Prime Minister Inaugurates Legislations Governing Islamic Sukuk Financing on July 24.2014

Under the auspices of the Prime Minister Dr Abdullah Al-Nsor, the Jordan Securities Commission JSC held a ceremony yesterday after it concluded preparing all the required regulations and instructions by the Islamic Sukuk Financing Law No. 30 for the year 2012. The Law shall regulate the dealing in Sukuk as an investment instrument.

In his speech, the PM said “the Islamic Sukuk Financing Law is a feature in the financial and economic history of Jordan. It opens a wide door to invest savings according to Islamic Sukuk financing for the first time. It is integral and fulfils the required terms. Sukuk are effective and conform to our religion and traditions. They provide a new saving channel, allowing every citizen regardless of his income to be a partner and an investor in public and private sectors projects generating income. They bring together savings and investments and conform to the faith, religion and desire of every investor, to know were his capital is invested in and in which project is it directed to”.

The PM indicated “Jordan under its Hashemite leadership is a pioneer in Islamic finance compared to other Arab countries. Jordan is an incubator for innovation seeking sustainable development based on transferring our economy to a knowledge based and productive one. We are currently launching investments by fulfilling their elements and by preparing sound laws. The government sees in Islamic Sukuk Financing Law and its implementation an essential element to motivate the investment environment and make all citizens real partners in the development process and its projects. Furthermore, the government shall use Sukuk to finance its productive projects in particular those based on Public Private Partnership and hopes they shall support economic growth”.

At the end of his speech the PM expressed his gratitude to the JSC and administrators who issued the Islamic Sukuk Financing Law, regulations, and instructions as well as the technical and legal frameworks regulating Sukuk issuance, trading, redemption, monitoring and follow up.

During the ceremony, the Chairman of the Commission HE Mr Mohammed Saleh Hourani stressed in his speech “Sukuk become one of the most important and recent financing means in the world and proved to be a success in absorbing and confronting economic and financial crises. They were the least affected by the last world financial crisis. Jordan realized at an early time, the importance of the Islamic Finance Industry and was the first to establish Islamic banks. The first Islamic bank was licensed in 1978 and the first Muqharada Bonds Law was issued in 1981. Afterwards, the process decelerated until the Islamic Sukuk Financing Law was issued; today we are celebrating its enforcement”.
 
HE Mr Hourani added “financial markets play a vital role in the economies of countries and contribute to the economic development. They are the channel between sectors making savings and having huge surplus and inoperative capital but are not participating in the national economy, and between sectors lacking liquidity to finance different projects and investments. The issuance of Islamic Sukuk at this time in particular is expected to mobilize savings and use them to finance various projects. They will enhance the efficiency of the Amman Stock Exchange, its depth, diversify its instruments and decrease the severity of risks it might face as well as grant it a higher level of stability and trust. Using Sukuk as a long term financial instrument will enhance institutional investment and support sustainable economic growth”.

At the end of his speech HE indicated “despite the negative effects of the Restructuring Process: the human capital flight and the inability to collect or keep them, the Commission, its administration and employees had surpassed these effects by using time properly and competent staff. Various legislations were accomplished. Other projects are on schedule. A strategy and a work plan are being prepared in cooperation with the European Investment Bank, to enhance the monitoring role in the Commission and the investment environment in the market”.  

While Dr Abed Al-Salam Al-Abadi indicated in his speech “the system of legislations governing all aspects of Sukuk is now ready. It represents the significant effort made by the Kingdom and the service provided to the Islamic economy along its other services. The Kingdom was a pioneer in this field; it was the first country to issue a legislation regulating such a type of Sukuk in 1981: the Muqharada Bonds Law. The Islamic Banks Law of 1978 stipulates using Muqharada Bonds in investment. In 1986, I submitted the Jordanian initiative in a specialized paper to the International Islamic Fiqh Academy”.

Dr Al-Abadi pointed out “the world and international financial organizations are open to Sukuk in two essential areas, first: financing macro projects and second: using Sukuk as an instrument for temporary privatization. The Sukuk Financing Contract is now ready; two major by-laws required for its issuance process are issued. They are the Sukuk Contracts By-Law and the Special Purpose Vehicle By-Law”.

At the end of his speech, Dr Al-Abadi expressed his gratitude to the PM, his Cabinet, the JSC and its Chairman for following up the process and achieving it as well as His Majesty for his auspices of the process and for his continuous support of Sukuk on the local and international levels.        

The Commission’s Team Leader of preparing legislations governing the dealing in Sukuk Advisor Miss Malak Ghanem delivered a speech indicating “the Committee prepared all the required regulations and instructions to enforce the Islamic Sukuk Financing Law and observed other countries successful and unsuccessful experiences in this field alike, to avoid areas of weakness and to provoke and direct instructions properly”. The Advisor said “the Islamic Sukuk Financing Law delegated the JSC; as a monitoring entity to regulate and to trade in Islamic Sukuk from issuance to redemption. The Commission realized that its role is not merely confined to that. It educated and spread awareness in Sukuk as a new investment instrument and as a successful method to manage liquidity. Sukuk trading in the securities market will hopefully create new opportunities for financing and mobilizing savings. They will raise the efficiency of the financial market and have an effective role in formulating and managing polices”.

At the end of the ceremony, the PM honoured Team Members who prepared legislations governing the dealing in Sukuk upon the issuance of the Islamic Sukuk Financing Law. The Team Members formed by the Commission consisted of the Commission’s staff: Advisor Miss Malak Ghanem, Mr Walid Alabdullat, Mrs Dima Al-Tahtamouni and Mr Firas Khlaifat, one representative from the General Iftaa’ (Fatwa) Department: Dr Basel Al-Shaer, two representatives from the Central Bank of Jordan: Mr Mahmoud Sbehat and Mr Walid Nasser and one representative from the Companies Control Department: Dr Sami Al-Krabshe.
 
The legislations prepared by the Team consisted of instructions and regulations governing the dealing in Sukuk including their issuance, subscription, listing and trading as well as registration in addition to the Special Purpose Vehicle By-Law and the Principles and Provisions of Registering Legal Advisors and Legal Committees.