The Bahrain Monetary Agency (BMA) launched a debut issue of six-month ijara sukuk (Islamic leasing bonds) in August, the first short-dated instrument to be available to Islamic investors.
The BMA has already issued a total of $1.21 billion-worth of medium-dated and long-dated sukuk, and this first BD22.2 million ($59 million) issue means that its yield curve now extends from six months to 10 years. The issue was 222% oversubscribed, and pays 4.06% over Libor.
The BMA plans to issue this short-term paper on a monthly basis, and hopes that it will help develop Islamic banking as well as improve opportunities for commercial banks and pension funds.
The sukuk can be traded, helping local banks to manage short-term local-currency liquidity management. In the future, the BMA plans to allow institutions to use the short-term sukuk as collateral against short-term credit facilities from the BMA.
"In developing this instrument, the BMA's intention was to make available to Islamic financial institutions a greater diversity of investment choices, as enjoyed by their conventional counterparts," says Salman bin Ahmed Al Khalifa, director of banking services at the BMA.