IIFM and ICMA announce progress on joint Islamic finance initiative

This is to facilitate joint preparatory work in the development of potential Islamic capital market (primary and secondary) projects.

The third deliberation session on 18 June 2007, which was held in Bahrain, in conjunction with the IIFM's 2nd International Islamic Financial Market Conference, was a consolidation of the two previous deliberation sessions and covered primary market issuance and secondary market development issues.

The session was opened by Rene Karsenti, Executive President, ICMA and Ijlal A Alvi, Chief Executive Officer, IIFM. The aim of the session was to brief market participants on the joint IIFM-ICMA memorandum of understanding and its benefits to the industry and on the deliberations, findings and recommendations of the previous two sessions.

The briefing on the primary and secondary markets during the special session aimed to identify and integrate market participants into the IIFM-ICMA joint working group process and also to identify issues relating directly to the specific potential projects arising out of the alliance.

Moving forward, the next steps for IIFM and ICMA will be the preparation of two detailed structure papers on:

i)best practice recommendations applicable to sukuk primary issuance (which is similar in approach to ICMA's IPMA Handbook); and
ii)the framework and potential structures for a generally acceptable Islamic Global Master Repurchase ('repo') Agreement.

The sukuk issuance recommendations structure paper would be circulated for written comment, as a basis for subsequent discussions, to market participants involved in the IIFM-ICMA joint working group process; the recommendations would then be submitted for Shari'a review and inputs prior to embarking on a detailed drafting stage, which in itself is expected to further involve market participants and final Shari'a review and inputs.

The repo structure paper will follow the same approach.

"IIFM is pleased that soon the primary and secondary market structure papers will be ready, as this will enable the drafting of these new market tools. This is a clear step towards fulfilling the goals of IIFM's development initiatives towards global market standards,"

said Mr. Alvi, CEO of IIFM.

He further added that "considerable effort is required by the industry to achieve the objectives, and given the global nature it will take time to arrive at the consensus."