Bahrain’s Elaf Bank eyes SE Asian sukuk market
SE Asian sukuk markets held up better than Gulf.
January 18, 2011 3:50 by Reuters
Bahrain-based Islamic investment bank Elaf Bank plans to arrange Islamic bonds in South East Asia and sees the stagnant Gulf market shifting towards smaller issuers, its chief executive said on Tuesday.
Islamic bond, or sukuk, issuance in the Gulf Arab region fell about 40 percent year-on-year in 2010, according to Thomson Reuters data, with only a handful of mostly government-related issuers coming to the market.
Jamil El-Jaroudi told Reuters in an interview that he expects the sukuk market in the Gulf to be revived by small and medium sized companies that have been starved of financing over the past two years.
“That’s where the market is, if you want to work with the private sector you have to adjust yourself to that range…$30-50 million because that’s what the corporations need,” he said.
He also said he saw potential to establish sukuk funds of about $50 million to finance the small amounts of financing small-sized companies need.
Elaf obtained a banking licence in Malaysia at the end of last year and sees more opportunity for the company in the East.
El-Jaroudi said the bank has won a few mandates to act as financial advisor on sukuk issues in Malaysia and Indonesia, ranging from potential sizes of $50 million to up to $1 billion, which it is looking to bring to the market this year.
Malaysia has the biggest market for sukuk and managed to weather the financial crisis better than Gulf markets.
Indonesia has a less developed fixed-income market but is seen as one of the most important growth markets for Islamic finance due to the size of its Muslim population, which is still underserved by the banking industry.
Elaf Bank was originally established to enable trading on the secondary market for sukuk, setting it apart from Bahrain’s many Islamic investment houses that rushed into real estate and are now struggling to find new business models.
But secondary trading of sukuk has remained very thin due to a small number of issues and the fact that the Gulf Arab region typically hold bonds until maturity.
(Reporting by Frederik Richter; Editing by Shaheen Pasha)