JBIC says credit woes may delay sukuk sale

THE credit crisis seizing global financial markets may force the Japan Bank for International Cooperation (JBIC) to delay its Islamic bond sale, the lender yesterday said.

JBIC plans to sell Islamic bonds to help grow the syariah banking market in Japan, which wants to develop the industry to gain greater exposure to vast reserves of oil earnings in the Gulf.

"It may affect our position," Ryutaro Nishizaki, a JBIC spokesman said by telephone, referring to the impact of the global financial crisis on JBIC's Islamic bonds, or sukuk, issue.

"We are trying to issue the sukuk as soon as possible but we can't say within this year or next year."

He said details on the size, structure and currency of the issue had yet to be finalised although the ringgit and US dollar are possible options.

Syariah requires transactions to involve specific assets, such as property or a commodity. Islamic bond holders are often technically owners of an asset, not lenders.

Some bankers and investors argue that this structure renders Islamic bonds a safer investment than the intricate and opaque financing arrangements that are sometimes offered by conventional lenders. Still, some issuers are shying away from selling sukuk for now, put off by the turmoil in global financial markets.

Kuwait's Abyaar Real Estate Development Co has postponed the sale of Islamic bonds worth up to US$1 billion while Malaysian energy services firm Perisai Petroleum has aborted a programme to sell US$42.99 million of syariah debt.Reuters