MANAMA: The International Islamic Financial Market (IIFM), a Bahrain-based standard-setting body, has published its sukuk al ijara standard documentation templates.
The suite 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 templates is to provide the industry with a standardised set of documents addressing clauses that are challenged and are repetitive during the drafting of the sukuk prospectus and related issuance documentation, while also standardising definitions and updating Sharia requirements.
IIFM chairman Khalid Hamad said going forward IIFM also plans to work with the industry on standardising asset-backed sukuk documentation as well as other structures such as sukuk al mudarabah (tier 1 and senior unsecured) and hybrid sukuk.
Sukuk issuers, lead arrangers, legal advisors and other related parties are expected to benefit from the suite leading to efficiency and cost reduction in drafting of voluminous sukuk documentation for issuers and offer greater transparency and comfort to investors.
“The IIFM sukuk al ijara standards for asset-based sukuk are a culmination of extensive industry assessment, market consultation, working group deliberation and Sharia guidance,” said IIFM chief executive Ijlal Ahmed Alvi.
Development
“Standardisation of Sukuk documentation is a complex exercise considering that not all the clauses and information can be put in a standardised form. Hence, the aim of these document templates is to achieve maximum standardisation level which will help in the robust development of the sukuk market.”
The standards were launched during a webinar where an international panel of experts spoke on the legal, operational, market and Sharia aspects of the documentation.
The panelists view ijara as the king of sukuk, with market needs and innovation, the use of ijara 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 organising an industry level consultation process which will help Islamic standard-setting organisations 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 and business advisory firms and educational institutions.
avinash@gdn.com.bh
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