By Batrisyia Jay
Sukuk can play an important role in helping the general public and it is in line with the efforts to promote the financial inclusion idea, said YB Dato’ Ir. Haji Amiruddin Hamzah, Deputy Finance Minister at the second Kuala Lumpur International Sukuk Conference, held at the Securities Commission on 20 September 2018 to September 21 2018.
With the theme ‘The Future of Sukuk – Embracing the Fourth Industrial Revolution’, the potential and future of sukuk amidst the changing capital markets landscape was the focus of the conference that was jointly organised by Amanie Group and Malaysian Rating Corporation Berhad (MARC).
Sukuk and Blockchain
The two-day conference saw local and foreign Shariah, legal and finance experts discuss and deliberate on a wide range of topics related to sukuk. These include practical issues in structuring sukuk as well as the potential for applying blockchain technology to sukuk transactions.
An opening address by Datuk Dr. Mohd Daud Bakar, Founder and Executive Chairman of Amanie Group, marked the opening of the conference, whereas the keynote speech was given by YB Dato’ Ir. Haji Amiruddin Hamzah, Deputy Finance Minister, Ministry of Finance.
“I am personally eager to see how fast the sukuk market can tap into blockchain technology to manage sukuk issuances, covering its complete life cycle; from rating, subscription, trading, and such. I am confident this will become a reality one day,” said Dato’ Amiruddin.
“As we speak, there is already a technology or rather software that can predict the potential default of any issuer based on certain global data, the relevant industry and the issuer’s balance sheet. Not only can this help in managing the risk better, but it can also prescribe the steps to be taken to improve the financial terms and conditions, and what it takes to avoid any risk of default,” he added.
Commenting on the theme of the first session of the day, ‘Sukuk at Heart’, Dato’ Amiruddin said he was intrigued to see how sukuk can be an instrument to help the Malaysian society at large.
“I envisage that in the long run, sukuk should be promoted as a financial instrument, not only to facilitate the fundraising exercise for corporations for their commercial purposes, but also for charitable causes. In line with the whole idea of financial inclusion, sukuk should be implanted directly in the hearts of Malaysians, especially to ensure the well-being of the underprivileged and less fortunate,” said Dato’ Amiruddin.
Tool for Society
The first panel session ‘Sukuk at Heart’ was moderated by Datuk Dr. Mohd Daud Bakar, and had probed into the integration of environmental, social and governance (ESG) aspects in sukuk investment and sukuk’s enormous potential in furthering environmental and social sustainability.
The status of credit ratings in the efficient functioning of the sukuk market was also underlined during the following panel session moderated by MARC’s Ahmad Feizal. The Securities Commission Malaysia’s recent announcement on the liberalisation of its regulatory framework to enhance retail participation in sukuk and bonds had further highlighted the need for a strong disclosure regime augmented by independent credit ratings.
Meanwhile, a presentation on sukuk blockchain had explained how blockchain technology may be harnessed to promote greater investor and issuer participation in sukuk.
The first day of the conference ended with a session discussing a high-profile sukuk default which highlighted the potentially calamitous consequences of differences in the interpretation of Shariah standards and emphasised on the need for a centralised Shariah framework. Self-regulation, although providing flexibility in the early phase of market development, can later become an obstacle to further growth.
Evolution of Sukuk
The second day of the conference had sessions that had explored future approaches to structuring sukuk as well as the potential of Industry 4.0 technologies to revolutionise sukuk, going forward. Innovation has been vital in the growth of sukuk as is apparent in the continued evolution of sukuk structures amidst the ongoing debate regarding asset-backed and asset-based sukuk.
The capability of market players to innovate and introduce new assets and structures that will create tomorrow’s opportunities for sukuk investors wasmet with high expectations and enthusiasm.
MARC’s Chief Executive Officer, Sabrina Kan Wai Sum delivered her closing remarks on the last day on the conference. She summed up the key messages from all the six sessions of the two-day conference. She stated that the sessions had generated a consensus view that growth prospects for the sukuk market remain tremendous.
“The challenge that remains is to overcome impediments to the global sukuk market’s potential growth, in particular the uncertainties arising from legal regimes, differing Shariah interpretations and ambiguity with regard to investors’ rights and remedies in default circumstances,” said Sabrina.
The conference was attended by numerous representatives from policy-makers, regulatory authorities, corporates, financial institutions, fund management firms, law firms and other stakeholders.
In an exclusive interview with Selangor Journal, Datuk Daud said the conference was insightful as it highlighted trending issues and updates in Sukuk markets both local and international.
“It discussed some insightful topics on fintech, blockchain application for Sukuk, new asset type for Sukuk transaction and social impact for new type of Sukuk focussing on sustainable charitable services and actions,” said Datuk Daud.
He also felt that the conference paved the way for a new direction and groundwork for the future Sukuk development. “We have successfully engaged the right topics with the right audience. Participants stayed and interacted with the panellist throughout the one-and-a-half-day event,” he said.
Datuk Daud hopes that participants enjoyed the discussion and gained knowledge as well as new ideas and perspective in Sukuk.
“The conference provides the impetus and drive for more innovative ideas, direction and new hope in achieving stronger growth for the local market. We hope that Malaysia will continue leading the Islamic finance market in the global arena and we hope to see more active Sukuk issuance in the future.”
About Datuk Dr. Mohd Daud Bakar
Datuk Dr. Mohd Daud Bakar is the Founder and Executive Chairman of Amanie Group. One of its flagship companies namely Amanie Advisors, is operating in six cities globally. He currently serves as the Chairman of the Shariah Advisory Council at the Central Bank of Malaysia, the Securities Commission of Malaysia, the Labuan Financial Services Authority, and the First Abu Dhabi Bank.
Datuk Daud is also a Shariah board member of various global financial institutions, including the National Bank of Oman (Oman), Amundi Asset Management (France), Bank of London and Middle East (London), BNP Paribas (Bahrain), and Dow Jones Islamic Market Index (New York) amongst many others.
In the corporate world, he sits as a Board Director at Sime Darby Berhad and is a member of the PNB Investment Committee as well as the third Chair Professor in Islamic Banking and Finance of Yayasan Tun Ismail Mohamed Ali Berdaftar (YTI) PNB at Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia (USIM).
In 2016, he received the “Award of Excellence for Outstanding Contribution for Shariah Leadership & Advisory” at London Sukuk Summit Awards and “Shariah Adviser Award” at The Asset Triple A Islamic Finance Award. In 2014, he received the “Most Outstanding Individual” award by His Majesty, the King of Malaysia, in conjunction with the national-level Prophet Muhammad’s birthday.
His publications include articles in various academic journals and presentations of more than 150 papers in both local and international conferences. His first book entitled “Shariah Minds in Islamic Finance: An Inside Story of A Shariah Scholar” has won the “Islamic Finance Book of the Year 2016” by the Global Islamic Finance Award (GIFA). He has just released a new book on sukuk which is “An Insightful Journey to Emirates Airline Sukuk: Pushing The Boundaries of Islamic Finance” (2017).
His latest publication, ‘Harapan Buat Pakatan Harapan’ was released shortly after the 14th general election and was written in only 17 days.
