UK Islamic bank looks to issue sukuk bonds

News - Banking

Written by Ray Clancy

Monday, 04 October 2010 11:28

The largest Islamic bank in the UK has set up a capital markets desk to advise on Islamic bond issuance as firms look to attract more investors from Asia and the Middle East.

The Bank of London and the Middle East (BLME) has launched the unit headed by Massoud Janekeh with the aim of winning business from European companies able to pledge assets to issue Islamic bonds, known as sukuk.

‘These clients may be in the property sector or equipment operators. If you owned trains, for example, these could be used for a sale and lease-back,’ Janekeh said.

Sukuk are generally certificates of ownership of either an asset or a project or a business venture.

Janekeh sees the lease and buy back structure, known as Ijara, as the one likely to be most popular and is expecting to close the first deal within a year.

The bank has targeted a number of potential issuers in the UK, ideally for transactions in the region of £50 million.

Before the credit crisis, Islamic finance was touted as a more reliable source of capital for companies because of its use of tangible assets, but the sector suffered a dent in the wake of the Dubai debt crisis.

Britain is viewed as the most advanced Islamic finance centre in Europe, having changed its legislative and tax frameworks to accommodate the tenets of Islamic law. It has hosted sukuk listings for foreign issuers, and last month an English milling machines maker became the first company in Europe to issue sukuk.

‘The development of Islamic capital markets is critical to the growth of global Islamic banking. London’s capital markets offer more depth and diversity that can help to overcome sector issues such as liquidity and risk management,’ said Humphrey Percy, chief executive officer of BLME.

‘As the largest wholesale Islamic bank in Europe, BLME is well positioned to facilitate the issuance and distribution of sukuk, as well as a growing range of innovative Islamic investment products that can help to meet investor demand for a greater choice of alternative and relatively secure investment products,’ he added.