BTr eyeing regulatory approval, sale of inaugural sukuk bonds (Business Mirror (Philippines))

The Bureau of the Treasury (BTr) is eyeing the sale of Islamic bonds, more known as sukuk, and has asked the assistance of the investment banking community on how best to structure and execute the planned sale.

This was learned from the First Metro Investment Corp. which was the first to submit a proposal to the Treasury headed at present by Roberto Tan.

Tan, according to FMIC President Roberto Juanchito Dispo, is opening up a new funding avenue for the government via the sale of sukuk bonds.

Dispo said the investment banking community was asked to submit proposals after which Tan has to seek regulatory approval from the Department of Finance, the Bangko Sentral ng Pilipinas and all the way to the Office of the President.

Once the proposals are in, they will do competitive selection and then they will get regulatory approvals, Dispo said.

Sukuk bonds typically get to the market in batches of $200 million to $500 million and are marketed in the Middle East or Malaysia, for example, which is the most active buyer of such bonds.

Dispo said their partnership with Malaysia’s CIMB Group is going to be very strategic, because of CIMB’s experience in Sukuk.

The biggest sukuk market in the world is Malaysia, and CIMB is the most active underwriter for sukuk issuance, he said.

Dispo sees political benefits in the sale of sukuk because such are supported by the Islamic Development Bank (IDB) which is owned by Organization of Islamic Countries (OIC).

For the longest time, it was noted, Philippine government has been trying to become a member of OIC.

There’s political goodwill because when the Philippines finally decides to do a sukuk bond issue they will work very closely with the IDB. CIMB has a very strong relationship with the IDB. IDB may be brought in as part of underwriting consortium, Dispo said.

He added the sukuk market is huge and the Philippines may take advantage of the excess petrodollars among the oil-producing Islamic countries.

First Grade Finance Inc. Managing Director Astro del Castillo sees a big potential for sukuk bonds being an untapped resource and an alternative funding avenue.

We’re open to all forms of investments. I believe it’s substantial to give opportunities for most of the investors. It gives Muslims the avenue to invest their money, he said.

Even the Philippine Stock Exchange is encouraging people to invest in Shariah-compliant stocks. That’s an untapped resource also, del Castillo said.