Jordan issues local currency sukuk in boon for banks
DUBAI: Jordan’s government has raised 34 million dinars ($47.9 million) in its first issue of a local currency sukuk for its own funding purposes, a deal that will benefit the country’s Islamic banks, the government said yesterday. The Islamic bonds, which use a common sale and lease-back format known as ijara, have a tenor of five years and an expected profit rate of 3.01 percent.
Jordanian finance minister Omar Malhas said the issue, which was more than three times subscribed, priced inside the country’s conventional bond curve - a sign of strong demand.
“The sovereign issuance is of great significance for the kingdom’s four fullfledged Islamic banks, because it will give them a badly needed tool to manage their excess liquidity, estimated to be 1.4 billion dinars,” he said in a statement. The issue was conducted with help from the Islamic Corporation for the Development of the Private Sector, an affiliate of the Jeddah-based Islamic Development Bank, which said Jordan would now be able to conduct more sukuk sales on its own using the same documentation.
Jordan has a small but growing Islamic finance industry. In 2011, the local company Al-Rajhi Cement issued 85 million dinars of seven-year sukuk, the first Islamic bonds in the country. In May this year, the central bank said it had auctioned its first sukuk, a five-year, 75 million dinar deal to help finance purchases by state utility firm National Electric Power Company. —Reuters