Takaful News - Saudi Arabia: Issuance of Sukuk Helps Takaful

Source: Middle East Insurance Review | Sep 2006

The Saudi Capital Market Authority (CMA) has confirmed that Saudi Arabia is in the process of drafting legislation to facilitate the issuance of sukuk or Islamic bonds, in particular, corporate sukuk. The new regulations are expected to be ready by the end of the year.

The Islamic finance sector in the kingdom, particularly the takaful industry, has seen little activity in the secondary market, which increases the liquidity and market depth.

Factors explaining the lack of activity include a general lack of awareness of the structure of Islamic finance as well as inadequate legal and regulatory frameworks to facilitate the issuance of Islamic financial products.

However, the participation of global banking majors such as HSBC and Citibank in Islamic finance will improve the situation. Another encouraging sign is that companies like Saudi Aramco and SABIC are already issuing sukuk.

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