Tuesday, 13th October 2020, Manama, Kingdom of Bahrain – The International Islamic Financial Market (IIFM) announced the publication of its Sukuk Al Ijarah Standard Documentation Templates. The suite of standardized documentation consists of Template Prospectus, Sale and Purchase Agreement, Ijarah Agreement, Service Agency Agreement, Purchase Undertaking, Sale and Substitution Undertaking and Declaration of Trust.
The purpose of the Sukuk standard documentation templates is to provide the industry with a standardized set of documents addressing clauses that are challenged and are repetitive during the drafting of the Sukuk prospectus and related issuance documentation, while also standardizing definitions and updating Shari’ah requirements.
The Sukuk issuers, lead arrangers, legal advisors and other related parties will greatly benefit from this suite of standard documents as it will lead to efficiency and cost reduction in drafting of voluminous Sukuk documentation for issuers and offer greater transparency and comfort to investors.
“This IIFM Sukuk Al Ijarah Standards for Asset-Based Sukuk are a culmination of extensive industry assessment, market consultation, working group deliberation and Shari’ah guidance. Going forward IIFM also plans to work with the industry on standardizing Asset-Backed Sukuk documentation as well as other Sukuk structures such as Sukuk Al Mudarabah (Tier 1 and Senior Unsecured) and hybrid Sukuk,” said Khalid Hamad Al-Hamad, Chairman of IIFM.
“Standardization of Sukuk documentation is a complex exercise considering that not all the clauses and information can be put in a standardized form. Hence, the aim of these document templates is to achieve maximum standardization level which will help in the robust development of the Sukuk market,” said Ijlal Ahmed Alvi, Chief Executive of IIFM.
The Standards were launched at a special webinar event organized by IIFM where an international panel of experts representing IIFM, Bank ABC Islamic, Credit Agricole CIB, Standard Chartered Bank, Clifford Chance LLP and DDCAP Limited spoke on the legal, operational, market and Shari’ah aspects of the documentation and their benefit to users as well as the positive impact of the standards in development of the market. The market share and potential of Ijarah Sukuk as well as other fast emerging hybrid structures were also discussed at the event. The panelists view Ijarah as the king of Sukuk, with market needs and innovation, the use of Ijarah structure is now embedded across many Sukuk. In the context of Sukuk and other Islamic financial instruments, the speakers also touched on the impact of regulatory driven Interbank Offered Rate (IBOR) transition to Risk Free Rates and IIFM efforts in organizing an industry level consultation process which will help Islamic standard-setting organizations in particular IIFM, AAOIFI and IFSB to provide guidance and benchmark protocols for the Islamic finance industry.
More than 150 participants from around 115 institutions based in 30 countries attended the webinar launch event. The participants were representatives from financial institutions, multilateral institutions, regulatory bodies, stock exchanges, law firms, accounting & business advisory firms and educational institutions.
Mr. Alvi and Dr. Ahmed Rufai, Head of Shariah Compliance, thanked the esteemed and distinguished members of IIFM Shari’ah Board for their invaluable guidance, continuous support and their commendable efforts in correcting the path of Islamic banking and financial services industry. Thanks were also extended to Clifford Chance LLP for providing exceptional external legal counsel services, working group member institutions for their active involvement in the drafting and feedback exercise. He also acknowledged the financial grants received from The Waqf Fund (Bahrain) and the National Bank of Kuwait (Bahrain) to enable the completion of this project.