ADB mulls multi-billion dollar sukuk

Manama, May 5, 2010

The Asian Development Bank (ADB) is considering launching a medium-term note (MTN) programme worth several billions dollar for Islamic bonds, or sukuk, to finance infrastructure in Asia, an official said on Wednesday.

"If we use such an instrument we're able to tap a wider wealth pool," Jaseem Ahmed, a director of ADB's Southeast Asia Department, told Reuters on the sidelines of a conference in Manama.

"It would be really nice if we could do a large programme, several billion dollars over a number of years," he said.   

Payments to sukuk holders are made from cash-flows generated by underlying assets such as real estate or infrastructure.

The sukuk market in the Gulf region has been dominated by real estate projects and there is a dearth of highly- rated issues such as those by sovereigns or multinational organisations.   

The Islamic Development Bank (IDB), with which the ADB is cooperating on advising countries on building their Islamic finance regulations, has become an important issuer with its multi-billion dollar MTN sukuk programme.

"In Asia, we need at least $300 billion investments every year in infrastructure, in water, roads, communications ... so this is a very exciting development for us," Ahmed said.

Ahmed said the ADB was still studying whether the sukuk programme would be compliant with its charter.
    "The question is whether we need to make any adjustments in light of our charter ... we are now carrying out that evaluation," he said.

"The sooner the better. Can we do it this year? I can't say but I'd be happy if we could," he said when asked when the programme could be launched. - Reuters

Tags: sukuk | Islamic | ADB | Asian Development Bank |