By NNN-KUNA
Kuwait : The Kuwait Finance House (KFH), the country’s leading Islamic banking operator, has announced an initiative to set up a Kuwaiti Dinar 100 million company aimed at the competent development of the financial investment instruments in accordance with the Islamic Sharia, especially Sokouk, an Islamic financial tool. (USD 1 = KD 0.279680)
KFH Director-General Mohammad Sulaiman al Omar said in a press release Wednesday that the initiative would pave the way for the establishment of a market for the dealing of Sokouk issued by world Islamic financial institutions.
The move would strengthen the role of KFH, or Baitak, as a market maker by helping issuance, buying and sale of Sokouk, a tool widely needed in the Islamic finance industry, said the top banker, noting that there is no room for Sokouk holders (companies and individuals) to liquidate and obtain quick cash dividend through a market with a fair assessment.
Total world Sokouk value amounted to USD 24.5 billion, Baitak’s share of which exceeds USD 4 billion, during the first half of 2007, a 75 per cent increase over the year earlier, he said.
He anticipated that a USD 16 billion worth of Sokouk would be placed in the market by the end of 2007.
Gulf Cooperation Council (GCC) financial institutions have issued a total of USD 6.3 billion worth of Sokouk during the first half of 2007 compared to USD 9 billion worth of Sokouk in 2006, he said, anticipating that unpaid value of sovereign and company international Sokouk volume would hit USD 70 billion in mid 2008 and USD 225 billion by the year 2010.
The average Sokouk dealing at present stands at USD 100-200 million a month, with Malaysia representing 36 per cent of the issued Sokouk and 30 per cent for the GCC countries, he said.
He said that the volume of projects to be funded in the Gulf region alone either by the private sector or government during the next 10 years amounts to USD 800 billion. He said that Sokouk may be the most important instrument of financing that can contribute to providing liquidity for these projects and thus contribute to development efforts in the Gulf states.
The Kuwait Finance House (KFH) was established in the State of Kuwait in 1977, as the first bank operating in accordance with the Islamic Sharia. KFH is listed on the Kuwait Stock Exchange (KSE), with a market capitalisation of KD 3.133 billion as of Dec 31 2006. Assets total KD 6.314 billion and deposits amount to KD 3.730 billion, representing 25 per cent of the total deposits in the Kuwaiti market as per the balance sheet of 2006.