesia in late March 2016 issued its first-ever dual-tranche US dollar Wakalah-structured Islamic papers worth US$2.5 billion: a US$750 million five-year facility and a US$1.75 billion 10-year facility, priced at profit rates of 3.4% and 4.55% respectively. The issuance makes it the largest Asian US dollar transaction.

Total sovereign Sukuk issuance in Indonesia reached IDR503 trillion (US$36.44 billion) with total outstanding amounting to IDR380 trillion (US$27.53 billion), as of the 10th May. Indonesia’s US dollar Sukuk offering totalled US$10.15 billion since 2009, with total outstanding at US$9.5 billion. In terms of retail Sukuk, eight series have been issued, with total issuance size increasing from IDR5.5 trillion (US$398.49 million) in 2008 to IDR31.5 trillion (US$2.28 billion) in 2016, and total investors up from 14,295 individuals in 2008 to 48,444 in 2016.

Malaysia’s dual-tranche sovereign global Sukuk facility worth up to US$1.5 billion was issued in April this year. Based on the Wakalah structure, the Sukuk was split between a US$1 billion 10-year tranche and a US$500 million 30-year tranche at a rate of 3.18% and 4.08% respectively. The issuance was oversubscribed by 4.2 times with over US$6.3 billion orders from more than 195 accounts. Malaysia’s latest issuance is the Southeast Asian nation’s fifth global Sukuk after issuances in 2002, 2010, 2011 and 2015.

Furthermore, RAM Ratings noted that Malaysia’s Sukuk issuance increased 50.5% to RM22.8 billion (US$5.58 billion) in the first two months of 2016, compared with RM15.1 billion (US$3.7 billion) for the same period last year, which contributed significantly to global Sukuk issuance figures for the period.

Bank Maybank Syariah was also reported to be preparing Shariah hedging products and is looking at offering them this year. The bank’s US dollar portion financing makes up around 30-40% of total financing, according to the bank’s head of product development and strategy, Habibullah, as quoted by

Oman successfully auctioned its debut OMR250 million (US$650 million) five-year sovereign Sukuk in the final quarter of 2015, with a profit rate of 3.5%. The government had to expand the program by 25% from its initial issuance size due to a strong order-book with OMR336 million (US$873.18 million) in firm orders.

Ivory Coast made its debut with a Sukuk issuance worth CFA150 billion (US$256.26 million) in December 2015. With a profit rate of 5.75%, proceeds from the five-year Sukuk will be utilised to finance the government’s social and economic projects.

Potential issuers

Nigeria may be looking to issue its first sovereign Sukuk in the second half of this year, according to a local news report. The Securities and Exchange Commission (SEC) and the Debt Management Office have already set up a government committee in February to work out modalities for the Sukuk facility, which is still pending approval from the SEC at the moment.

Kuwait is planning to issue KWD2 billion (US$6.62 billion)-worth of debt comprising Sukuk and bonds to help plug a budget deficit driven by low oil prices, reported Al Arabiya.

The Maldives is planning a sovereign dollar-denominated Sukuk expected to be issued within the next year, Finance Minister Abdulla Jihad revealed to IFN recently. The issuance is part of the Republic’s National Economic Transformation Program and ambition to become the regional hub for Islamic finance in South Asia.

Germany may be considering a debut sovereign Sukuk with a potential value of up to US$1 billion, a spokesperson from the Federal Financial Supervisory Authority told IFN recently. The matter is currently under discussion and a potential issuance could be expected as early as the end of this year.


Fitch expects Sukuk issuance to remain relatively strong in the second quarter, based on the pipeline of deals and potential for governments to issue on the back of weakening oil revenues. Hong Kong, Qatar, Afghanistan, Kazakhstan, Tunisia and Egypt are some of the countries that have indicated their interest in issuing sovereign Sukuk. With more countries creating legal frameworks to support Sukuk issuance, the market can expect some interesting activities in the second half of 2016.


This article first appeared in Islamic Finance News (25 May 2016, Volume 13, Issue 21, Page 15). For more information, please visit the website at