Rizwan Kanji Quoted on Sukuk Markets, ESG

For its article “Outlook 2022: Global sukuk issuance may soften but ESG provides bright spot,” Salaam Gateway quoted Akin Gump partner Rizwan Kanji on various aspects of the sukuk market. “Sukuk” refers to Sharia-compliant certificates.

On the topic of Sharia-compliant ESG products, Kanji said that increasing demand benefits the issuer regarding sukuk pricing: “The cost of funding will play a significant role in the issuer’s thought process while considering issuance of sukuk. Similarly with macroeconomic considerations in mind, issuers may also consider bells and whistles to help reduce the cost of funding considerations, such as issuing ESG sukuk.”

The article discusses the Bahrain-based Accounting and Auditing Organisation for Islamic Financial Institutions’ (AAOIFI) Standard 59 on the sale of debt, which, it notes, has been a challenge in the United Arab Emirates (UAE), where the Higher Sharia Authority (HSA) of the central bank has been stricter in enforcing AAOIFI standards on sukuk issuers and Islamic lenders.

Kanji, who works in the firm’s Dubai office, said, “AAOIFI Standard 59, which initially at the beginning of 2021 provided some challenges to structuring of sukuk, has now been by seen significant volume of issuances in compliance with AAOIFI in the second half of 2021.” He added that issuers are saying that they are adapting their programs to account for the changes. He did note that the Standard 59 requirements do pose challenges in attracting new issuers or investors to the market.

In that regard, he said that non-UAE issuers wishing to target investors from the UAE will need to ensure that the Sukuk structure and documents comply with AAOIFI and HSA requirements. Kanji said, “For repeat issuers this may mean that it isn't simply a process of using previously utilised documents but there will be a requirement for some investment of time to ensure that the documents are amended to reflect the AAOIFI and HSA requirements.”