The London-based ICMA and Bahrain-based IIFM will focus their work on the sukuk (Islamic bonds) market, which has grown to over US$40 billion in just a few years and is increasingly attracting non-Islamic financial institutions and firms.
ICMA and IIFM will collaborate to develop standardised contracts and documentation as well as market practices for sukuk.
The MoU was signed today in London, at the 6th Annual Islamic Finance Summit, being held on 30 & 31 January 2007. The agreement was signed by Mr. Hans-Joerg Rudloff, Chairman of ICMA, and Mr. Ijlal Alvi, Chief Executive Officer of the IIFM.
Present at the signing ceremony were Ed Balls, Member of Parliament and Economic Secretary to the UK Treasury and H.E. Rasheed Mohammed Al Maraj, Governor of the Central Bank of Bahrain.
âThe signing of this MoU between the IIFM and ICMA is a significant step forward in the development of a key segment of the global Islamic financial services industry (IFSI),â said Khalid Hamad, Vice Chairman of the IIFM and Executive Director, Banking Supervision, at the Central Bank of Bahrain (CBB).
Standardisation and uniformity are critical to the further growth and advancement of the IFSI, in general, and to the Islamic capital and money markets, in particular.
âThis MoU will enable the IIFM and ICMA to address critical market issues, through shared expertise and through consultation with industry. I am positive the exchange of ideas will result in much-needed innovative solutions for the long term benefit and growth of the Islamic finance industry,â said Mr. Hamad.
Mr. Alvi said the Islamic finance industry has entered a new phase of dynamism, particularly in the area of product development.
âSukuks were the first Islamic products to be launched in 2000. Since then, sovereign and corporate sukuk in excess of US$47 billion have been issued, and sukuk issuance is expected to surpass the US$150 billion mark by 2010,â he said.
âAs an organisation committed to the promotion and development of the global Islamic capital and money markets, the IIFM is delighted to partner with ICMA in laying a firm foundation for the future growth of the Islamic finance industry, in general, and the sukuk market, in particular.â
RenÃ© Karsenti, Executive President of ICMA, said: âAs in the early days of the international debt market in Europe, the Eurobond market, there is now an immediate need for the formal establishment of best market practice in issuance, trading and regulation of sukuk, to enable the market to develop further.â ICMA has, since the inception of the international capital market in Europe, provided and enforced the self-regulatory framework of rules for best practice in all areas, which has been a key factor in the marketâs successful growth. ICMA has also invested significantly in education via the ICMA Centre at the University of Reading.
âFacilitating the expansion of the fairly new sukuk market now in such an early stage of its development is both an exciting and an important project for our Association and its international membership. We are proud to have been chosen by such an influential organisation as the IIFM as their partner in this enterprise,â said Mr. Karsenti.
Under the terms of the MoU, ICMA and IIFM will develop best practices and common high standards, aimed at underpinning the efficiency and soundness of Islamic financial market activity.
The two institutions will establish a establish a joint working group to develop standardised contracts, standardised language, standard practices for secondary market transactions and standardised practices in trading of sukuk and other Islamic financial instruments.
âWe will be consulting with market players in prioritizing projects as the intention is primarily to focus on market needs. We will utilize IIFMâs market-based approach by including industry players in our working group,â said Mr. Alvi.