The Bahrain Monetary Agency (BMA) successfully launched the debut issue of a short term, tradable Ijara sukuk (Islamic leasing bonds) today. The move aims at developing Islamic banking and enhancing investment opportunities for commercial banks and pension funds.
The issue, which begins on 25th August 2005 and matures on 23rd February 2006, has been oversubscribed by 222%.
The BD-denominated Sukuk Al-Ijara of six-months (182 days) maturity, is the first of its kind in the world.
The short term Ijara sukuk, which is asset backed, will be issued on a monthly basis by the BMA on the last Thursday of each month. Each issue will be worth BD10 million (US$27 million). At close of subscriptions on 23rd August 2005 for the debut issue, tenders worth BD22.2 million (US$59 million) had been received by the BMA.
Each issue will carry a fixed rental return, which will be based on the prevailing six-month LIBOR rate, with the return to be paid on maturity. The return on the debut issue is 4.06%.
Each sukuk issue is available to all Islamic and conventional full commercial banks (FCBs), licensed by the BMA, as well as pension funds in Bahrain. Other interested investors, who are allowed to subscribe through the eligible FCBs, include locally-incorporated insurance firms, Islamic investment banks and individual investors from in and outside Bahrain.
"The sukuk is the first short term, tradable Ijara sukuk for the global Islamic banking industry and we are delighted by the success of the first issue," said Shaikh Salman bin Ahmed Al Khalifa, Director, Banking Services, at the BMA.