New bonds and sukuk regulation to bolster innovative financing
Sultan bin Salim al Habsi, Chairman of the Financial Services Authority (FSA), has issued a decision setting out the bonds and sukuk regulation, which regulates the long term debt market in the Sultanate of Oman.
The debt market is one of several financing avenues offered by the capital market to support new investments and the existing projects in the private sector.
The regulation offers flexibility in structuring diversified financing products such as Green and Sustainable Bonds and Sukuk and Waqf Sukuk.
It also provides for special types of bonds and sukuk customised to the financing needs of the investor and the issuer of the security.
The new regulations include a chapter on disclosure rules, specifically disclosures related green and sustainable bonds and sukuk as the issuer will be obliged to implement the rules and terms and conditions of such disclosures to enhance the integrity of the capital market and encourage conventional investors and those interested in sustainability issues to invest in such securities.
Commenting on the legislation, Shaikh Abdullah bin Salim al Salmi, Executive President – FSA, said the regulations stem from the strategic plan of the FSA to complete the legislative infrastructure of the capital market after the issuance of the Commercial Companies Law and the Securities Law to bring the Omani market into line with the latest global practices and standards.
He emphasised that the regulation would contribute to designing the debt instruments to be one of the main financing options to provide for appropriate investment environment and, at the same time, allow for additional alternative instruments for local and foreign investors making the capital market a sustainable engine for comprehensive economic development and wealth creation which is consistent with the strategic objects of the Oman Vision 2040, as the issuance of the regulations is related to three strategic objects, the first related to providing resilient and innovative financial instruments, the second issuance of flexible legislations and the third is the sustainable usage and investment of resources and natural wealth.
Al Salmi added that the regulation is resilient enough to encourage innovative and diversified financing products in accordance with the nature of financing needs of projects.
In addition to conventional bonds and sukuk, there are specific rules for issuance of sustainable and green bonds and sukuk to encourage such issuances in the Sultanate of Oman as there are interested investors and promising market for such types of financing, given their importance in financing the earnest steps the country pledged to take to reach net zero carbon emission by 2050.
Such products will enhance green and sustainable financing to achieve economic growth as the creation of such bonds and sukuk is a delivery of the national road map to align the non-banking financing with the requirements of green and sustainable financing approved by the Board of Directors of FSA, he noted.
The regulation incentivises Waqf Sukuk which supports the further development of the Waqf sector, notably in its role in contributing to activating monetary Waqf and development of Waqf institutions, whether civil or charity institutions.
The goal is to expand the base of subscribers and participants in the activity to benefit from such type of assets in the development of the national economy to be able to generate fair returns serving the purpose of the Waqf whether educational or medical or social, and so on.
Bonds and sukuk can be issued in Oman in any convertible currency and the FSA allowed to accept prospectuses addressing private placement to be in English. The regulation comprises 12 chapters including chapters on issuance of bonds and Sukuk, private placement, rights issues and assignment, special purpose companies, financial trusts, sharia compliance, agents of beneficiaries or issuers, disclosure rules, general meetings and a chapter on the rules for issuance of green and sustainable bonds and sukuk.
The regulation is resilient enough to encourage innovative and diversified financing products in accordance with the nature of financing needs of projects
SHAIKH ABDULLAH BIN SALIM AL SALMI FSA Executive President