At a gathering in Cairo, international financial experts urged the management of the risks related to sukuk transactions should be guided by science.
The Arab Administrative Development Organization, together with the Albaraka Forum for Islamic Economy and the Egyptian Islamic Finance Association, organized the event, which had the title “The Importance of Strengthening the Role of Sukuks in Sustainable Development: Presentation and Analysis of International Experiences.”
According to the Saudi Press agency, the discussions brought together business executives to examine how a bond following Islamic finance principles may enable investments in industries that are in line with sustainability goals.
It concentrated on the flexible function of sukuk in adjusting to this changing environment.
Participants stressed the importance of offering investors a base of knowledge about sukuk-related investment prospects, market conditions, and company status to aid in decision-making.
Furthermore, they pushed for the creation of a comprehensive plan to educate and improve the credentials of professionals, giving them the necessary expertise, information, and experience relevant to sukuk, spanning law, economics, and financial accounting.
To increase stakeholder confidence, the speakers emphasized the significance of regulatory and legislative frameworks for regulating sukuk issuing and standardizing their transactions.
To expand industrial and green financing projects, participants also emphasized the importance of creating cooperation agreements with organizations that support and oversee sukuk.
The creation of an Islamic financial market that is open, well-regulated, and capable of effectively mobilizing and allocating financial resources was advised to increase investor interest and the client base.
They recommended putting in place a comprehensive and functional legislative and regulatory framework to offer legal protection, including tax advantages on returns from sovereign sukuk.
In September 2023, Moody’s Investors Service reported that the amount of bonds issued in the first half of 2023 that complied with Shariah fell by 28% to USD 66 billion from the USD 92 billion issued in the same period in 2022.
This decline is the result of subdued activity in important nations like Saudi Arabia, Indonesia, and Turkey amid high commodity prices.
“In the GCC (Gulf Cooperation Council) and Southeast Asia, robust commodity prices associated with sustained economic growth have translated into stronger fiscal positions and lower issuance needs,” wrote Moody’s in the research.