UK firm targets SME sukuk origination in Islamic countries
LONDON - Bedford Row Capital (BRC), a London-based fixed income structuring specialist, is eyeing sukuk origination opportunities for small and medium-sized enterprises in Islamic countries following the launch of its short-term sukuk product for liquidity management.
BRC is particularly keen on medium-sized corporates because they connect to real economy activity, according to Scott Levy, CEO of Bedford Row Capital.
“The sweet spot would be mid-sized enterprises which have a real impact on the real economy and employment,” he said. “The majority of employment and job creation in most Islamic economies is through SMEs. [For example] we are able to originate sukuk for companies seeking finance for factories and purchasing goods.”
BRC is primarily targeting SMEs as they find it difficult to access affordable Shariah-compliant financing from lenders, including Islamic banks.
“For most of these SMEs, they would not be able to get financing from traditional or Islamic banks because the ticket size is too small,” Levy explained. “[These] SMEs would be able to raise around $100 million to $200 million on our platform.”
Levy said SMEs in Pakistan, Bangladesh, Malaysia, Indonesia and Turkey are on their radar as well as those in Kazakhstan, Tajikistan, Uzbekistan, Algeria, Morocco, and Tunisia.
BANGLADESH A KEY MARKET
Bangladesh is a key market for BRC’s opportunities, according to Levy.
“Islamic finance is at an early stage in Bangladesh and they are becoming more aware of the Islamic capital markets,” he said.
Most recently, BRC participated in Deshbandhu Group’s U.S. dollar corporate sukuk issuance. BlueMount Capital and Bedford Row Capital are acting as international lead manager and structuring agent respectively for a $250 million sukuk which is set to be listed on the Frankfurt Stock Exchange. The bookbuilding for the sukuk is being finalised, Levy told Salaam Gateway. Bedford is working with fintech platform Fasset to tokenise the sukuk, it said in a statement on June 22.
Deshbandhu is one of Bangladesh’s largest corporates. It has subsidiaries and controlled entities with interests in sectors including food, fibre, and textiles. The company will use the funds to repay outstanding debt and to invest in new technology to scale capacity of its group businesses.
Levy said that BRC is planning more deals and will announce more transactions in Bangladesh by the fourth quarter.
SHORT-DATED SUKUK ROLL OUT
Meanwhile, last month BRC rolled out its first 360-day short-dated sukuk via its issuance platform Al Waseelah.
The Insured Money Market Certificate (IMMCTM)-17 EUR 360-Day Certificates, due May 6, 2022 were fully subscribed.
Based on a murabahah investment, the IMMCTM is a cash management product. BRC is the arranger of the Al Waseelah PLC IMMCTM and Khalij Group is the Shariah adviser to Al Waseelah.
“This 360-day sukuk is cost effective; you can pick a currency, pick tenor; size,” said Levy. “The majority of this sukuk were taken up by GCC-based Islamic financial institutions and takaful companies.”
He noted there is investor and institutional appetite for short-dated Shariah-compliant paper with different tenures, size and currency.
Other than short-dated issues from sovereigns like the Central Bank of Bahrain there are few short-dated sukuk options for investors. Supranationals like the International Islamic Liquidity Management Corporation (IILM) offer sukuk up to 364 days.
“[The] IILM have been successful but they have some limitations as an NGO,” said Levy. “Their product is targeting a core group of institutional investors and participants.”
BRC’s debut short-term sukuk is based on murabahah but Levy highlighted they can adapt the structure according to clients’ needs.
“We can offer the product based on wakalah and/or mudarabah,” he said. “[The] reality is for a 90-day or 360-day product, you could do a mudarabah or wakalah. For a 2-year or longer, wakalah would be more appropriate.”
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