Jordan closes its inaugural Sovereign local currency Sukuk

On the 17^th of October 2016 the Hashemite Kingdom of Jordan (“Kingdom”), closed its inaugural local currency Sukuk. The debut sovereign issuance was more than three-times oversubscribed. The amortized Ijarah-based Sukuk has a tenor of five years and expected profit rate of 3.01%. The landmark sovereign issuance marks a major step to develop the Islamic Jordanian capital market as well as provides Shariah-compliant banks with an investment avenue. The Kingdom raised Jordanian Dinar JOD 34 million (USD 47.9 million) maturing in 2021.

“The sovereign issuance is of great significance for the Kingdom’s full-fledged four Islamic banks, because it will give them a badly needed tool to manage their excess liquidity (estimated to be 1.4 billion dinars)”, said H.E. Omar Malhas, Minister of Finance. “As part of the fiscal reform programme implemented by the Ministry of Finance, we aim to widen the use of Sukuk in the short-term. The Sukuk will play a critical role in increasing the effectiveness of the financing mechanisms of government needs to cover the budget deficits.” he added.

The Islamic Corporation for the Development of the Private Sector (“ICD”), the private sector arm of the Jeddah-based Islamic Development Bank, acted as Transaction Technical Support and Advisor.The sovereign issuance is part of comprehensive joint-Technical Assistance (TA) Package provided by Japan International Cooperation Agency (JICA) and ICD. The TA also provided external practical capacity-building trainings for government employees behind the sukuk transaction.