Thursday, January 20, 2022
Editor's PickDigital Sukuk gaining increasing mainstream attention

Digital Sukuk gaining increasing mainstream attention

A fintech start-up in Saudi Arabia has engaged a Shariah advisor to monitor and certify the Shariah integrity of its automated Sukuk issuance platform, amid increasing mainstream adoption of digital Sukuk which began in Southeast Asia and is now spreading to the Middle East and Africa.

Mudaraba Financial Company (MFC) confirmed Bahrain-based Shariyah Review Bureau to be its partner in ensuring its Mudarabah-based Sukuk issuance platform will be aligned with Islamic principles. The platform is to automate the Sukuk process, streamline the intermediaries and minimize operational costs and third-party charges.

MFC is part of a growing community of digital-first companies capitalizing on technology to ease Islamic capital market deals, a boom which has been fueled by the digital revolution of financial services and catalyzed by the global COVID-19 pandemic.

Fintech companies such as Indonesia’s Blossom Finance, Saudi Arabia’s Wethaq Capital and the UK’s Bedford Row Capital (through its Al Waseelah issuance platform) have offered retail and institutional investors with digital avenues to invest in Sukuk in various modalities.

The Malaysian government issued its first digital Sukuk in 2020 driven by the health crisis, following the pioneering lead of the Indonesian government to sell Sukuk to retail investors through a mobile platform in 2018.

Indonesia took a leaf out of Kenya’s groundbreaking move to offer bonds through its successful m-Pesa platform, a mobile phone-based money transfer and microfinancing service.

“The pandemic amplified the need for digital solutions in every aspect of life. Sukuk issuance picked up during the second half of 2020 as governments took measures to alleviate the hit to the fiscal budgets. We wanted to optimize the issuance, trading and management of this instrument for the Islamic capital market,” explained Mosaed Al Enezy, CEO of MFC. Sukuk issuance from the GCC, Malaysia, Indonesia, Turkey and Pakistan rose 136% quarter-on-quarter to hit US$23.4 billion in the second quarter of 2021, according to Fitch Ratings which tracks issuances with maturities of over 18 months.

Digital Sukuk may be a more permanent reality for the Islamic finance sector as stronger investor appetite as well as a need to refinance and diversify funding sources in the backdrop of a tech boom are expected to drive Sukuk offerings, shoring up keen interest among issuers to turn digital and attracting fintech start-ups to capture such commercial opportunities. Last year, it was learned that the Nigerian government is exploring mobile Sukuk.

LEAVE A REPLY

Please enter your comment!
Please enter your name here