The sukuk, guaranteed by the government, will be used to refinance an existing 30-year BD 100 million ($263 million) conventional bond issued in 1999. ‘The primary aim is the development of the market in Islamic instruments,’ says a BMA official. ‘This will be the second of our sukuks to be marketed internationally and Citi was chosen for its global reach.’ The seventh issue was arranged by the local Liquidity Management Centre(LMC), which was also selected to arrange the $200 million Lebanese sukuk being used by the government to fulfil its Paris II donors’ conference commitment and due to be signed by the end of October. Previous issues were marketed by the BMA in-house.

The BMA is at the forefront of efforts to develop a market in short to medium-term Islamic instruments in order to ease the liquidity management problems faced by the Islamic banking community (see Cover Story). The number of instruments available is increasing rapidly, with recent issuers including the Islamic Development Bank and Qatar. ‘Demand will continue to far outstrip supply for some time to come,’ says a local Islamic banker. ‘It is this that has so far prohibited the development of the secondary market that the BMA and Islamic bankers wish to see.’