A growing number of organisations are turning to Islamic Finance, and in particular to sukuk instruments, to raise funds for their infrastructure and development projects, affirms a leading UAE based investment banking expert.
Zahid Aslam, Managing Director of Investment Banking at Dalma Capital Management Limited, says that the firm registered an almost one-third jump in enquiries regarding Sharia-compliant bond issuances from corporations outside of the GCC countries.
This development comes after S&P Global Ratings predicting in January the global issuance of Sharia-compliant foreign and local currency bonds is expected to reach as much as US$115 billion (Dh422.1bn) this year.
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“It is our experience that sukuk-based solutions are establishing themselves as an increasingly attractive alternative for the funding of infrastructure and development projects,” observes Mr. Aslam.
“We are currently working with clients on a variety of ‘off the beaten path’ projects, including a refinery initiative in the CIS region and a scheme to help develop eco-tourism and sustainable farming in several African nations. We are also seeing interest from Malaysia, Indonesia and Pakistan,” Aslam added.
Mr. Aslam suggests that there are five main drivers for this significant upward trend for sukuk-issuance to continue this year and beyond.
He said ”First, lower oil prices – despite recent gains – have created a funding shortfall for many. Second, there is notable and mounting pressure on global liquidity. Third, the U.S. Federal Reserve’s ongoing plans to slowly raise interest rates, making borrowing more expensive. Fourth, global regulation is enhancing and becoming more Islamic finance-friendly. And finally, general awareness outside the GCC of the uses and benefits are becoming ever-more understood and valued. Dalma Capital, being a licensed and regulated asset manager and investment boutique with a network of institutions and accredited partners, provides all the necessary solutions for sukuk issuers and investors.”
Zachary Cefaratti, CEO at Dalma Capital is of the opinion that there is growing evidence that potential borrowers who had never considered Islamic Finance are better understanding the clear benefits of such solutions.
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Mr. Cefaratti said that this is cemented by the fact that deals can be structured to be project based, not centred solely on the credit standing of the borrower. He added that numerous virtuous aspects of the nature of Sukuk will continue to bolster their prevalence in capital markets globally.
Dalma Capital Management Limited is an alternative investment fund accelerator and advisory firm focused on alternative investments and innovative financial products. The company primarily serves institutions, family, offices and corporations – managing their alternative investment products and advising on innovative financial products including Sukuk as well as blockchain-enabled fundraising solutions. Dalma Capital Management has expertise in global capital markets, global edge in Islamic Finance and proficiency in alternative investments.