Distinguished Guests, Ladies and Gentlemen,

Assalaamu’alaykum W.R.T. and good morning or good afternoon to all.

1. Alhamdulillah, praise be to Allah the Almighty for with His blessing and guidance, we are able to meet here today. I sincerely wish one day in the near future we can meet again with old friends face-to-face physically. I would like to extend my warm welcome to everyone to this event held in conjunction with the issuance of the IIFM annual publication – The 11th Edition of the IIFM Sukuk Report. The publication of the IIFM Sukuk Report not only shows the commitment by the IIFM workforce to publish a quality and comprehensive report on global sukuk development, but also the determination to provide continuous support to the Islamic finance industry, predominantly in the global Islamic capital market.

2. I am grateful to IIFM for the opportunity to deliver the special address for today’s event. My remarks will inshaAllah highlight three points relating to global market developments on sukuk. Firstly, the technological advancement and digital innovation. The increased use of financial technology promotes more innovation and efficiency by making financial products and services more accessible to investors. From the Islamic capital market perspective, the digital transformation and blockchain application have the potential to scale up the existing mechanism, exploring new market segments, and providing better solutions for fund-raising. Upholding financial inclusiveness, it also democratises access to markets by increasing liquidity, reducing costs, and ensuring fairness and security. Besides that, blockchain and smart contracts help to simplify the structure of sukuk issuance at all its stages, including trading process and settlement period – thus implying digitisation of the sukuk process issuance.

3. As a reflection, sukuk tokenisation represents a major opportunity for the Islamic financial industry. Tokenisation makes it possible to materialise and unitize existing assets from the physical world to the digital world. This could lead to new business models and potentially as a new means to raise investments in the future, especially for small and medium enterprises. Tokenised assets are similar to investment in sukuk where a digital token is created on a blockchain that supports smart contracts to represent interest in the underlying assets, beneficial ownership and constructive possession. Smart contracts also determine how the token can be purchased, traded and sold in a compliant fashion, and since they are blockchain based, the transactions are immutable, traceable and fully transparent. According to Shariyah Review Bureau, a Shariah Advisor licensed by the Central Bank of Bahrain, tokenisation can be structured in a way that is in compliance with the rules of Islamic finance.

4. Secondly, I wish to highlight on one of the biggest trends in the capital market – the environmental, social and governance or known as ESG. The growth for sustainable investments focusing on thematic ESG is indeed increasing, moving from the periphery into the mainstream. The ESG-focused sukuk issuances have demonstrated that by adding a sustainability component to a sukuk offering, the scope of clientele is broadened. Not only it attracts the conventional and Islamic investors, it can also attract the socially responsible investors who seek to diversify their holdings and meet their investment goals for sustainable finance. With respect to the use of proceeds of an issuance, the ESG is very much aligned to Islamic finance principles in terms of advocating positive values such as social responsibility, shared prosperity and sustainable growth.

5. Responding to the burgeoning demand for ESG-focused sukuk, the Securities Commission Malaysia in June 2022 launched the Sustainable and Responsible Investment linked (SRI-linked) Sukuk Framework. The Framework is an extension of the initiatives under the SRI Roadmap that was introduced in 2019 to broaden SRI product offerings. More significantly, this initiative is part of the latest SC Capital Market Masterplan’s priority to facilitate transition finance which supports Malaysia’s commitments and aspirations to transition to a low-carbon and climate-resilient economy. It aims to encourage the issuances of SRI-linked sukuk by corporates in carbon-intensive industries as they transition to better sustainability practices and low-carbon activities. In addition, the Securities Commission Malaysia announced the expansion of the SRI Sukuk and Bond Grant Scheme that will enable eligible SRI-linked sukuk issuers to apply to offset up to 90 percent of the external review costs incurred, subject to a maximum of RM300,000 (USD70,000) per issuance.

Ladies and gentlemen,

6. My final point for today is on the regulatory landscape, where we see regulatory authorities continuing to support sector development with enabling policies and measures. Aside from the previously mentioned SRI-linked Sukuk Framework, let us take a look at some of major regulatory developments in the Sukuk market. Based on the Islamic Finance News analysis in June 2022, the Securities and Exchange Commission of Pakistan and Indonesia’s Otoritas Jasa Keuangan are refining their P2P framework, and the Capital Market Authority of Saudi Arabia released the draft regulatory framework for equity crowdfunding. On the ESG sides, the capital market regulators of Oman and Morocco convened in March 2022 to explore ways of collaboration which included on Islamic green financing. The regulators also held discussions on the economic feasibility of offering green bonds and Sukuk. Meanwhile, the Qatar Financial Centre has developed a sustainable Sukuk and bonds framework based on the International Capital Markets Association’s Green Bond Principles, Social Bond Principles and Sustainable Bond Guidelines. And lastly, the introduction of Shariah Standard 59 relating to the sale of debt by AAOIFI is one of the most significant events in the Sukuk industry timeline to-date.

Ladies and gentlemen,

7. Over the years, Malaysia has been proactive in developing new regulations that integrate Islamic finance, ESG agenda and financial innovations together. As an international centre, Labuan International Business and Financial Centre (or Labuan IBFC) plays a complementary role to the hinterland’s agenda on the development of Islamic finance in Malaysia. In response to market trends, Labuan IBFC has issued the Guidance Note on Issuance of Green, Social and Sustainability Sukuk which offers a suitable environment for sukuk issuance. Labuan IBFC has a comprehensive infrastructure that supports and accords certainty as well as integrity for Shariah-based structures. In 2017, Labuan IBFC licensed its first digital finance related entity and since then, the jurisdiction has licensed crypto currency platforms, fintech funds, digital token issuance and licensed digital securities exchanges using blockchain technology.

8. Pursuing Labuan’s aspiration as Asia’s Islamic Digital Asset Centre or IDAC, the Shariah Supervisory Council of Labuan FSA issued a pronouncement in February this year on the minimum compliance criteria for offering of Labuan Islamic digital-based solutions, in order to highlight the Shariah permissibility for such offerings. Labuan also anticipates to launch the first Shariah-compliant ESG-based digital exchange middle of this month, potentially making it one of the first Islamic digital exchanges in the world. This exchange platform will focus on tokenisation of securities including digital sukuk, allowing for immediate buying & selling of securities through its integrated blockchain technology solution and support from a comprehensive ecosystem. It creates a competitive market environment for Labuan as a fund raising and investment hub in the digital space.

9. On that note, I end my speech by wishing you a fruitful and engaging webinar ahead. Thank you & wabillahitawfik walhidayah wassalam W.R.T.