Infrastructure financing can spur Islamic bonds

 

MALAYSIA'S sukuk market stands to grow from financing needs required by local off-budget transactions, says Aseambankers chief executive officer Mohammed Rashdan Mohd Yusof.

Rashdan said these off-budget transactions - mainly infrastructure projects dealing with the Penang second bridge, public transportation and water restructuring sectors - all require financing.

"The key is linking the cashflow of the underlying infrastructure with some form of government support, which can be done through Islamic financing to spur the sukuk market," he said.

Rashdan added that this was an opportune time to latch onto the global perception that the sukuk market is safer.

"Investor demand will probably be greater as a result of this perception," he told reporters on the sidelines of the Kuala Lumpur Islamic Finance Forum 2008 yesterday.

The push for Islamic finance can now be even greater with two Malaysians, Tan Sri Dr Zeti Akhtar Aziz (Bank Negara governor) and Dr Jomo Sundaram, appointed as members of a high-level task force set up by the United Nations to examine possible reform of the global financial system including the IMF and World Bank.

On a global scale, Rashdan said, there are still pockets of liquidity in the Gulf nations and there is a need to tap into those funds to increase the market share of sukuk issuances in terms of overall financing.

However, Deutsche Bank (UAE) head of global market Mohd Safri Shahul Hamid expects the slowdown in the global sukuk market to persist through the first half of 2009.