Gov’t eyes ‘Sukuk’ comeback

Another “sukuk” bond offering is on the table of the government in 2025, as the state aims to regularly include Shariah-compliant debt securities in its financing strategy.

Speaking to reporters on the sideline of the “Philippine Islamic Finance Roadshow” on Tuesday, Bangko Sentral ng Pilipinas (BSP) Assistant Governor Arifa Ala said that such was the plan of the Bureau of the Treasury (BTr) next year, although the size of the offering was still unknown.

“Sukuk is part of their planned issuance in 2025, but no amount yet,” Ala said.

READ: BIZ BUZZ: Retail ‘sukuk’ bond sale?

If realized, this would mark the Philippines’ return to the Islamic debt market after making its debut last year.

Recall that the government had raised $1 billion from its maiden sukuk bonds sale in December 2023. The offer was met with strong demand after attracting orders that exceeded the original size of the issuance by nearly five times.

The Islamic bonds were payable in 5.5 months. The BTr had said the robust appetite for the debt securities helped the government lock in cheaper borrowing.

Sukuk is a form of financing that is compliant with Islamic religious law that prohibits the charging of interest.

Unlike traditional bonds, sukuk allows investors to have a share in the ownership of an asset with actual value rather than holding debt securities and earning from interest payments. The Philippines’ maiden offer had utilized real estate assets under “Ijara” and “Wakala,” together with a “Commodity Murabaha” aspect.

The landmark issuance marked a significant step in the government’s agenda to promote and develop Islamic banking and finance in the country. It also allows the state to diversify its global investor base. —Ian Nicolas P. Cigaral INQ