We are delighted to announce the inaugural IFN Saudi Arabia Forum, which will take place in Riyadh on the 12th & 13th November 2012.
This exclusive event in Saudi Arabia’s financial centre will follow our tradition of delivering two, one-day events focusing on the 'Issuer' and 'Investor' markets; and structured around a series of exclusive regulatory country presentations, practitioner-led round-table discussions, non-debatable power presentations, original case studies and sector focused side sessions. Saudi Arabia is a sleeping giant in the world of Islamic finance. With Shariah compliant assets totaling US$92 billion in 2010; making the Kingdom the largest Islamic banking player by fund volume and home to the world’s largest Islamic bank. The world’s largest oil producer and exporter is set to become a global Islamic finance hub with the proper nurturing of its capital markets and heightened secondary market activity.
The Kingdom is currently the largest market in the GCC with an average annual growth of 3.2% forecast between 2011 and 2015 and a booming economy set at 4.2%. For the banking sector alone, Saudi Arabia has the highest global proportion of Islamic banking assets to total banking assets exceeding 20%, as all its banks have Shariah compliant operations; whether fully fledged or in the form of Shariah windows. The Saudi Arabian banking sector currently comprises 22 commercial banks, including 12 local banks and ten branches of Gulf and foreign banks. Out of the 12 local banks, four (Al-Rajhi, Al-Jazira, Al-Bilad and Al Inma Bank) are full-fledged Islamic banks.
With enormous potential in areas such as Real Estate, Private Equity, Infrastructure and Project Financing and Capital Market growth via Sukuk issuances, the Kingdom’s investment outlook for Islamic finance is incredibly positive. Saudi Arabia’s population growth has far outstripped the development of infrastructure in the Kingdom in multiple sectors; be it water, power, transport, ports, soft and social infrastructure such as healthcare and education. From a legal standpoint, compared to the other five GCC members Saudi Arabia is perhaps the most open to foreign investments, due to revised regulations by the Saudi Arabian Monetary Authority and Capital Markets Authority to open up the market and encourage foreign investments and talent into the country.
Over the last five years, a paradigm shift has taken place in the Saudi securities regime, and the rapid growth of Shariah compliant securities has placed Saudi Arabia alongside Malaysia and the UAE at the forefront of the global Sukuk market. From a complete lack of issuances in 2004, the Kingdom held 3% of the market by 2006, and accounted for 11% of all global Sukuk issuances by 2007. Industry players are confident of Saudi Arabia’s bullish position in this market, and have high hopes for the Kingdom to potentially overtake Malaysia as the largest global issuer of Sukuk in the near future due to the sheer size of issuances originating from the Kingdom. Just last year, Sukuk issuances in Saudi Arabia totaled an impressive US$2.3 billion – compared to US$7.3 billion in Malaysia, and is expected to be further fuelled by the desire for Islamic bond issuances by major national players such as Saudi Electricity and the Saudi International Petrochemical Company moving forward.
In terms of Islamic Real Estate financing, industry players across the board are confident of the market potential in the Kingdom, based on its highly liquid environment as well as increasing demand from retail and institutional investors for tangible assets and investment diversification. In 2010, Saudi Arabia’s Sumou Holding and Geneva-based Encore Management launched the first Islamic Real Estate Investment Trust for the Kingdom of Saudi Arabia to tap into the estimated US$260 billion worth of real estate projects in the Kingdom, which includes an US$82 billion government spending plan to fund home-building for Saudi nationals. The recent approval of the Kingdom’s long-awaited mortgage law on real estate is also expected to increase demand for homes by an estimated 55,000 additional units per year, providing renewed opportunities for Shariah compliant financing in this sector.
What is perhaps most needed in the Kingdom now to create impetus to its Islamic finance cause is the proper development of its capital markets, via the creation of a local Sukuk market in riyal to be made available to Saudi Arabian companies to allow them to tap into the local investor base and raise money via Sukuk; and to gradually move away from bank lending. The Kingdom’s foreign asset pool, high liquidity, strong economy, and vital position at the center of the Muslim world provide it with all the leverage it needs to develop into an Islamic finance hub. With proper infrastructure and regulatory developments, the Kingdom is set to become a force to be reckoned with in the global Islamic finance market.